March 14, 2019 - 4:00 pm
Updated March 14, 2019 - 5:30 pm
Caesars Entertainment Corp. is cutting jobs at its Las Vegas headquarters as part of a plan to reduce corporate expenses by more than $40 million annually.
The majority of the savings, though, will come from eliminating open job positions and reducing consulting expenses, the company said in a statement Thursday.
Caesars employs about 3,000 people in corporate positions around the U.S., including in legal, information technology, marketing, analytics, human resources and finance departments. The company did not say how many people would lose their positions, adding that the percentage would be in the single digits.
The majority of the cuts will be in Las Vegas. Caesars said all affected employees will be offered severance and company-paid career counseling.
The announcement comes two months after Caesars’ largest competitor, MGM Resorts International, said it would cut corporate positions to save $100 million annually.
Las Vegas casino operators are facing rising costs, including for wages and security, when visitation is stagnating and competition increasing with the spread of sports betting.
Caesars CFO Eric Hession told Wall Street analysts Feb. 21 that the company’s labor costs will increase about $80 million this year, “higher than in prior years,” after signing new union contracts. Las Vegas accounts for about half of the company’s labor force.
Hession also said he didn’t expect to squeeze much more savings from the Las Vegas marketing budget this year while security spending will increase. Labor and marketing are the company’s largest expense items.
Las Vegas cash flow will be “impacted throughout the year by a combination of labor headwinds as we contend with the tight labor market and wage inflation, as well as incremental investments in security across our properties,’’ he said.
Caesars forecasts its Strip revenue will grow only about 2.5 percent this year even as its extensive room renovation program approaches the finish line, enabling the company to offer tens of thousands more room nights this year compared with last year.
Las Vegas visitation has fallen the past two years, only the third back-to-back decline in nearly half a century. Visitation in January was flat when excluding two conventions that were held in February of last year.
Caesars CEO Mark Frissora has spent much of his four-year tenure cutting costs at the casino operator, which emerged from bankruptcy in October 2017. Frissora has done a “good job” trimming expenses at the company’s Las Vegas properties, which boast some of the highest Strip margins, Macquarie analyst Chad Beynon said.
“But, there is still probably some fat left to cut at the corporate level,” Beynon said.
Caesars’ annual corporate wage expense is more than $250 million while MGM is more than $350 million, Beynon estimated. Penn National Gaming, the second-largest casino operator by properties after Caesars, is under $100 million.
Last month, Frissora foreshadowed the possibility that the company would seek to rein in corporate expenses this year.
“We’re focused on reducing corporate costs. They are currently elevated due to our IT transformation and sports betting businesses, and we expect to show improvement later in the year from the current run rate,’’ he said.