With the passage of Proposition lA, the good citizens of California are expectantly (or apprehensively) waiting for  Nevada style" casinos to arrive in their state. Prop lA will no doubt affect traditional gaming markets, most specifically Las Vegas. One of the primary effects will be to further stretch an already thin managerial talent pool.

The industry experienced a similar situation in the mid '90s when a number of new "emerging jurisdictions" opened for business. We decided to take a look at those jurisdictions to determine what it might cost a California operator to assemble a new executive team.

The playing field In dollars

We pulled compensation data from the Hospitality Compensation Exchange (for properties in the Midwest and the South, where the locals driven markets should be similar to the new California casinos).  Jurisdictions included Mississippi, Louisiana, Indiana, Illinois, and Missouri. We analyzed data for the four top managers in a casino: CEO/GM, CFO/Vice President of Finance, Vice President of Gaming Operations, and Vice President of Marketing.

Although there are many factors that affect compensation levels in gaming, the most consistent over time has been casino size. By and large, the bigger and more sophisticated the casino, the greater the paycheck.

Beyond size, California operators will also have to pay a premium for startup experience. The premium in previous startups averaged nearly 20% for lateral moves and almost 15% for promotional moves.

We would expect that new casinos in California would have to pay in the top two quadrants of the salary scale (50th Percentile to Maximum). Likewise, pay
for the top four executives would average approximately $178,500 for a CEO/GM, $108,000 for a finance officer, $106,200 for a top operations executive, and $115,000 for a senior marketing officer (see Table 1).

Bonus payouts would follow a more traditional scenario, with a CEO/GM needing a bonus equivalent to roughly 20% to 30% of base salary. The other three positions would see bonuses that equate to 10% to 20% of base salary (see Table 2).
 
 

Gentlemen, bring your checkbooks

While it may be true that recent consolidation in the gaming industry has made free agents Out of some top quality professionals, these individuals will find work long before a casino is built in California. One of the major lures for the Golden State is its climate and quality of life.

Yet quality comes with a big price tag. Housing, state taxes, and other factors make California an expensive proposition. We are counseling our California clients to think long term and balance the cost of talent with expected returns over a certain time horizon.

The quest for the best and brightest is going to get fierce. So bring your beautiful weather, bring your lovely new casinos, and above all, bring your checkbooks.
 

Keith Kefgen is president of HVS Executive Search, a division of HVS International. Stephen Goebel, is vice president of HVS
Executive Search and works with gaming industry clients. HVS Executive Search, the Mineola, NY - based human resources consulting firm, also produces the Hospitality Compensation Exchange Annual Report.