US Gambling Regulation at the end of 2013 - the Downside
As 2013 nears its end, American casino executives are reflecting on their earnings for the year. Because gambling revenue fuels government expenditures, particularly local agencies and school funding, the performance of casinos is of interest to just about everyone. Recent months have seen both positives and negatives in the realm of casino income. Overall, the results have been slightly disappointing.
As of October 2013, United States casino revenue was actually up. An overall gain of four percent was made beyond 2012 profits, adding up to a whopping $31.5 billion. Nevertheless, of the 23 states with legal gambling, 13 of them have experienced a decline in recent gaming revenue.
Every casino, or Mecca of casinos, has its own financial story to tell. Here are some of the most notable stories of revenue loss as 2013 draws to a close.
Atlantic Club Files for Chapter 11
Atlantic City, New Jersey, is not as popular as Las Vegas, but it holds its own as the second most notable gambling hub in the nation. Even so, the casinos of Atlantic City have been struggling with overall profits for some time now.
The town's southernmost casino, the Atlantic Club Casino Hotel, filed for Chapter 11 benefits in November of 2013. Administrators saw this coming and did what they could to avoid it. Two years ago, in fact, the ailing business began catering to low rollers, hoping that such a change in market strategy would pull them out of debt. Michael Frawley, Atlantic Club CEO, said this new strategy has indeed helped, but not enough to make a significant dent in the company's massive debt.
The Atlantic Club currently owes a significant chunk of money to both patrons and businesses. Balances due range from a $2.5 million bill owed to the city to a $25 credit owed to a Brooklyn civilian. Unable to pay off all of this debt, administrators are hoping to sell the building at a bankruptcy auction later in December. Total assets are estimated around $17 million, although this figure is only an educated guess. The company's liabilities are estimated to be around $16 million.
Interestingly, over the past six years, six of Atlantic City's 12 casinos have filed for bankruptcy. Some, like Revel Casino Hotel, have managed to stay afloat in spite of bad finances. Revel was actually able to pull itself out of bankruptcy last May, but the prospect of a sale similar to that of the Atlantic Club has not been ruled out.
Missouri Casinos Lose Patrons
St. Louis area casinos comprise the 5th largest gambling hub in the U.S., according to 2012 statistics. Since the end of 2012, St. Louis casino revenue has dropped nearly seven percent, with the number of patrons visiting area casinos falling over nearly 13 percent.
When casino patronage goes down, tax revenue also declines. The Missouri Gaming Commission has anticipated a $10 million decrease in overall tax revenue for the 2013 fiscal year. This figure came as a surprise to some experts who believed the 2012 opening of the Cape Girardeau Isle of Capri would inject some vitality back into the market. If it did, it wasn't enough to make the numbers significantly rise.
All is not lost in the state's gaming outlook, however. Optimism abounds over two major changes in Missouri's gambling landscape which may boost revenue in the long run. The first is the re-branding of a Maryland Heights Harrah's into a Hollywood Casino. This move was paid for by Penn Gaming, the building's new owner. The second is the recent purchase of Ameristar Casinos by Pinnacle. The corporation had to sell two other properties in order to make the purchase, but Ameristar's location just off the interstate puts the casino in prime position to make lots of money. Only time will tell if these recent changes will help Missouri casinos turn a financial corner in the next fiscal term.
New Arizona Tribal Casino Suffers a Slow Start
A six-month old tribal casino in Flagstaff, Arizona, the Twin Arrows Navajo Casino Resort, recently had to ask its Navajo financiers for a reprieve on its debt until business picks up. Located on Interstate 40, the casino's CEO has said that in spite of its prime location, a lack of marketing could be to blame for the business's weak financial start.
Indeed, limited marketing may have played a part in Twin Arrows' lackluster opening. County law restricts the amount and type of signage that may be displayed for casinos. The recent erection of an electronic billboard, however, seems to have almost doubled Twin Arrows traffic. The facility now receives approximately 2,500 guests per day where it once received only about 1,000.
As an extra attraction, the Navajo Nation is planning to build an entertainment hub on a 40-acre parcel adjacent to the casino. The prospective addition, dubbed "The Outlook at Glittering Mountain," will contain a shopping mall, golf course, movie theater, and condominium site. Although off to a slow start, it looks like Twin Arrows may fare well now that some wrinkles have been ironed out.
Ohio Casino Revenue: Disappointing
Even though Ohio's four new casinos are taxed at 33 percent, gambling revenue isn't as high as politicians hoped it would be in the Buckeye State. Back in 2009, when the state's casinos were nothing but a proposal on a ballot, Governor John Kasich theorized that the new additions would bring in well over $900 million. In 2011, Spectrum Gaming Group of Atlantic City predicted revenue would be even higher, around $1.1 billion. In reality, the casinos will probably gross a disappointing $868 million this year.
As a result of this letdown, Columbus has lowered its expected casino revenue for 2014 from $12 million to $11 million. Cincinnati has lowered its expected revenue from $14 million to $10 million. Cleveland and Toledo also are also expecting lower income streams for 2014. Budget cuts made in anticipation of this revenue decline will affect school funding and other local government projects.