Michael Gaughan Receives Rent Reduction for Slot Machines

On May 30th, 2009, although several gaming concession operators have supported rent reductions in the face of dropping passenger counts, McCarran airport management has continued along with only a few. Easily the biggest break was given to casino developer Michael Gaughan, who owns about 1,500 slot machines installed in concourses. His minimum yearly rent was reduced by $8 million to $27 million.

The smoking ban, which cost an estimated $3 million in slot machine play, plus the dwindling flight schedules have combined to slash slot earnings by eighteen percent through the first quarters of the year, making the probability that the previous minimum of $35 million could have caused losses on Gaughan. Gaughan, who pay the bigger of the minimum or 86.5% of the gross as rent said that he should never have agreed to raise the minimum payment which was previously at $12 million.

While airport management dismissed rent breaks for others making similar arguments like car rental groups, Gaughan possessed a one-of-a kind leverage. When the slot machine concession was put out to bid more than a year ago, about forty individuals showed up at an information meeting but only Gaughan submitted a bid.

Aviation director Randall Walker said that since Gaughan own the machines; his departure if the losses grew too big would leave the airport without any gambling operations for at least 6 months while another slots operator was signed up. It would also affect the plan to install slot machines at the rental car facility this summer. With slots revenue expected to produce about $30 million for the airport this year or close to ten percent of overall revenues, empty slot machine alcoves would affect the budget under stress.

Some smaller businesses received smaller breaks due to special circumstances like relocating an airline to a different gate and others. Airport tenants pay the bigger of a percent of sales, with share varying according to the example of store or a minimum that is fixed or floats according to the sales of the previous year. In general, Walker informed the commissioners when the issue first came up in May that the whole purpose of the minimum year guarantee is to protect the airport during difficult times. This follows the position taken by different airports, which rely on a portion of concessions and an assortment of other fees to pay off bond credit and finance operating expenses. A lot of food vendors have been holding their own or even expanding as airlines have cancelled meal service or started charging for it.

Monday, 29 June 2009
Darren G. Strachan