Caesars Entertainment Reducing Customer Comps to Offset Wage Hikes
Posted on: May 2, 2019, 10:22h.
Last updated on: May 2, 2019, 11:51h.
Caesars Entertainment plans to improve its player rewards program – in the company’s favor – in order to cover increased employee wages.
Executives relayed during the company’s first quarter conference call with investors that it will offset higher labor costs by trimming expenditures stemming from freebies issued to loyalty patrons. That means fewer comped rooms and food concessions.
Caesars CFO Eric Hession explained that low unemployment throughout the US is leading to companies paying a premium for top talent. The casino giant also agreed to higher wages and better benefits with the Culinary Union in Las Vegas last year.
A lot of it is stemming from basically a lack of labor, or having difficulty finding great talent in a lot of these markets,” Hession said. “As a result, that pushes up the price of labor.”
Caesars announced in March its planned to trim annual corporate costs by $40 million. The company is accomplishing that by eliminating certain executive capacities and open positions.
The US Bureau of Labor Statistics says unemployment in the Las Vegas area is at 4.2 percent – down one percent from a year ago. The nationwide average is 4.1 percent.
Caesars isn’t the only Las Vegas casino company trying to reduce overhead. MGM Resorts is focused on saving $100 million annually, and is doing so by eliminating 1,000 positions by the end of June.
Caesars Entertainment says net revenues increased 7.3 percent January through March to $2.12 billion. Income from operations surged 92 percent to $240 million.
Despite the casino company still reporting a net loss of $217 million – or $0.32 per share – investors reacted positively to the news. Traded on NASDAQ, shares climbed more than three percent on the financial performance.
Hession led the call, as new CEO Tony Rodio is transitioning into his new role. The longtime gaming industry veteran was named Mark Frissora’s replacement on April 16. Caesars says Rodio will officially step into the capacity within the next 30 days.
Rodio comes from Affinity Gaming, and is thought to have been hand-picked by billionaire corporate raider Carl Icahn, who controls an 18 percent ownership stake in the Caesars.
Betting on Las Vegas
Following its bankruptcy, Caesars Entertainment began focusing on non-gaming properties. As such, it rebranded its loyalty program from Total Rewards to Caesars Rewards.
“Guests know the Caesars brand, and Caesars Rewards helps us strengthen that connection across our global network,” Frissora said in February.
Caesars is licensing its brands such as Caesars Palace, Flamingo, The Cromwell, and The Linq to hoteliers. The strategy is to expand the company’s hotel operations without the associated costs of building from the ground up properties. Its first non-gaming hotel in the US is Caesars Republic Scottsdale, a “lifestyle” boutique in Arizona.
However, that isn’t to say that the company is trying to distance itself from gambling.
Caesars Senior VP of Finance & Treasurer Joyce Arpin explained regarding Las Vegas, “We continue to be bullish on the city over the long term. In 2020 and beyond, we see several different catalysts for growth, including the opening of Caesars Forum, and the arrival of the (Oakland) Raiders.”
Of Caesars’ $2.12 billion in net revenue, $955 million was generated in Las Vegas.
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