The state of Nevada reported that for fiscal 2005 revenue from hotel rooms and food & beverage in hotel casinos was greater than revenue for gaming. Stephen Goebel looks at the impact of this shocker on compensation for casino executives.

Today's casino resort operations include a very large variety of ways in which a guest might entertain themselves from weekend hotel getaways, shopping, or dining to taking in a movie, bowling or even ice skating. However, the real business of a casino property is and always was conducted on the gaming floor! Right?

Perhaps the answer to this question is not as obvious as it once was. The 2005 revenue statistics for the gaming industry in the state of Nevada show, for the first time in history, that 51% of casino resort revenue came from hotel rooms and food and beverage sales! This reflects changes which have occurred particularly in Las Vegas, Mecca for casinos, where hotel room rates have been climbing steadily for the past five years and the quality and variety of fine restaurants and nightclubs is now on par with the best restaurant cities in the U.S.A. More importantly, hotel rooms and restaurants have become real profit centers for modern casinos not just must-have amenities.

There are still many "locals" markets in Las Vegas and elsewhere that are less impacted by hotel room rates, but not any less by the quality of restaurants and other entertainment. At any given moment in the casino nearest you, look around and try and estimate the number of people in the casino who are not gambling and came for dinner, a show, or other event and may or may not ever fill a gaming position. Casinos are "a scene" a modern place to be, and be seen and the quality of their "other services" is more and more becoming the differentiating factor in why guests choose where they go to gamble and/or just be entertained.

This led me to wonder if compensation for the executives in charge of hotel and food and beverage services has achieved parity with that of their peers running the gaming operation. To find out, I queried our proprietary HCE Compensation Exchange, Gaming Property Report for 2005, comparing the compensation of VP Hotel Operations and VP Food & Beverage to that of VP Casino Operations, VP/Director Slot Operations and VP Table Games. Since these revenue statistics are taken only from Nevada casino operations I selected only compensation data from Nevada based casinos.

Base Salary - 2005

Position Minimum 25th percentile Median 75th percentile Maximum
VP Hotel Ops $48,530 $91,650 $142,215 $186,045 $395,638
VP F&B $55,000 $82,575 $115,680 $158,541 $219,875

Position Minimum 25th percentile Median 75th percentile Maximum
VP Casino Ops $75,788 $115,095 $168,451 $242,510 $447,673
VP Tbl Games $59,525 $92,675 $124,556 $155,500 $260,000
VP Slot Ops $68,520 $90,510 $131,025 $174,266 $281,216

It will come as no surprise that the VP Casino Operations is making the highest median salary of the group at $168,451 or 18% more than his or her nearest peer. The surprise may be that the next highest median base salary is going to the VP Hotel Operations. The increased average rates and the realization of hotel rooms as a profit center for the property are likely justification.

The VP Food and Beverage remains the lowest earning position of this group. However, this may be inevitable as profits from Food and Beverage operations, with the exception of nightclubs, will never be as high a percentage of the revenue dollar as gaming or hotel rooms.

Bonus - 2005

Position Minimum 25th percentile
VP Hotel Ops $38,875 $105,821
VP F&B $24,441 $73,650

Position Minimum 25th percentile
VP Casino Ops $56,520 $242,975
VP Tbl Games $28,775 $91,615
VP Slot Ops $31,948 $108,722

Since bonuses are most often calculated as a percentage of base salary we find that similar trends exist in this area as we found above. As a percentage of salary VP Casino Operations earned a median bonus of 34% while VP Hotel Operations median bonus percentage was 27%. All the other executives in this group earned median bonuses of less than 25% of their base salary with the VP Food and Beverage again earning the least at 21%.

In summary, while I obviously can't state that the "service" executives have achieved parity in compensation I think there is a definite trend in that direction. Certainly when compared to an industry of a not so long ago that considered hotel room and meals something to give away in order to lure players to their gaming tables this shows progress and a heightened awareness of the need for competitive service in gaming resorts. I, like many others feel that it will be these types of services that will be a property's competitive advantage as the gaming industry continues its growth in new and existing markets in the U.S. and abroad.

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Leora Lanz
HVS Sales & Marketing Services
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