erinwootan

Cost Strategies in a Slumping Economy

Posted on: August 13, 2011

This can become...

I just came across a very interesting article by David Schwartz from the Las Vegas Business Press about cost strategies for companies in the hospitality industry and it got me to thinking about the most logical and effective ways to deal with costs when the economy is not running at full strength. The obvious choice would be cut, cut, cut. Logically, if revenues are down, the easiest way to help boost margins is to cut costs. Many of the cost cutting strategies affect your front line employees, but this may not be the best way to approach your cost strategy. Eliminating the need for overtime, running skeleton crews during off-peak times and even eliminating free meals for employees (to name a few) can greatly affect the moral of your employees. And if they’re unhappy, you can bet at least some of that unhappiness will be passed along to your customers. In the years since the recession began in 2007, I’ve seen a few waves of layoffs and position eliminations as a cost cutting strategy. It’s very hard to be productive when positions are being cut left and right and you’re left wondering if you’re next. I’m not saying that this is a completely unnecessary strategy, but it seems to be the first place companies go to reduce costs and it’s often the most detrimental to the attitudes of the employees who are left behind. As a result of layoffs and position eliminations, remaining employees are also left with a greater workload for the same or sometimes less money than before. Yet another way companies are not helping the attitudes of employees.

...this faster than you may intend.

I haven’t even mentioned the cost cutting strategies that directly affect your customers such as reduction in comps or, like a Las Vegas casino recently did, elimination of comps and even revocation of comps. It doesn’t make sense to alienate your customers or scare them away just so the CFO can sh

ow improvement on the bottom line. There has to be a point at which upper management starts realizing that these cost cutting strategies may not be the best long term solution, and hopefully that does not happen before it’s too late and your customers have gone looking for greener pastures. As I’ve mentioned before, the gaming industry is experiencing a stagnation, and in some cases decline, and any strategy that sends your customers to a competitor because you’ve committed to a cost cutting strategy that negatively affects their bottom line is definitely not the smartest move in my opinion. Why should your customers wait in longer lines, or go to dirty restrooms just because you’ve cut your staff to levels that no longer make your organization as efficient as it can and should be?

It would be pretty naive to assume that cost cutting measures are always efficient, effective and full of sunshine and rainbows, but I would hope there are better ways to look at the BIG picture, rather than going for the most obvious choices that can seriously harm your most basic business practices. Using the charts above, using innovation to improve business rather than simply cutting costs or spending money on things that are simply sustaining the business can greatly help the bottom line and can put you a step ahead of your competitors.

Trust me, this is NOT where you want your business to end up.

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About Me

This blog is devoted to the gaming industry news and information - keeping you up to date on the happenings in the gaming world. My personal expertise lies in event planning and entertainment in casinos.

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