Union puts spin on casino revenue

May 21, 2007 4:47 AM

Throughout the country, we’re reading about unions attempting to organize dealers and other casino workers. Why should Colorado be any different?

A recent article in the Rocky Mountain News had this headline, "Union trying to organize casino workers in Black Hawk."

The targeted casinos are "Ameristar, The Lodge and the Gilpin (both owned by Jacob’s Entertainment), Mardi Gras and Central Station.

The United Food and Commercial Workers Local 7 union decided to target Black Hawk instead of Central City or Cripple Creek because in the words of Ernie Duran III, a director at UFCW Local 7, "We’re going after casinos making huge amounts of money."

Note the semantics, "we are going after," like it’s an extortion attempt instead of something of the gist of "we are going to work with the management."

The logic is good on whom to "go after," but the facts do not support that the casinos are the giant cash registers this party assumes.

Here are Operating Income Margins for the casinos in question:

Ameristar St. Charles 22.1%

Ameristar Kansas City 19.5%

Ameristar Council Bluffs 30.3%

Ameristar Vicksburg 30.8%

Jackpot Properties 17.0%

Mountain High/Ameristar Black Hawk: 0.6%

The above figures are the Operating Income Margins (operating income/revenues) for Ameristar Fiscal Year 2006. The financial information is available from Ameristar’s web site under the category of investor relations and may be verified with Security and Exchange Commission (SEC) filings.

In other words, for every dollar Ameristar Black Hawk brings in, the amount dropped into the proverbial piggy bank is $0.006 — 60% of a penny. With the addition of hotel, retail, and food and beverage in the coming year, the ancillary revenue garnered will increase this figure, but I would not describe this rate of return as huge amounts of money for the "big boys" in the Black Hawk market.

The other companies are privately held and thus their finances are not publicly disclosed, but knowing the market, it is safe to assume that the other listed properties also are not requiring wheelbarrows to carry their loot to the bank.

In fact, at less than 1 percent return at Ameristar in Fiscal Year 2006, money could have been made more efficiently by placing it into a child’s passbook account at a local bank.

The other salient fact is that one of the reasons return is so low for a property like Ameristar Black Hawk is that the company already offers (costly to the parent company) benefits to all employees (e.g., health care, 401K matching, etc.) that other companies with employees of comparable work skill levels do not receive. Taking orders at the snack bar at Ameristar will provide an employee with a salary and decent benefits, taking orders at the local pizza place will not.

The article refers to the $53.6 million in Adjust Gross Revenue (revenue minus payouts to winners) the Black Hawk casinos "made," and in the next paragraph notes the firm’s 4,397 employees.

Those employees are not working pro bono, and then there are the taxes, and physical plant upkeep, and numerous other detractors from the bottom line.

One of the first things one learns in business school is to comprehend and respect the key performance indicators (KPI) that reveal the general status of a company. By the look of Ameristar’s operating income margin, one recollects the maxim, it is not what an organization brings in, but what it keeps that counts.

Founded in 1996, Yarborough Planning, LLC partners with select clientele to better understand and address business process issues. Core competencies include training, providing reliable and valid research, strategic / analytic marketing, and accountable Customer Relationship Management (CRM) development and implementation. David Paster is accepting new clients and may be reached at (702) 813-5062 or [email protected]