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Station management and Colony Capital blazed a trail last year in taking the company private, a trail now potentially headed for bankruptcy. That’s what happens when one levers up at the highest multiple, at the peak of market and the peak of the easy money era.
Station is now blazing another trail in eliminating employer matching contributions to employee 401(k) plans. Like many gaming operators, Station has laid off employees this year but this is the first I’ve heard of a gaming company cutting benefits. It’s hard to believe that employee morale and service levels won’t suffer. Station’s employees have seen coworkers laid off and now their benefits cut at the same time their 401(k)s are likely down significantly already with the stock market crash.

Whether this is the right move for Station at this juncture is debatable, but it certainly adds to the list of potential competitive disadvantages vis-à-vis Boyd Gaming in the locals Las Vegas market. Unlike Station, BYD is on the right side of the liquidity trade. We’ve written extensively on the advantages liquidity provides in this environment including:

• The ability to acquire cheap and strategic assets or companies in a buyer’s market with few buyers
• More cash for advertising, marketing, and promotional activity
• Liquidity to upgrade slot floor – this is a biggie
• Better maintained facilities overall

Better customer service should be the next opportunity for BYD to steal share. Employee relations are very important in this labor intensive and service oriented business. Happy employees provide better service. Ask Steve Wynn. Hopefully, BYD will capitalize.