It’s no surprise that casino operators are desperately trying to figure out where they cut significant costs when they’re losing out on major revenue each and every single day amid this coronavirus outbreak.
In fact, the American Gaming Association (AGA) estimates that if the casino industry is out of commission for the next seven weeks, which it looks like it will be, it could cost the U.S. economy around $21.3 billion. According to their report, these costs are directly related to consumer spending.
MGM Resorts specifically is said to be burning $14.4 million daily, with nine months of cash burn.
As for the U.S. casino workforce, which is made up of around 750,000 people, the shutdown could result in a near $59 billion loss in total annual wages for workers.
For the impacted casino workers, AGA is working with the White House and Congress in hopes of developing relief packages. AGA is putting forward ideas that could possibly provide the liquidity needed to support affected workers’ financial needs.
But what does a major casino operator, like MGM Resorts, do in the face of heavy financial loss? Who do they turn to? Well, the first strategic move is, with any business really, is to cut costs where you can.
On Friday, MGM Resorts International advised they would be doing just that. Here’s how they plan to cut costs in order to weather the storm that is the coronavirus pandemic.
Hiring Freezes, Furloughs, and Reduced Staff – Oh My
The first area MGM looked into reducing was their variable operating costs, which include hiring freezes, furloughs, and staff reductions.
In their filing with the U.S. Securities and Exchange Commission, MGM said they believed that around 60-70% of their operating costs fell in the “variable” category and that they would look there to cut a significant portion of their expenses.
MGM initiated their first round of furloughs and layoffs earlier this month, and we’re unsure if there will be another round coming soon.
For those full-time and part-time employees who were laid off, they are receiving two weeks’ pay and extended health benefits, which will go through June 30.
Deferring Capital Projects
In their outline, MGM Resorts said they will also expect to defer at least 33% of their planned capital projects for the year.
“With the continued execution of the MGM 2020 plan, as well as the implementation of aggressive cost savings initiatives, we believe the Company will be able to manage its expenses while navigating this unprecedented event. We are currently making very difficult decisions but believe these will be in the best interest of the Company long term,” their filing reads.
Donated $1M to Employee Fund
Despite the financial impact COVID-19 has had on their operations, just a few days ago, MGM Resorts International donated a cool $1 million toward its employee fund.
The MGM Resorts Emergency Relief Fund offers short-term financial relief to employees and their immediate families when it comes to helping in making payments, like rent or utility bills, or meeting other financial obligations during unexpected hardships and emergencies.
The fund offers relief to all levels of employees, including full-time and on-call employees, and employees who are facing layoff, furlough, or separation.
“As we confront extraordinary events and an unprecedented global pandemic crisis, we know that this is an extremely challenging and uncertain time for many of our employees, their families, friends and neighbors and we are committed to help those in need,” Bill Hornbuckle, acting CEO and president of MGM Resorts International said in a statement on Monday.
In the same statement, the company also announced that they donated the “equivalent of 400,000 meals through local food banks to alleviate food insecurity in the United States.”
Casino operators across the U.S. are being forced to make difficult decisions to keep their operations afloat and in preparation for making a rebound once the dust from the coronavirus closures settles.
When will that rebound happen? We’re not sure. But while you’re waiting this out, there are plenty of online casinos you can find on our home page that will help fill the gambling void.