Has gaming reached a saturation point? An oddly self-serving cry of "Enough"
29 May 2012
By Howard Stutz
By Howard Stutz
Imagine the surprise, however, when the developer of Maryland's largest casino suggests the U.S. has reached a saturation point.
The statement seemed a bit self-serving.
During the East Coast Gaming Congress in Atlantic City last week, Cordish Company Chairman David Cordish suggested casino expansion needs a respite. He said lawmakers in states starved for tax dollars "think you can have casinos like Starbucks," the coffeehouse chain that seems to operate on every street corner in America.
If that attitude continues, Cordish said, "it's going to implode on them."
On June 6, Cordish's company opens the $500 million Maryland Live! in Anne Arundel County, roughly 15 miles south of Baltimore. The casino has 4,750 slot machines and electronic table games.
But Maryland Live! will have company. State leaders want to place a slot-machine-only casino - potentially operated by Caesars Entertainment Inc. - in Baltimore, south of the Inner Harbor.
That concerns Cordish.
"What happens when you put megacasinos close together is they generally not only oversaturate the market, they don't work," Cordish said.
In other words, keep the competition out.
During a presentation at the 2010 Global Gaming Expo, Caesars Chairman Gary Loveman said casino companies damage themselves when they fight over growth opportunities. The self-inflicted wounds actually slow expansion.
He used Cordish as an example. In 2010, rival casino operators financed an unsuccessful advertising campaign to stop Maryland Live!, using negative images about the gaming industry.
Ironically, Cordish now wants to keep Caesars out of Baltimore.
Isle of Capri Casinos CEO Virginia McDowell said the gaming industry often "lets its best growth opportunities die on the vine" because of infighting.
Ohio became the 23rd state with commercial casinos - land-based, riverboat or racetrack - when the Horseshoe Casino Cleveland opened May 14. Gaming expansion is being debated, but is now on hold in Florida and Texas. However, McDowell said states traditionally hostile toward gaming - Georgia, the Carolinas and Kentucky - are considering casino legalization.
Over the past decade we've learned that gaming expansion is not a "flip on the light switch" event. After gaming referendums gain approval, it often takes years for casinos to come to fruition.
Maryland legalized casinos in 2008, but just two small gambling halls have opened. In Ohio, voters approved four full-scale casinos in 2009. The state's second casino opens Tuesday in Toledo.
Kansas has been on a slower pace. Four casinos were legalized in 2007, but by the end of 2011 only two were operating. Large casinos near Kansas City and Wichita opened this year.
The recession dried up credit markets and the casino companies' access to much-needed development dollars. That has since changed. Gaming operators are focused again on growth, with Caesars and Penn National Gaming, Inc. leading the pack.
Caesars, in partnership with Detroit-based Rock Gaming, will open a Horseshoe casino in Cincinnati in 2013. The joint venture is also working in Baltimore. Meanwhile, Caesars and the Suffolk Downs racetrack are bidding for a lone Boston-area casino license.
Penn National, which will have two casinos in Ohio, opened a casino in Kansas City, Kan., earlier this year, and is seeking a single gaming license for Western Massachusetts.
Cordish, however, said the casino market needs stability. Deutsche Bank gaming analyst Andrew Zarnett agreed.
In a note to investors, Zarnett criticized Illinois lawmakers who seek to add five new casinos in that state. The Illinois House has already approved the bill. If it makes it through the Senate, Zarnett expects the governor to veto the measure.
The expansion would cut into revenues of Illinois and Indiana casinos operated by Penn National, Caesars, Boyd Gaming Corp. and Ameristar Casinos, he said.
"The proposed expansion by Illinois lawmakers is yet another example of gaming saturation," Zarnett said. "Not only will this excess capacity take away share from existing operators, but it may also significantly heighten the promotional landscape in the region."
Executives from Las Vegas Sands Corp. cited oversaturation as a reason the casino operator withdrew from competition for the Boston gaming license. Company officials thought three casinos and a slot machine parlor in Massachusetts would be too much gaming for the Northeast. The area includes Indian casinos in Connecticut, a growing racetrack casino market in New York, Pennsylvania's 10 casinos, and Atlantic City, which is hoping for a revival from the opening of Revel.
Some analysts said quietly that oversaturation was just an excuse. Las Vegas Sands didn't stand a chance of winning the Boston license against Caesars, which has business ties to Suffolk Downs plus Loveman's personal and professional connections to Massachusetts.
Copyright GamingWire. All rights reserved.