Making the News

Wilkes-Barre Times Leader

Originally Published:Sunday, January 25, 2009
http://www.timesleader.com/business/staying_in_the_game_01-25-2009.html

Staying in the game
As some casinos slash jobs, Mohegan bets on different strategy

By Ron Bartizek
Wilkes-Barre Times Leader

Casinos, once thought to be recession-proof, are balancing cost reductions with smarter promotion as they battle through a recession punctuated by plunging stock prices and a blizzard of pink slips.

A grim U.S. Labor Department jobs report showed the economy lost 1.9 million jobs in the final four months of 2008, after the credit crisis mushroomed in September. The department estimated 2.6 million jobs evaporated during the full year.

Some of them disappeared along with familiar businesses like Lehman Brothers and Sharper Image, while others were eliminated as failing banks and brokerage houses consummated shotgun marriages. Even high-flying Google recently cut 100 recruiters when it sensed demand for its services softening.

Many workers, though, found themselves on the outside looking in after their employers sent them packing in a desperate attempt to make ends meet. For the first time in gambling industry veterans' memory, casino employees were in that camp.

Not all employers are quick with the razor, though. While casinos across the nation slash jobs the Mohegan Tribal Gaming Authority has so far upheld a no-layoff pledge. But that doesn't mean casino workers aren't feeling some pain; starting Feb. 1 about 50 Mohegan Sun at Pocono Downs managers will take pay cuts, with the biggest reductions coming at the highest levels.

Vice presidents and above will see 10 percent reductions; directors, 7.5 percent and managers, 4 percent. Chief executive Robert "Bobby" Soper, whose salary and bonus last year totaled $477,475, according to the authority's financial statement, is in the 10 percent group.

The wage rollbacks do not affect more than 1,000 employees at the casino and racetrack, many of whom saw their pay go up last fall.

"All our team members got their normal annual raises" on Oct. 1, the start of the company's fiscal year, Soper said.

The authority also will suspend its matching contributions to employees' 401(k) retirement plans.

The salary cuts are one part of an overall expense reduction program that Soper said totals "certainly in the millions." Other measures include limiting the hours of some non-gambling amenities, such as the VIP lounge. "One of our bars is closed at lunch," Soper said.

And some employees, while maintaining pay rates, have been cut to 32-hour weeks, "simply because we want to preserve jobs," Soper said.

Recovery a year away

According to state Gaming Control Board reports, the casino's nearly 2,500 slot machines took in $1.3 billion between July 1 and Jan. 18, a 16.5 percent increase from the year before. But the interim gambling hall in operation last year held less than half as many slots.

Soper said that while customer counts are near plan, gamblers are holding more tightly to their wallets. "The major variant is the amount of dollars that each individual spends," he said, an average of about $65 per visit compared to about $90 last year.

Daily visits are averaging 8,500-9,000 compared to an expected 10,000. Put those two statistics together and gambling volume is one-third below what it would have been at last year's spending levels.

Joseph Weinert, senior vice president at industry consultant Spectrum Gaming Group, said Mohegan Sun's decision to cut the highest salaries the most is evidence that executives are sensitive to public perception and employee relations, but the casino faces big challenges.

"Mohegan Sun is a very well-managed company," Weinert said, but "the fortunes of the gaming industry are attached at the hip to the national economy," which hasn't been true in the past. "We're not expecting to see industry improvement in 2009."

Weinert said because the $208 million permanent casino at Mohegan Sun at Pocono Downs opened only in July it is hard to gauge its performance against others. "They opened their new facilities at an inopportune time," he said, acknowledging that there was no way to predict the current economic collapse when the project began in 2006.

So far, the Mohegans' response to financial pressure has been more benign than many other casinos. From Atlantic City to California, thousands of workers have been let go; the Culinary Union estimates that up to 10 percent of its 55,000 members in gambling capital Nevada have lost jobs or had their hours cut back.

Mount Airy cautious

Mount Airy Casino Resort spokesman Pete Peterson said the Poconos gambling hall eliminated about 15 jobs last fall, but attributed them to normal adjustments after a year in business. "We saw that we had more shift managers than we needed," he said and some service positions were combined.

Mount Airy, which Peterson said employs more than 900 people, last week was granted permission by the state Gaming Control Board to accept a $15 million cash injection from suspended owner Louis DeNaples. "This takes us out of default and frees up some revenues" while allowing Mount Airy to tap credit lines for operating funds.

"As with any other business we're reviewing our operating costs," Peterson said. He contends that with a 55 percent state tax rate and other overhead costs, 70 percent of expenses are unchangeable.

On the revenue side, both Northeastern Pennsylvania casinos say they are sharpening their efforts to attract good customers while trimming marketing costs.

"I think we have to be extremely strategic in how we market," Soper said, while Peterson said "increasing our targeted marketing efforts" is in the works.

Soper said more cutbacks may be needed if revenue deteriorates further, and he would not rule out layoffs. "It is a philosophical decision that layoffs are an alternative of last resort," he said of the Mohegans' commitment to maintaining employment. He pointed out that business dropped off dramatically at the flagship casino in Connecticut after the Sept. 11, 2001 terror attacks, but no jobs were eliminated.

"Hopefully by the end of the year it will turn around," he said. "The good news is we're well positioned when things do pick up."

 

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