Cut costs or invest? in the LVBP

My Las Vegas Business Press column on the dubious benefits of cost-cutting in a hospitality company is out today:

It goes without saying that there are several ways to cut costs. Shaving off some perks — first-class travel for jet-setting execs or caviar in the employee dining room — makes eminently good sense when revenues are down. Likewise, optimizing employment levels, which often means finding ways to do more with less, can help strengthen a hospitality company’s bottom line and competitive position if it’s done sensibly.

But not all cost-cutting provides a net benefit.

via Las Vegas Business Press :: David G. Schwartz : Cut costs now or invest for the future?.

I still don’t understand why you would want to incentivize your executives to make decisions that hold costs down without regard for performance or guest satisfaction. I don’t have any problem at all with people being well compensated for their work (I know I wouldn’t turn down a bigger paycheck if someone offered it to me, and it’s hypocritical to assume that others would), but they should be rewarded for either improving results or delivering better service, not just keeping costs down.

That’s my two cents, anyway. Though if I start cutting costs, I might only give you one cent’s worth next time.

1 thought on “Cut costs or invest? in the LVBP”

  1. David,
    Firstly, let me say that I have a great respect for your opinion. I have been reading your quotes for years in the news and its great that I found your site.

    Now for the topic at hand, which is near and dear to my heart… I agree 100% that compensating for cost cutting without considering other metrics is insane. Using this logic, why not fire everyone and do away with comps while we are at it? We have seen this exact sort of indiscriminate slashing at all of the casinos that were taken over by Harrah’s over the years. Gary Loveman is an MBA to the core who I dont think ever even played a hand of 21 in his life. His believes he is making widgets instead of providing customer service. Rio and Caesars were both gambler favorites at one time and they completely destroyed that. From the insidious 6/5 Blackjack and decimating paytables to taking away discretionary comps from hosts, the whole reason why people return to a casino is lost on them.

    Most gamblers willing accept the house edge if they are rewarded for their patronage. Too many casinos have forgotten that their slot machines are just like the ones next door. Why would I play at a place with bad service and scrooge-like policies? This is the reason why I will vacation on the Strip but take my bankroll to South Point. Michael Gaughan is one of the few left who understands how to truly run a casino.

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