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Rod Smith

Las Vegas Worker Productivity Up

15 January 2004

LAS VEGAS -- Productivity in Las Vegas hotel-casinos surged more than 6 percent immediately after the Sept. 11, 2001, terrorist attacks and has continued its upward creep for two years, a local analysis released Wednesday showed.

"Post-Sept. 11, people tightened their belts and now (the gaming companies) are seeing the benefits," said Jeremy Aguero, principal analyst for Applied Analysis, a Las Vegas financial consulting company. "Revenues are up, costs are down and Wall Street is applauding, but worker groups are unhappy."

University of Nevada, Las Vegas professor and casino industry expert Bill Thompson warned that increasing productivity can be bad for the gaming industry in Las Vegas.

"What it means is people are being laid off. Bill changers instead of change people. This is bad because what makes casinos a good entertainment experience is human contact," he said. "The human contact is what makes Las Vegas different from the rest of the country and what keeps visitors coming back."

A slot machine in Illinois rakes in $442 a day, while the same equipment on the Strip makes $120, he said. "So the machine is not as efficient, but together they keep people coming back," he said. "The Internet, people playing in their homes, is the ultimate efficiency, but it's bad for the economy.

"Wall Street would love the Internet. (Investors) don't have to build any buildings or hire anyone, but you don't build an economy that way."

Gaming's productivity gains, which are part of a national trend, have been driven in the industry by consolidations, new technology and the drive toward greater efficiency, Aguero said.

His company's analysis showed two key measures of productivity -- gross gaming revenues per employee and rooms per employee -- each has increased 6 percent since Sept. 11, 2001, and have moved up and down in tandem over the past decade.

Gross gaming revenues approached a record $43,000 per employee as the year closed, and rooms per employee increased to a near-record 0.7.

The only comparable period of productivity gains in recent years came in the mid-1990s when it increased 10 percent over two years. Before that, productivity in Las Vegas casino-hotels had been on a downward slide, with productivity tumbling 9 percent over four years.

Whatever the gauge, productivity shows how much labor is required to service guests in a facility, Aguero said.

"Labor is the number one expense for hotel-casinos," he said, and "the trends bode well for the industry from a productivity standpoint."

Deutsche Bank analyst Andrew Zarnett said Wall Street demands increasing productivity because less capital can generate added cash flow, generally defined as earnings before interest taxes, depreciation and amortization.

"The higher returns can be used to pay dividends, pay down debt or reinvest in the companies," he said.

Keith Schwer, director of the University of Nevada, Las Vegas Center for Business and Economic Research, said the productivity gains also have been good for workers and the economy.

"As productivity has increased, employers have been able to pay higher wages to employees who have kept their jobs. Productivity simply means the pie is getting bigger for the same input," he said.

However, Schwer said unions have not always appreciated productivity increases because they have spelled smaller work forces and have reduced the political clout of union bosses.

D. Taylor, Secretary-Treasurer Culinary Local 226, the largest union in Nevada, said no one is against productivity.

"The problem is the classic (business) speed-up where workers are asked to do three jobs for the same pay. If productivity means I'm doing my job better, that's fine. If it means I have to do three jobs and workers are cut, it's not," he said.