UNITE HERE! GAMING RESEARCH

Ken Liu (702)387-7001 kliu@unitehere.org

UNITE HERE represents hospitality workers in gaming, hotel, food service, and other industries in the U.S. and Canada. UNITE HERE Gaming Research provides analysis of the gaming industry from the perspective of those who work in the industry.

September 9, 2013

Las Vegas Contract Negotiations: From Simmer to Boil? Union workers preparing for first citywide strike since 1984

Collective bargaining agreements covering 44,000 workers at Las Vegas casino resorts expired on June 1. The operators (except one) and the unions – UNITE HERE’s Culinary Workers Union Local 226 and Bartenders Union Local 165 – have signed extensions, which maintain the status quo while giving either side the right to terminate the contract with 14-days’ notice. Simmering tensions in negotiations now appear likely to boil over as the weather cools and the city enters its busy fall season.

Contract talks have been slow-going. Since June, the unions have held several rounds of talks with the two major multi-property operators, MGM Resorts International (MGM) and Caesars Entertainment (CZR). While there has been some small progress (e.g., updating immigrant worker protection language and changing payroll systems), significant issues remain unresolved.

Union workers are preparing for a major labor dispute. As the companies have shown no urgency toward working out a settlement, union members have started to sign up for ID cards in preparation for a strike. Back in May, union members overwhelmingly approved to raise dues by over 60% to support striking workers if there is a strike this fall.

This year’s contract negotiations in Las Vegas involve virtually all major operators on the Strip and Las Vegas Downtown: Las Vegas Strip Owner-Operator CityCenter’s Aria (50% owned by Dubai World), Bellagio, Circus Circus, Excalibur, Luxor, Mandalay Bay, Monte Carlo, New York-New York

MGM Resorts International

Bally’s, Caesars Palace, Flamingo, Harrah’s LV, Paris LV, Planet Hollywood, Rio,

Caesars Entertainment

Four Seasons, LVH, Stratosphere, Margaritaville, Tropicana LV, TI, Riviera, Hilton timeshares

Various private owners

Las Vegas Downtown Owner-Operator Fremont, Main Street Station Boyd Gaming Golden Nugget LV, The D, Golden Gate, The Plaza, Las Vegas Club, Four Queens, Binion’s, El Cortez

Various private owners

In 2Q13, Las Vegas operations made up a significant percentage of the net revenues and property-level EBITDA of MGM and CZR: Las Vegas operations as share of total operations, 2Q13 Company Net revenues Property EBITDA MGM* 56.2% 57.3% CZR 34.6% 42.7%

*We include here the results of CityCenter, which is a 50-50 joint venture between MGM and Dubai World and is managed by MGM.

Virtually all of MGM’s and CZR’s Las Vegas properties are union with contracts that expire this year. (For CZR, only the Quad is non-union. For MGM, Mandarin Oriental at the CityCenter is

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third-party-operated and non-union; CityCenter’s Vdara, MGM Grand Las Vegas, and the Signature are union with contracts expiring in 2014.) We will analyze in a separate report the significant weights of CZR’s Las Vegas properties in both its CMBS loan and the proposed Caesars Growth Partner transaction. Negotiations Status Since June, the unions have held “big table” negotiations with each of MGM and CZR four times, plus numerous “subcommittee” meetings to address departmental issues (housekeeping, bells, food and beverage services, etc.) The unions have made proposals aimed at securing long-term security of healthcare, pension, and other benefits. The unions are also interested in return-to-work opportunities for union members in food and beverage outlets that closed during the recent recession and have been slow to re-open. On the table are also additional union work opportunities in new venues that the companies are planning to open as the recovery in Las Vegas continues. The companies have not yet made any concrete proposals regarding wages and benefits except for an idea (from CZR) to tie wage increases to net revenue growth in Las Vegas. Both have so far not responded to the unions’ proposal to create health clinics in order to create long-term cost-savings for the Taft-Hartley health plan. Starting in mid-August, the unions have been signing members up on special ID cards in preparation for picketing and striking duties. Back in May, in anticipation of contentious negotiations, union members held a citywide vote to raise dues by 60% (or $25/month) to bulk up the strike fund if there is a strike this year. The vote passed by an overwhelming margin, with 93% voting yes. Recent History of Major Labor Disputes in the Gaming Industry Labor peace has been the norm on the Las Vegas Strip for nearly 30 years. The last citywide strike took place in 1984. In 2009, at the depth of the recession in Las Vegas, the unions even voluntarily agreed to open their contracts and union members voted to give temporary financial relief to the Las Vegas operators. For the U.S. gaming industry overall, the last major strike occurred in the fall of 2004 in Atlantic City. On October 1 that year, over 10,000 members of UNITE HERE’s Local 54 struck 7 casino resorts and scored significant contract gains when the operators settled 33 days later. Collectively, the struck casinos saw their gaming revenues decline by 9.8% y-o-y that October. Caesars Palace AC and Bally’s AC saw their casino revenues drop by 19.0% and 20.5%, respectively. While the strike was over by early November, it had a lingering impact. Harrah’s AC suffered an 18.1% EBITDA decrease for the 4th quarter of that year, and Tropicana AC, which opened a large retail and food-and-beverage expansion called The Quarter in November that year, saw its EBITDA plummet by 44.4%.