Do Rooms Managers Exhibit Expense Preference Behavior in Nevada Casinos?

Abstract

Within the hospitality industry, the largest expense is payroll, and it is often considered one of the most controllable. Expense preference theory postulates that managers may focus more on maximizing their own utility by overspending as opposed to firm profit maximization. The purpose of this study is to evaluate if hotel managers in Nevada casinos exhibit expense preference behavior by overstaffing. Results of various regression models show that occupied rooms is positively and significantly related to rooms payroll. In one model, there is a modestly significant relationship between market concentration and rooms payroll. Results also show that after accounting for other variables, there is no significant relationship between a recession and rooms payroll.