Las Vegas casinos, union negotiating pay raises for workers

Las Vegas’ two largest casino operators are trying to bridge a roughly $110 million wage and benefit gap with union workers before employment contracts officially end at midnight Thursday.

The five-year contracts affect about 50,000 Las Vegas hospitality employees, including bartenders, servers and housekeeping staff at 34 resorts on the Strip and downtown.

Negotiators for union workers are threatening to call a strike if an agreement isn’t reached by the deadline, potentially impacting tens of thousands of guests expected to arrive at the beginning of June for conventions and hockey games.

MGM Resorts International and Caesars Entertainment Corp., the two largest resort operators by employment, have said they expect to reach a deal and avoid the first citywide strike in more than three decades.

A monthlong strike could cost MGM Resorts and Caesars as much as $300 million in cash flow, according to a report Wednesday by UNITE HERE Gaming Research, the research unit of the hospitality workers’ union. The calculation assumes a 10 percent drop in revenue and a 10 percent decline in margins.

4 percent

In a statement Wednesday, Culinary Local 226 and Bartenders Local 165 said they are seeking an average annual increase of 4 percent over the next five years in workers’ wages and benefits, such as health care and pensions.

“We are asking for one-dollar raise in the first year,” Francisco Ruffino, a Caesars cook, said in the union statement. “A one-dollar raise for 12,000 of us will cost less than what the company paid the CEO last year.”

Caesars CEO Mark Frissora received $23.9 million in total compensation last year after helping the company emerge from two-year bankruptcy proceedings. That was 600 times more than the median salary of a Caesars employee. Caesars spokesman Rich Broome declined to comment Wednesday.

MGM Resorts CEO Jim Murren took home $14.6 million in total compensation, or about 400 times as much as the median for its employees. An MGM spokeswoman said Wednesday the company is “confident that we can resolve the outstanding contract issues and come to an agreement that works for all sides,” but she did not comment on CEO compensation.

The unions said MGM Resorts and Caesars are offering an average annual increase of about 2.7 percent. The two companies operate 18 of the resorts impacted by the talks, and their settlement with the union would set the standard for the remaining operators.

A 4 percent increase in wages and benefits is “probably a little bit on the high side,” said Union Gaming analyst John DeCree. However, with consumer price inflation hovering around 2 percent and expected to stay around there in the coming years, “somewhere in the 3 percent range is reasonable.”

U.S. wage growth

Union workers received an average annual increase in salary and benefits of about 2.2 percent over the past five years, according to the unions’ statement.

By comparison, U.S. private, non-farm hourly wages rose on average 2.5 percent a year over the past five years, while U.S. leisure and hospitality workers received an average hourly wage increase of 3.4 percent a year, according to the Bureau of Labor Statistics.

Contract negotiations in 2013 came amid a battered local economy struggling to emerge from the worst economic downturn in decades. MGM Resorts and Caesars were handcuffed by a mountain of debt racked up during the booming 2000s.

This time around, the casino operators — and their properties — are in their best shape in more than a decade. They have completed upgrades costing billions of dollars and reduced their leverage. Their share prices have rebounded.

Now they are returning money to shareholders for the first time since the financial crisis and awarding executives. MGM Resorts this month announced it would buy back $2 billion of its shares over the next three years, equivalent to more than 10 percent of the company. Caesars announced it would purchase $500 million of its shares, or about 6 percent of the company.

The unions are seizing on the buybacks, executive pay and corporate tax cuts that go into effect this year to demand an increase that would likely be above the U.S. average this time around.

Contact Todd Prince at 702-383-0386 or tprince@reviewjournal.com. Follow @toddprincetv on Twitter.