UNITE HERE estimates strike could cost over $300 million for Caesars Entertainment and MGM Resorts in Las Vegas
LAS VEGAS, May 30, 2018 /PRNewswire-USNewswire/ -- New investor alerts from UNITE HERE Gaming Research, the research arm of the hospitality workers' union, project that a one-month strike in Las Vegas could cost the two largest employers on the Las Vegas Strip – MGM Resorts International and Caesars Entertainment Corporation – over $300 million in operating profits.
"It is difficult to gauge the potential impact of a large-scale strike in Las Vegas since we haven't had one since 1984, but we think a strike now would significantly impact MGM and Caesars' operations on the Strip," said Ken Liu, a UNITE HERE analyst. "With lower revenues and reduced operating margins, we believe a month-long strike could cut Caesars' EBITDAR by about $115 million and lower MGM's EBITDA by just over $200 million."
UNITE HERE Gaming Research's investor alerts are available here (for MGM) and here (for Caesars).
Labor contracts covering 50,000 hospitality service workers in Las Vegas expire at the end of the month. Approximately 24,000 MGM workers and 12,000 Caesars workers are part of this year's contract negotiations. Last week, 25,000 union members voted by a 99% margin to authorize the union negotiation committee to call a strike if necessary. The last major strike by a UNITE HERE local took place in Atlantic City in 2004. That strike lasted 34 days, and the union won a historically good contract.
In Las Vegas right now, major outstanding issues between the employers and UNITE HERE's Culinary Workers Union Local 226 and Bartenders Union Local 165 include technology, hotel housekeeping workload study, union security in case of property ownership change, and wages and benefits. Going back to 2012, the Unions have seen economic increases (for wages and benefits all-in) averaging 2.2% per year. For the new 5-year contract, the Unions are proposing average increases of 4.0% per year. The Union's goals are to cover anticipated healthcare cost increases, improve pension benefits, and create above-inflation wage increases. The companies have countered with about 2.7% average annual increases over five years.
Caesars had projected free cash flow of approximately $2.9 billion through 2021 when it was preparing to complete the Chapter 11 reorganization of its CEOC subsidiary last year. The company also does not expect to be cash taxpayer for the next three years, and just announced a share buyback program of up to $500 million. In 2017, the company's CEO received nearly $24 million in total compensation, and the company's 2017 reported CEO pay ratio was 601:1.
MGM has projected free cash flow of up to $5 billion from 2018 through 2020. The company has also just announced a new, $2 billion share buyback program, having recently completed a $1 billion share buyback. The company's 2017 reported CEO pay ratio was 396:1.
Culinary Workers Union Local 226 and Bartenders Union Local 165, Nevada affiliates of UNITE HERE, represent over 57,000 workers in Las Vegas and Reno, including at most of the casino resorts on the Las Vegas Strip and in Downtown Las Vegas. UNITE HERE represents 270,000 workers in gaming, hotel, and food service industries in North America.
SOURCE Culinary Workers Union Local #226
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