SUB OPTIMISATION

by E Malcolm Greenless

One of the serious organisational problems that has developed in the casino business in the last few years has been a growing sub optimisation of the overall hotel casino performance. There have been many reasons advanced for this situation. One of the most significant is that the importance of overall profit performance has become a widely recognised ideal within various training programs as well as traditional educational institutions over the past five to ten years. The result of this "profit focus" is that new managers, usually trained in traditional areas of hotel management such as food and beverage operations, tend to focus on the profitability of their individual departments and fail to recognise the complex interplay between the service or support functions of the hotel and the primary revenue generating function of the casino.

The use of complex departmental profit and loss statements may have accelerated this process by improperly focusing the attention on the bottom line of the departmental unit rather than the overall hotel casino operation. Thus the unfortunate situation arises where decisions are made to maximise the departmental profit - or perhaps contribution - while the overall quality of casino customers is slipping, casino revenues are decreasing or costs are being increased in the casino area.

The problem of sub optimisation cannot be avoided simply by the use of one form of financial statement or another, but the use of some types of financial statements that create the illusion of "bottom line responsibility" may have contributed to some undesirable trends in hotel casino management.

Date Posted: 28-Feb-1999

Excerpt from "Casino Accounting and Financial Management" by E Malcolm Greenless