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MGM Resorts To Lay Off 1,000; Wynn Gets Another Multimillion Dollar Fine

mgm-grand.jpg

Associated Press

Nevada’s economy is healthy. Its unemployment rate is above the national average. Tourist numbers on the Strip remain steady 

So why did MGM Resorts just lay off 254 people, with plans to lay off more in the coming months? 

Last week, MGM continued executing its MGM 2020 corporate restructuring plan. Labor reductions began with buyout deals for nearly 40 executives. Last week's wave of layoffs included mostly middle-management staff. When the final terminations happen in June, around 1,000 employees will have lost their jobs.   

Todd Prince, gaming reporter for the Las Vegas Review-Journal, told KNPR's State of Nevada that the reason for labor force reductions is simple - the shareholders aren't happy.

"Growth for MGM is modest, at best, on the Strip and shareholders aren't too pleased. So, they're putting pressure on [CEO Jim] Murren to drive profit," Prince said.

He noted there are two ways to drive profit. One way is to increase revenue and another is to drive down costs. 

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Since MGM Resorts is facing stiffer competition from Caesars Entertainment and off-Strip properties driving up revenue might be difficult but driving down costs by cutting labor costs can be done.

Prince pointed out that MGM already had much higher corporate expenses than other gaming companies. Its corporate expenses were near $400 million a year, compared with Caesars Entertainment at $300 million.,

While slashing jobs seems like a numbers game for corporations, the impact is felt by real people living in Las Vegas. 

One of those people laid off last week called KNPR's State of Nevada. John said it is difficult to be let go from a job you've been working at for years.

"When you're loyal for so many years and you work hard to do your best, you know you're making money for the company and you find yourself unemployed, it's a tough pill to swallow," he said.

Chris Sieroty, who covers the gaming industry as the U.S. editor for Gambling Compliance, understands it can be difficult to lose a job. He admitted he has gone through being laid off before and it is not easy. But he notes it is part of what a company has to do, especially with nearly $15 billion in debt.

"It's just time to restructure the company," he said, "And that might sound cold but that's what they're doing."

He said the resort giant is trying to protect itself from a downturn in the economy, which will come sooner or later.

"This is part of refocusing the company, making sure that they're strong when the next downturn comes because another recession will come, whether it's next year or the year after. It will happen," Sieroty said.

While MGM's layoffs are getting all the headlines, Howard Stutz, executive editor for CDC Gaming Reports, said the company isn't the only one reducing its workforce.

"It is happening in different corporations around the Strip. It's just not as public as MGM, which is the biggest company in Las Vegas with 77,000 workers, as of now," Stutz said, "They have 10 resorts on the Strip. They are the biggest company in Las Vegas - if not Nevada."

Stutz said the changes at MGM Resorts and other companies are being driven by activist investors who want to maximize their share price.

Besides the restructuring going on at MGM Resorts, the other big news in gaming this week is the decision by the Massachusettes Gaming Commission to fine Wynn Resorts.

The commission fined the resort company $35 million for failing to disclose years of allegations of sexual harassment and misconduct by then-CEO and founder Steve Wynn.

Although regulators leveled a stinging fine on the company, they did not revoke its gaming license, which allows Wynn Resorts to open its new Encore Boston Harbor.

"I think the reason for the huge fine is to send a message to other casino operators that the behavior that the Wall Street Journal initially reported, the sexual harassment allegations and the settlement, will not be tolerated," Sieroty said.

He said gaming regulators in both Nevada and Massachusettes want other gaming companies to know they better keep their house in order or face serious consequences.

Sieroty believes the whole scandal will stick around the company for a while but ultimately it will be able to move on. 

The gaming commission also fined current Wynn Resorts CEO Matt Maddox $500,000 for "clear failure" to investigate at least one misconduct complaint.

Prince doesn't believe the rebuke from gaming regulators will mean Maddox is out at Wynn. He's been leading the company since Steve Wynn stepped down in the wake of the allegations, which Wynn has denied.

But Prince does believe it was another message to the entire gaming industry.

"They just wanted to make a statement that it's not only going to be the companies, it's going to be individuals that will also feel a little bit of the financial pinch if these types of actions happen again," he said.

 

Guests

Todd Prince, gaming reporter, Las Vegas Review-Journal; Howard Stutz, executive editor, CDC Gaming Reports; Chris Sieroty, U.S. editor, Gambling Compliance

 

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