Is It The “Cost of Doing Business” or …..Cost Creep?

There are probably many acronyms that apply … familiarity breeds complacency … a new broom sweeps clean … waste not, want not.  The fact is that as time goes on and we stay in our jobs longer and stay with one casino, we begin to accept our daily costs simply “as the cost of doing business.”

If we treated the casino’s money as our own, we would save hundreds of thousands of dollars annually.  These potential savings come in many forms; labor, employee benefits and utilities to name a few areas that may reap significant dollars for your casino.

Labor Savings

If your goal is to make money, labor savings offers significant opportunities to drive money to the bottom line.  A word of caution … reducing costs by critiquing labor may not make you popular with your colleagues.  Your colleagues might think these costs are necessary and have become accustomed to their team members and the related costs.

We have all witnessed the change in slot product over the last few years.  Not only are there hundreds of new games available, but the transition to cashless and ticket-in-ticket-out (TITO) has been rapid.   If your casino has begun to make the transition to cashless or tickets, have you taken a serious look at your slot labor?  Do you really need the same number of employees with these new forms of gaming as you did when your slot floor was 100 percent coin?  If your casino still has the same number of attendants on the floor after making the transition, I hope they are working as “slot ambassadors” interacting with the guests and delivering outstanding guest service.

Regardless of how your employees spend their time, your casino might find extra profit by analyzing your slot labor on an hourly basis and comparing staffing needs to machine utilization, machine occupancy and guest headcount.  If you reduced your staff by four team members, it could equal annual savings of $100,000 to $150,000 (including benefits).

New technology and great employee training should enable your team to do more with less. Well trained employees with the latest technology should be able to take better care of more customers. If your casino is not gaining synergy from these types of investments, why invest in the technology and the training?

 

A thorough labor analysis conducted by a watchful eye in your accounting department or an outside source could very well find “low hanging fruit” in slots, table games, maintenance, cage/credit, administrative/general and food & beverage.  Leave no stone unturned, there could be money under that rock!

Benefits Savings

Employee benefits vary based upon full-time or part-time employment.  An easy audit will ensure that your part-time employees are not getting benefits intended for full-time employees.  Example: To receive health insurance, an employee must be classified as full-time and work an average of 32 hours per week.  You might want to consider that if your employees do not average 32 hours a week over a six-week period, they are not eligible for this benefit.  Many part-time employees receive the benefit because no one performs an audit.

The benefit of part-time labor is not paying the same benefits as full-time employees.  An astute manager will make certain the casino is gaining leverage from part-time employees.

Utility Savings

Have someone at the casino contacted your local utility company to perform an audit of electricity and water usage?  This service is free and might shed light on wasted expenditures in water, sewage and electricity.

One question you should ask the utility company is how many electric meters your casino has on the property.  You might find that as your property expanded over the years, the utility company did not combine meters.  Your utility company may be treating each meter as a stand-alone meter.  In a recent audit, one casino found it had 13 electric meters.  Each meter was charged separately and each had a different rate based upon consumption. The utility company did not aggregate the meters and charges based upon the total number of kilowatt hours consumed.

Arrangements were made with the utility company to reduce the number of meters from 13 to 4.  The utility company charged a substantial fee to combine the meters but the investment was recouped in three months and the electricity bill dropped $8,000 per month after the meters were consolidated.  While the above-mentioned savings in electricity were substantial, do not overlook the other potential utility savings on your property.

 

Being an ogre about costs may not be a glamorous endeavor. However, you will find that not all of your casino’s expenses are “the cost of doing business.” The money saved by critiquing costs should provide additional income and capital dollars to make property improvements that will generate financial benefits for years to come.

Lee Witherow is President of Hospitality & Gaming Associates which assists clients in casino operations, acquisition/development, food & beverage, team/leadership development and hotel operations.  Contact him on the web