Cost controls drop Monarch revenue growth into profit | nnbw.com

Cost controls drop Monarch revenue growth into profit

John Seelmeyer

The record earnings reported by the parent of Reno’s Atlantis Casino Resort last week are a textbook example of cost control and the dramatic role that technology can play.

Monarch Casino & Resort managed to bring a full 70 percent of its growth in net revenue to the bottom line during the final three months of 2004.

Technology played a big role, said John Farahi,Monarch’s chief executive officer and co-chairman.

In the Atlantis casino, for instance, conversion of 90 percent of the slot machines to ticket-in, ticket- out systems is paying off in reduced labor costs.

In the hotel, to cite another example, housekeepers now use technology to let the front desk know the minute that a room is ready for the next customer.

And at the front desk, the company’s investment in new technology speeds the check-in process, allowing the existing staff to serve growing numbers of customers.

“Technology is helping us tremendously,” Farahi said.”It’s bringing our labor costs down.”

The numbers tell the story: The company reported record quarterly revenues of $31.2 million, an increase of about $3 million over the fourth quarter of 2003.

Its profit,meanwhile, rose by $2.1 million to total $3.9 million for the three months.

A sharp decrease in depreciation and amortization cost a decline of nearly $1 million played a part in the earnings increase.

So did a savings of nearly $238,000 in loan-guarantee fees no longer paid by company’s major shareholders Farahi and his brothers, Ben and Bob after a new loan was nailed down last year.

But the company’s operating staff kept a tight hand on costs as well.

Casino revenues, for instance, increased by $1.9 million from the fourth quarter of 2003 to the fourth quarter of 2004.

The operating expenses in the casino, however, rose only $250,000 in the same period.

Food and beverage revenues climbed by $973,000, but costs were up only $166,000.

Hotel revenues rose by $591,000, but hotel costs rose only $92,000.

For the full year, the company said operating costs grew only 4.5 percent, and 67 cents of every new dollar of revenue flowed through to the bottom line.

Farahi said old-fashioned management attention also played a part in the company’s cost control.

Saying that he believes managers shirk their responsibilities when they use terms such as “micro-manage,” Farahi said managers and supervisors at Atlantis are held personally responsible for the company’s operation.

The strong increases in profitability are helping Monarch Casino pay down its bank debt.

On Dec.

31, its outstanding debt was $32.4 million, a 31 percent reduction from the $47 million a year earlier.


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