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These seemingly small procedural changes can have a big impact on your casino’s profitability without compromising the customer experience.

Operations

Three Ways Casinos Can Drive Down Costs — and Drive Up the Bottom Line

  • Matthew Cronrath
  • 11/9/2018

There are certain universal truths about expense management that apply to all business operations, but in the larger-than-life world of casinos — where glitz and a little extravagance are the name of the game — discipline in spending is particularly important. You want to give your customers an exciting experience while still improving the bottom line. But casinos often waste a good deal of money on expenses they can actually control much better. These areas tend to be in vendor contracts, marketing, and bill analysis and payment practices.

If your casino needs to rein in costs, start with these three things.

Take charge of your contracts

Vendors want to work with casinos, and there’s a good chance they will compete to get your business. In most cases, you have a bit of an advantage in negotiating the terms. Use it. Review your contracts to see where you can drive a better deal. If you have worked with certain contractors for a number of years, don’t get too complacent and comfortable; see what their competitors are offering in product or service quality and price, and then compare and contrast. You can often use this information to get a lower bill from current contractors or shop the market for better options.

Casinos often end up paying vendors for services they either are not using or are being overcharged for. (Cell phone and telecom bills are a classic source of unnecessary and complex, confusing fees.) A contract review can help you square with vendors on overcharges and negotiate better prices. It may also help you determine if services you are paying others for can be done in-house using current staff or by hiring someone to do the job for less.

You can make contract reviews a robust and regular practice by developing and following a strong procurement policy, which guides your contract creation, acceptance, review, and execution and looks out for risk.

Get the most bang for your marketing buck

Advertising and public relations are major components of your casino — and a big presence in the expense column. You have to market your casino features, whether giveaways, restaurants, concerts, and other entertainment events. But you must also understand the return on that investment, and which type of advertising works best for each thing you’re marketing. Is radio best for promoting concerts? Television for gaming? Print and billboards for restaurants? When you have that data, you can eliminate wasteful spending and control your advertising costs much more effectively.

When you use metrics that track the drop for players who received promotional tickets, for instance, or track increases in activity for certain events, you can reach target customers with greater accuracy. You may find that your billboard spending has limited value, but promotional items generate larger crowds or bigger spenders. Until you have a method to track and understand the effects of marketing, you may not be allocating your resources properly to best affect your bottom line.

Watch your bills like a hawk

Do your team members question expenses? Or do they simply cut the check and file away the invoice? Bills should be thoroughly and closely reviewed for accuracy and compliance with purchase orders and contracts. Casinos that don’t scrutinize the bills invariably pay for items they didn’t specify or need, or may be overcharged for them.

It’s also not uncommon for casino accounting departments to pay late fees or fail to take advantage of early-pay discounts. Identify who you do business with frequently and determine if those vendors have concessions for paying early. Analyze accounts payable aging closely, and determine why bills are not being paid in a timely manner.

How we can help

CLA’s casino-specialized professionals understand the importance of balancing a first-rate customer experience with discipline in spending to help drive the bottom-line results you want. We can work with you to develop a sound procurement policy, review your contracts for more favorable terms, evaluate marketing expenditures, and tighten up AP practices. These seemingly small procedural changes can have a big impact on your casino’s profitability without compromising customer amenities.