Operator News
US – Las Vegas strike could wipe away $300m in profits
By Phil - 30 May 2018
A one-month strike which is now very much on the horizon in Las Vegas could cost the two largest employers on the Las Vegas Strip – MGM Resorts International and Caesars Entertainment Corporation – over $300m in operating profits.
The warning has come from Unite Here Gaming Research, the research arm of the hospitality workers’ union.
Labour contracts covering 50,000 hospitality service workers in Las Vegas expire at the end of the month. Approximately 24,000 MGM workers and 12,000 Caesars workers are part of this year’s contract negotiations. Last week, 25,000 union members voted by a 99 per cent margin to authorise the union negotiation committee to call a strike if necessary. The last major strike by a Unite Here local took place in Atlantic City in 2004. That strike lasted 34 days, and the union won a historically good contract.
Ken Liu, a Unite Here analyst, said: “It is difficult to gauge the potential impact of a large-scale strike in Las Vegas since we haven’t had one since 1984, but we think a strike now would significantly impact MGM and Caesars’ operations on the Strip. With lower revenues and reduced operating margins, we believe a month-long strike could cut Caesars’ EBITDAR by about $115m and lower MGM’s EBITDA by just over $200m.”
In Las Vegas right now, major outstanding issues between the employers and Unite Here’s Culinary Workers Union Local 226 and Bartenders Union Local 165 include technology, hotel housekeeping workload study, union security in case of property ownership change, and wages and benefits. Going back to 2012, the Unions have seen economic increases (for wages and benefits all-in) averaging 2.2 per cent per year. For the new five-year contract, the Unions are proposing average increases of four per year. The Union’s goals are to cover anticipated healthcare cost increases, improve pension benefits, and create above-inflation wage increases. The companies have countered with about 2.7 per cent average annual increases over five years.
Caesars had projected free cash flow of approximately $2.9bn through 2021 when it was preparing to complete the Chapter 11 reorganidation of its CEOC subsidiary last year. The company also does not expect to be cash taxpayer for the next three years, and just announced a share buyback program of up to $500m. In 2017, the company’s CEO received nearly $24m in total compensation, and the company’s 2017 reported CEO pay ratio was 601:1.
MGM has projected free cash flow of up to $5bn from 2018 through 2020. The company has also just announced a new, $2bn share buyback program, having recently completed a $1bn share buyback. The company’s 2017 reported CEO pay ratio was 396:1.
An MGM spokseperson said: “We met with the Culinary and Bartenders Unions on Monday and more talks are scheduled this week. We are confident that we can resolve the outstanding contract issues and come to an agreement that works for all sides.”
Culinary Workers Union Local 226 and Bartenders Union Local165, Nevada affiliates of UNITE HERE, represent over 57,000 workers in Las Vegas and Reno, including at most of the casino resorts on the Las Vegas Strip and in Downtown Las Vegas. UNITE HERE represents 270,000 workers in gaming, hotel, and food service industries in North America.
