Recently the Las Vegas Sun ran a story by their excellent business and gaming writer Liz Benston:
People — Your Customers and Employees — Are Your Most Important Resource
The content is from Barry Shier, who worked closely with Steve Wynn for many years and now heads a consulting company, The Partner House. Shier suggests some excellent, realistic New Years resolutions that Las Vegas casino-resort operators should follow.
More details on Barry Shier’s career, below.
His suggestions are very worthwhile, and we hope they makes it to the desk of some hotel-casino executives. He reinforces what many others have said.
As with the Mirage debut, the recession and arrival of CityCenter are another turning point for Las Vegas — a time to rebound or stumble. To get through this recession, Shier says, Strip operators need to put down their Bloody Marys and add the following to their list of New Year’s resolutions:
Conventions, Conventions
Casinos figured out early on that booking conventions and trade shows months or years in advance allowed them to charge higher rates for everyone else who tried to book rooms afterward.
When that business fell through in the downturn, rates fell harder. Until the convention market rebounds, business is going to be tough in Las Vegas. Lots of nice hotel rooms — the town’s chief asset — have become its biggest liability. Tourists aren’t enough to fuel the Strip.
Reinvest Now, Not Later
Spending money to keep things fresh is a requirement in Las Vegas, a high-volume traffic zone where things wear out or tire faster than they do elsewhere. Now is the time for companies to update rooms and other attractions, not when business is at its peak and closing amenities for servicing will cost companies even more revenue. While that will be tough for companies with big debts, they will be forced to keep up.
“When you don’t reinvest, you very quickly get behind the 8 ball,” which can significantly hurt profits down the road as customers see that “things weren’t what they used to be,” Shier said.
Forgoing improvements hurt employee morale, he added. “Your employees need to take pride in their facilities and what they represent.”
Don’t Ignore Penny-Pinchers
Remember the adage: It costs more to cultivate a new customer than keep an old one. Some hotel operators aren’t aware of how much their marketing departments are spending to attract each new customer and may be spending more than they should attracting new visitors rather than keeping the ones they have.
“Someone who spends $25 in a store is a potential customer who may spend more on the next trip” if they have a good time, Shier said. “A lot of people believe that once they get people into the property they’ve done what they need to do. That’s just the beginning. This is the time to shine, not when they have left and you’re telling them what they can do on their next trip.”
Customer Service Is Key
Customers form an impression when they first step onto a property, before they speak with anyone. That first interaction with a customer is a critical time when the employee can either reverse a visitor’s negative first impression or confirm it. To make good impressions, workers must set aside concerns about lower tips, foreclosed homes and other personal troubles.
“We’re all on stage in this business and we have to make people feel good,” Shier said. This task, he said, falls to line workers, as most casinos are no longer owned by individuals with strong personalities that project “a level of quality and promise” customers can cling to. Also, casinos that rely too heavily on technology risk losing the personal touch that attracted customers to Las Vegas in the first place.
Attract International Visitors
Some foreign tourists have a greater propensity to spend money during their trip than Americans do — a gap that’s even more obvious with the national economy in worse shape than many others around the world. “About 8 percent of our business is international and we need to make that 20 percent,” which would bring Las Vegas closer to bigger, port-of-entry cities such as Los Angeles, Seattle and Miami, Shier said.
Meet Expectations
Luxury hotels will have little problem attracting customers, as customers are getting top-tier service and amenities for less. At budget properties, guest expectations are already low. They need only offer bargain-basement prices to appease customers.
It’s the mid-market properties that are headed for trouble, as customers may expect more than some properties are able to deliver for cut-rate prices. The largest chunk of these bargain-hunters are from California, where the economy is also hurting. Price increases will be difficult, Schier said, as the Internet has made comparison shopping easy and because “consumers have become intoxicated with markdowns.”
Have A Heart-To-Heart With Employees
Managers should schedule pep talks with individual employees to tell them how their companies, with their help, are going to weather the downturn.
If employees feel “it’s all for naught,” they might not be as professional with the next disgruntled customer who comes along, he said.
The topics are preceded by a short bio of Shier, mentioning his post-Mirage Resorts involvement with F.X. Sillerman’s CKX Company and the planned (now defunct) Elvis theme hotel at Harmon and the Strip. (Shier purchased 500,000 shares of the CKY common stock at a price of $5.14 per share.)
Related story April 22, 2010 – Las Vegas Sun: F.X. Sillerman’s Elvis Resort Seeks Bankruptcy
The Sun ignores his responsibility in building the Beau Rivage in Biloxi, Mississippi , which is covered in the following story. The Beau Rivage encountered many problems, and the purpose of addressing it here is not to diminish Shier’s accomplishments, but to provide greater perspective, examine more of Shire’s experience, and most importantly, propose that he learned a great deal from his experience in Mississippi.
More on Barry Shier
Barry Shier was a key executive with the Golden Nugget and in many respects Steve Wynn’s lieutenant and right hand man. He joined Wynn in 1984 from the Waldorf-Astoria Hotel as executive assistant and resident manager of the historic New York City property.
He joined the company as executive vice president of hotel operations for their two properties; Las Vegas and Atlantic City. Following the sale of the Golden Nugget Atlantic City to Bally Manufacturing in 1987, Shier’s responsibilities were expanded to include coordination of marketing activities for the parent company. In this capacity, Mr. Shier was involved in the expansion of the Golden Nugget, and the design and development of The Mirage.
In 1991 Shier was named as president of the Golden Nugget and Casino in addition to his role as executive vice president of marketing and hotel operations for the parent company, Mirage Resorts
In 1995 Mirage resorts announced plans for resorts in Las Vegas and Biloxi. The Bellagio was originally named Beau Rivage until Steve Wynn saw the beautiful village of Bellagio on Italy’s Lake Como. The Golden Nugget in Biloxi became Beau Rivage. The Bellagio was budgeted at $1 billion and Beau Rivage at $200 million.
The most extensive project ever conceived in Biloxi, 18.2 acres were purchased at a cost of $27 million. Wynn time and commitment was to the construction of the Bellagio and in November of 1995 he assigned Shier full responsibility for Beau Rivage.
Contractors working on Beau Rivage saw no cost constraints and felt that Shier was given carte blanche to build the resort. The luxurious 31 slip marina cost $10 million and fifteen mature live oaks graced the entrance, at a cost of $67,000 each.
Bellagio opened in October 1998 and Beau Rivage opened in March of 1999. Bellagio came in at $1.6 billion and Beau Rivage at $680 million. Beau Rivage had grown from 1200 to 1780 rooms, and four restaurants to twelve food outlets.
Biloxi was essentially a day trippers market, and Wynn wanted Beau Rivage to impact the destination as the Mirage had Las Vegas in 1989. Even at over triple the planned cost, revenue expectations were high and Mirage stock was at $22.
Market evaluation indicated the property needed to draw from a 600 mile radius to meet projections, greater than the current drive-in market. The property spent $5 million subsiding flights from Dallas, Atlanta and Nashville.
Unfortunately the property opened at the beginning of the peak spring and summer southern vacation season, and the staff was not fully prepared for the level of business, and much of the properties offerings did not match the current market. Long waits at valet parking were followed by long lines at the front desk. Southerners with the level of income the resort was built for, didn’t see Biloxi as a destination. The luxury spa did little business. A beautiful property, visitors wanted to see it, then went to familiar casinos, where slots were looser, comps more plentiful and the buffet featured familiar southern items. However, interest in the resort helped drive a 43% increase in Biloxi casino revenues.
Management admitted it didn’t know the Mississippi market as well as they thought. It didn’t take long for a complete overhaul of the property. Staff and management changed, menus were revised, dining specials added, room rates lowered, and the staff was reduced to 3,680 employees. The level of customer was not what Wynn and revenue projections had envisioned, and management continued to learn the intricacies of the South, the Gulf Coast, and Biloxi.
Wynn placed the responsibility squarely; “Barry Shier dreamt up Beau Rivage”. He also said “Sometimes you just misfire” and “There’s plenty of time, its going to be there forever”. He also said the company spent too much on the property, but implied this was a component of Mirage Resorts success.
In February 2000 Mirage’s share price was at $10.625, seen as less than the company was worth. Quickly, Kirk Kerkorian and MGM acquired Mirage Resorts (including Beau Rivage) for $6.4 billion, the final offer representing almost a 100% increase in the price of Mirage stock from where it closed prior to the offer.
Some believe that Beau Rivage sufficiently weakened Mirage Resorts to facilitate the transaction. Steve Wynn certainly has an eye for a good deal and may have felt it could be difficult for the stock to reach $20 in the foreseeable future. As much as he loved his creation, the Bellagio, at the time he may have seen the financial reward as a step toward his next creative project. Now we have seen the project.
