Mba 520 Economics - Environmental Analysis

Running Head Environmental Analysis

University of Phoenix

MBA 520 Economics

Prof. J. Kirrk

June 25, 2007

Purpose

The purpose of this paper is to identify key macroeconomic variables that affect the Resort and Casino industry. Also, I will choose two macroeconomic variables and will identify and locate the corresponding industry variable. The two variables will be GDP and the unemployment rate for both national and industry, I will use a table to show the economic growth for the past five years. Based on the environmental analysis completed, I will identify what challenges and opportunities exist in the operating environment for the Casino firm I represent which shall remain nameless.

Resorts and Casinos Industry

Effect of Macroeconomic Factor: Hurricanes

This year’s State of the States report features the results of a special survey of opinion leaders from the U.S. Gulf Coast on the status of regional recovery efforts and the outlook for the future of the local economy, particularly with regard to the gaming industry in the region. Conducted by Vox Populi Communications, the results show the area continues to face a number of challenges, but the entire region and the gaming industry along its shores are well on their way to exceeding the levels of success exhibited before the storms. According to the results, the lack of affordable insurance, a significant housing shortage for lower- and middle-income residents and an employee shortage are among the problems the region still needs to overcome. Despite these obstacles, however, the outlook for growth is tremendous. Interviewees say the casino industry has been a major contributor to overall recovery efforts in the region and think the casino industry will grow more quickly than the rest of the local economy in coming years. The shift to land-based resorts on the Mississippi Gulf Coast and the growth of non-gaming amenities at casino facilities will help the region’s tourism and gaming industries grow beyond pre-hurricane levels, according to respondents. They also expect that within 10 years the overall level of tourism in the region will be greater than before the hurricanes.

Other Macroeconomic Factors

The hospitality and tourism industry continues to grow in both revenue and employment totals. But employee turnover, which exceeds 100 percent annually, remains a key concern. Multi-cultural employee populations can lead to miscommunication and misinterpretation. Health and safety compliance concerns are constantly coming to the surface. And macroeconomic factors, such as fuel costs, airline bankruptcies and terrorism affect the daily life of professionals in this space. According to Fedland and Morris, certainly poor macroeconomic conditions can cause the failure of the marginal firm even if the underlying cause may be poor management or insufficient capital (Fredland and Morris,1976). In studies that have specifically looked at the macroeconomic impact on business closures, the results are not always clear. According to Cressy he finds it surprising that macroeconomic fluctuations have so little impact on small business failures although he does find that extraordinary changes in the

Macro-economy does have some impact. (Robert Cressy, " Business Failure”)

There are many economic factors that can affect the resorts and casinos industry and company, such as GDP, interest rates, mortgage rates, inflation rates, unemployment rates, currency rates, and energy rates. Many people think that just because interest rates go up it will affect the casino and gambling industry. This is true that interest rates can affect the way people spend their money but to a certain extent. When interest rates rise, society thinks that the casino industry will go down because people will not be able to spend it on leisure time. Then again, when interest rates increase it can also mean that society is growing stronger and people are making more money, thus, will be able to spend more on traveling to Las Vegas. Mortgage rates are similar to that of interest rates, when the rates go up then people might not be able to spend it