Park Place looking to trim costs

Friday, Sept. 20, 2002 | 11:03 a.m.

A slot club card, "cashless" slot machines and reduced labor costs are among several ways casino resort giant Park Place Entertainment Corp. of Las Vegas expects to cut expenses and boost returns, a company executive told a group of investors and industry observers at a trade show Thursday.

Park Place -- a relatively recent combination of several casino giants -- has a well-known collection of brands clustered in the nation's biggest gaming markets and large secondary markets. Still, the company's cash flow profit margin lags its major competitors on the Las Vegas Strip, Park Place Chief Financial Officer Harry Hagerty said at the Global Gaming Expo's Gaming Investment Forum.

The company's 25.9 percent margin falls below Mandalay Resort Group's 26.5 percent, Harrah's Entertainment Inc.'s 27.7 percent and MGM MIRAGE's 31.3 percent, he said.

To that end, the company has identified $100 million in operating costs it expects to reduce or eliminate next year, he added.

Park Place reported $4.2 billion in total expenses last year, financial statements show. The largest chunk of that, $2.4 billion, went to casino, rooms and food and beverage costs.

Labor costs mark the company's single largest expense, Hagerty said. The company aims to improve efficiency by tracking the relationship between labor costs and floor activity, he said. One particular property, which he did not name, has reduced its annual labor costs by about 10 percent using such tracking methods.

"We're not talking about a reduction in headcount," he added.

The company is also exploring ways of processing hotel guests electronically, such as using kiosks, he said.

Park Place plans to employ more "cashless" slot machine technology -- allowing players to ditch coins altogether -- and is pursuing a cross-country rollout of its multi-property slot club loyalty card, Park Place Connection.

The initiatives are part of a company-wide strategy to improve returns, Park Place spokesman Robert Stewart said Thursday.

"We have gone through a number of analyses at properties ... to increase return on investment and return on equity this year," he said. "We really have just begun to realize the benefits of being the world's largest gaming company, from the consolidation that has occurred from the human resources department to the laundry in Las Vegas."

The company has also consolidated its advertising agencies and public relations departments more recently, he said.

Meanwhile, Park Place is exploring international expansion opportunities and Internet gambling, though it will take a "disciplined approach" to new investments, Hagerty said.

Those opportunities aren't likely to include the bankrupt Aladdin property, he said. The Aladdin has a choice location adjacent to Park Place's Paris Las Vegas and Bally's Las Vegas. But it probably won't be available for the right price, given what creditors are now asking for, he added.

When asked about the effect that the luxury Borgata resort will have on the company, Hagerty said, "We get that question several times a day."

The $1 billion Borgata is a joint venture between MGM MIRAGE and Boyd Gaming Corp. and is also Atlantic City's first hotel-casino in more than a decade.

Park Place, with properties occupying five blocks of Atlantic City's famed Boardwalk, is well-positioned to withstand competitive pressure, he said.

"It's unrealistic to say ... we are not going to be affected by Borgata." However, he said, "Borgata is going to grow the market."

The company also will benefit by a retail center planned for 2004 that will be built on a pier and connect to its Caesars casino on the Boardwalk from an overhead walkway. It will also have other opportunities to expand amenities, he said.

"We're extremely positive on the Atlantic City market."

Hagerty, a former software company executive and Wall Street gaming analyst, joined Park Place in March.

In a separate session, Riviera Holdings Corp. executives outlined several new projects on tap for the north end of the Las Vegas Strip, where the company's flagship Riviera hotel-casino is located. The Riviera also stands to benefit from a monorail project under construction along the Las Vegas Strip. Visitors would be able to access the monorail via an overhead walkway.

Though September has been slower compared to a year ago, performance in July and August had actually improved over last year, executives said. Also, while the size of groups booked for conventions is down, the Riviera has seen an increase in the number of smaller group bookings.

Riviera also unveiled conceptual drawings of two upcoming projects that would expand the company's reach beyond casinos in Las Vegas and Black Hawk, Colo. The company is one of three applicants in a project to launch a racetrack and slot machine center in Hobbs, N.M., and is awaiting approval for a separate hotel-casino project about 20 miles from St. Louis.

The company also touted electronic kiosks that were recently installed at the Riviera to allow customers to check themselves in and out of the hotel. The kiosks are aimed at speeding up processing time for guests and reducing staff workload, the hotel has said.