Broken Trends

The last couple of months, my kids have been home from school and my wife and I have been working remotely. We have been very limited about where we can go, so we have eaten most of our meals at home. And we’ve eaten a lot! We hardly drive at all, anymore. When we do, we’ve paid under a dollar for a gallon of gas for the first time in twenty years. Trying to make sense of our family budget has been challenging, to say the least, and will probably be interesting for a while. I don’t even know how to begin to make comparisons to say if we are managing money well or not!

Take my situation and multiply it by about 20 other variables and you can begin to navigate through the financial situation of Tribal casinos. Over the years, we have told clients that a solid understanding of their past along with valuable insight from present conditions will provide a good indicator for the future. But then, a worldwide pandemic destroyed that logic (for now at least!). That said, a strong financial analysis of your business is as critical as ever. Lack of business activities over the last few weeks might make this feel like a moot point, but the reality is it is as good as time as any to evaluate what you’re doing and make changes if possible!

Most casinos are going to have about two months of lost revenue. The Tribal gaming business is very cyclical, and we are talking about two months of revenue during peak times, historically. Without question the pandemic is going to hurt. That doesn’t even consider the likely hesitation some customers will continue to have, even after reopening or the potential shortened business hours many casinos are considering. In other words, revenue might not look the same for the rest of 2020. However, a strong financial analysis can offer insight into what you were doing right before the pandemic. Were your marketing efforts effective? Was your gaming floor maximizing it potential? Did you have too many machines? Too few? Before the pandemic, the U.S. economy was booming. Logic would suggest that revenue would have been trending upward. Was that the case? Understanding this information will allow casinos to reopen with a new set of rules.

The same logic follows for expenses – maybe even more so. While everyone will have to deal with a decrease in revenues, expenses have, and will, continue. Profit is most simply defined as revenue minus expenses. Under the assumption that revenue is lost and the chances of recovering that quickly is slim, it makes the most sense to focus on expenses. Many of these expenses cannot be avoided. Utilities and labor are prime examples. No financial analysis will eliminate the need for those expenses; however, a good financial analysis may provide some awareness and alternatives for some costs. Again, as operations has been at a standstill, there is no time like the present to evaluate options for reducing those expenses and working toward generating a profit again.

I was reconciling my checkbook and penciled in the $70 gym membership I pay every month. It is worth noting I only use about $35 worth of a gym membership – an option the gym offers, I just haven’t taken advantage of. These expenses certainly capture my attention more these days. Sometimes you just need a little help finding them!