Casino Enterprise Management

When a project goes from the drawing board to reality, construction costs that were envisioned during the planning process often turn out to be unrealistic. The tremendous increase of construction in the lodging industry has put pressure on building costs at all levels. As construction costs continue to rise, the cost of steel, cement, glass, copper and other vital elements of construction, in particular, have soared.

This article is intended to address this change by providing specific ideas to help manage budgets, build more value for less money and, therefore, increase future profits.

Lessons from the Past
In the earlier days of gaming (then called gambling), the notorious casino owners in Las Vegas had some philosophies that may be worth looking at again.

• Focus on the “Money Machine”
While non-gaming revenues may have become equal to, or even surpassed, gaming revenue in Las Vegas, I believe something has been lost in the evolution. It is called “profit margin.” These other business venues, like entertainment, restaurants, retail and hotel rooms, may be fine businesses, but, as profit centers, their profit margins are very slim compared to gaming. Gaming is still the big opportunity. In my view, the primary purpose of these other venues is to drive gaming revenues. To the extent that they do, they are successful. To the extent that they do not, they just waste capital resources.

• Timely Decisions
Busting budgets often start with the owner. Decisions that are not made on a timely basis affect both cost and schedule. Changes that are made along the way are even more costly. The later they are made, the more costly they become.

• Avoid the “Fast-Track” Trap
“Fast-track” construction, sometimes referred to as “on-time” design, is a method of building in which construction starts before construction drawings are completed and often before construction cost is fixed. This clearly puts the owner totally at risk. Too often, this also results in runaway, out-of-control construction costs. There is no substitute for a good set of drawings, which requires a reasonable schedule.

• Basic Guest Rooms
The industry has clearly moved toward larger guest rooms and more suites. This is a significant change from the old days. In Las Vegas there were more than 100,000 guest rooms in the market before the first “all-suites” hotel was built. Before deciding to provide oversized rooms or all-suites, ask the obvious question: Why would you sell two rooms for the price of one? It is certain that two rooms can’t be built for the price of one. In fact, rooms in this industry are often sold at a lower-than-market rate or are comp’d. Most hotel rooms should be built standard size. Frankly, there are very few players that would be upset if they were given a standard-size room for free.

More Efficient Use of Space and Layout
• Balance the Program
In most existing properties, we see an unbalanced program, or what our firm calls a “wobbly wheel.” Building too much of anything just wastes money. On the other hand, building inadequate facilities results in frustrated customers.

• Measuring Success
Gaming properties often measure success in terms of win per machine. That may be a good comparison tool, but it does not measure how well the casino was planned. If properties were compared on an income-per-square-foot basis, we would quickly know how well planned our properties are and how successful the capital expenditure decisions have been.

• Multi-Purpose Facilities
The cost saving realized through not duplicating facilities is substantial. Entertainment, banquets, meetings and Bingo can all utilize the same space if the facility is designed correctly and if it is operated efficiently. Other creative multi-uses of space include restaurants that turn into nightclubs at 11 p.m. and sports bars that moonlight as entertainment lounges.

• Consolidate Kitchens
The cost-efficient way to provide food is with one large kitchen that serves restaurants, buffet, banquets and room service. The greater the number of independent kitchens, the greater the cost — both in terms of initial investment and operational expenses.

• Low Ceilings
Although it is seldom mentioned, the square-foot construction cost is affected significantly by the volume of the space. The advantages of lower ceilings are lower initial costs, the creation of a more-intimate gaming space and, in cold weather climates, savings on heating by keeping the heat low — where it is needed — as opposed to allowing it to rise into a high ceiling space.

• Exposed Ceilings
There is no need to build fancy and expensive ceilings everywhere. Some areas may be left open and painted black, exposing the structure, ducts and wiring.

Smarter by Design
• Simple Theme
Themes can be simple and still effective. It isn’t necessary to create a historic city to attract attention and create an interesting property. In fact, there is an obvious move in the industry to build more contemporary, sleeker-looking properties. Yes, it is important to create a “Wow!” element on the property, something special and unique that people will remember and talk about. But focusing the impact on one “Wow” is usually enough. It isn’t necessary to have a “Wow” around every corner.

• Faux It
It has been 40 years since the theme park industry showed us how to use faux materials instead of real materials. While it is best to use the real thing to a height that people can reach and finish with faux above that level, there are many examples of faux finishes that are done well and are effective throughout.

• Fabric
Fabric is cheaper than building construction. It also has the added advantages of being flexible, colorful and cleanable. It can be used for gaming canopies, to separate spaces instead of hard walls, and as decoration or sculpture.

Show Me the Money
• The Source
Counter to the common perception, slot machines do not generate money — customers generate money! Therefore, the objective is to focus on those things that bring players to the property, then keep them staying and playing.

• Go for the Big ROIs
When considering non-gaming amenities, build those that produce the greatest return on investment. While this statement may seem obvious, it is amazing how many entertainment centers and golf courses, which have minimal financial returns, are built versus parking structures and movie theaters, which generate tremendous returns in incremental gaming revenues.

• Global Procurement
The world is your marketplace. Products being produced internationally in places like China, Taiwan, Mexico and the Philippines are outstanding. They offer the opportunity to have upgraded materials at lower costs, even after shipping is factored in. This includes furniture, fixtures, carpet, stone, case goods, fabrics and even wall panel systems.
 
Lean on Me
• Hire the Experts
No one would ever choose an inexperienced or low-cost surgeon, or even a friendly family physician, to perform his or her heart surgery. In the same way, it is critical to have the best casino professionals on your team. Experienced casino architects, interior designers, contractors and other consultants can make the difference between having a great success or a financial disaster. Surround yourself with really smart people.

• Use Experts Properly
Use your architects and designers to design the project, but don’t have them complete cost estimates. Get contractors or cost consultants involved early to do cost estimating and quantity surveys, but don’t let them decide what the project is going to look like. And never let your attorney do either.

Barry Thalden, AIA, NCARB, is a partner in Thalden-Boyd-Emery Architects with over 35 years experience in hotel and casino design. The firm has offices in Las Vegas, St. Louis, Tulsa and Phoenix. He can be reached at 1-800-THALDEN or bthalden@thalden.com.