The Crimson Press Curriculum Center

First Page and the Assignment Questions:
In our world, good controls mean good business. A lot of our controls are dictated to us by the Nevada Gaming Control Board, but we would institute most of the same controls they require anyway. The State wants its share of the revenue. We want to earn profits.
   Trent Walker, Bellagio Casino Controller

MGM MIRAGE AND ITS PROPERTIES

The Bellagio was one of 23 properties of MGM MIRAGE (NYSE: MGM), one of the world's leading hotel and gaming companies. In addition to the 23 properties shown in Exhibit 1, MGM MIRAGE was also developing a major resort in Macau (with a joint-venture partner) and a new multibillion dollar “urban metropolis” on 66 acres of land on the Las Vegas strip. At the end of 2005, the company had over 66,000 employees and total assets of over $20 billion (see Exhibits 2 and 3).1

MGM MIRAGE operated primarily in one industry segment, the operation of casino resorts, which included gaming, hotel, dining, entertainment, retail, and other resort amenities. All the MGM MIRAGE casino resorts operated 24 hours a day, every day of the year. Over half of the company's net revenue was derived from non-gaming activities, a higher percentage than many of MGM MIRAGE's competitors.

Primary casino operations were owned and managed by the company. Other resort amenities sometimes were owned and operated by the company; owned by the company but managed by third parities for a fee; or leased to third parties. The company, however, generally had an operating philosophy that preferred ownership of amenities, since guests had direct contact with staff in these areas and the company preferred to control all aspects of the guest experience. However, the company did lease space to retail and food and beverage operators in certain situations, particularly for branding opportunities.

As a resort-based company, MGM MIRAGE's operating philosophy was to provide a complete resort experience for guests, including non-gaming amenities that commanded a premium price based on quality. The company's operating results were highly dependent on the volume of customers at its resorts, which in turn impacted the price it could charge for hotel rooms and other amenities. MGM MIRAGE also generated a significant portion of its operating income from the high-end gaming segment, which also caused variability in operating results. Results of operations tended not to be highly seasonal in nature though, but a variety of factors could affect the results of any interim period, including the timing of major Las Vegas conventions, the amount and timing of marketing and special events for high-end customers, and the level of play during major holidays, including New Year and Chinese New Year. However, the company's significant convention and meeting facilities allowed it to maximize hotel occupancy and customer volumes during off-peak times such as mid-year or during traditionally slower leisure travel periods, which also allowed better labor utilization.

Assignment

1.   Focus on three key roles at mainly three levels of authority in the casino - blackjack dealers, pit bosses, and the vice president of table games. How would you characterize the “control strategy” (e.g., tight vs. loose) used over each of these roles?

2.   Prepare a list of the controls described in the case. What control problems are they designed to address? Are the managers interviewed for the case justified in being proud of their company's control system? Why or why not?

3.   Are any of the control systems in place at the Bellagio suitable for firms in other industries?