Should Casino’s Manage their restaurants in-house or outsource to a third-party management company?

I’ve noticed several different types of management styles for restaurants within Casinos both as a Financial Auditor and as an Operator myself. I’ve worked for a third-party management company within the MGM Resorts and as a Casino Director responsible for on property amenities. Each management style has its benefits and pitfalls. The most noticeable difference between management styles is the venues relationship with Comp Revenue, the treatment of Casino guests, and the goals of chasing revenues compared to profitability.

Based on revenues, yelp reviews, and knowledge that third-party management focuses exclusively on the product it provides, I believe that the moderate loss in food and beverage profitability as a percentage of total revenue is worth the advantages of a third-party management agreement. Transferring the responsibility of hiring, training, and managing onto experts within the restaurant industry is more beneficial than managing a team within the Casino’s organizational chart. In addition, the ability of a third-party management company to utilize their database and brand equity to advertise your Casino is invaluable.

In 2020, 11 of the Highest Grossing U.S. Restaurants were located on the Las Vegas Strip inside Casino Resorts.

  • #7 Top of the World, $25.2M in estimated sales *
  • #17 Joe’s Seafood, Prime Steak & Stone Crab, $22.2M in estimated sales
  • #21 Bazaar Meat by Jose Andres, $22.2M in estimated
  • #22 SW Steakhouse, $21.5M in estimated sales *
  • #25 Mon Ami Gabi, $20.1M in estimated sales
  • #37 Lavo Italian Restaurant & Lounge, $18.4M in estimated sales
  • #38 Prime Steakhouse, $18.2M in estimated sales *
  • #56 Delmonico Steakhouse, $16.2M in estimated sales
  • #65 Carmine’s at the Forum Shops at Caesars, $15.1M in estimated sales
  • #75 Beauty & Essex, 14.1M in estimated sales
  • #100 Virgil’s Real Barbecue, $11.4M in estimated sales

* managed by Casino management.

Of those 11 restaurants, 3 are managed by the Casino’s internal staff and 8 are managed by third-party operators. The three Casinos are The Strat, the Wynn, and the Bellagio. Both the Wynn management and the Bellagio management also operate 5-star hotels, and arguably the most luxurious resorts in the world. The Strat is home to the Top of the World restaurant, which has one of the best views of the entire Las Vegas strip. These Casinos are either blessed with an outstanding location, such as the Strat, or are culturally programmed to sacrifice no expense in the pursuit of quality, such as the Bellagio and the Wynn.

When it comes to Yelp reviews, among the top ten rated restaurants on the Las Vegas Strip, only one is managed by the Casino, Bacchanal Buffet in Caesars Palace.

In 2016, according to a report from the Nevada Gaming Control Board and UNLV Center for Gaming Research, food and beverage revenue makes up approx. 22 percent of casino’s total yearly revenue. The beverage revenue is climbing, but the food revenue remains relatively consistent year over year, excluding 2020.

What do you think? Is the third-party management worth the expense?

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