Quick-takes: The month's trends in a glance - April 2008
Tough times for New Jersey. Some blame the economy, some blame the smoking restrictions, and some blame the slot machines in Pennsylvania. Governor Jon Corzine is tightening his belt and predicting continued declining revenues for Atlantic City. The legislature is taking no chances on the casinos being closed this year over budget wars and has passed legislation to allow casinos to remain open without state employees. The legislature is also in the process of approving legislation that requires the casinos to pay $90 million to the racetracks to keep the tracks from getting slot machines. The legislation includes tax incentives for casinos to increase their marketing efforts. All of that demonstrates that the governor and legislature are coming to grips with the increased difficulty faced by the casinos.
New Jersey Governor Jon Corzine said growing home foreclosures and unemployment are cutting into state tax revenue and he may have to make deeper spending cuts than the $2.7 billion he proposed last month…The warning comes as the Legislature deliberates on Corzine's proposed $33 billion spending plan for the year beginning July 1. His budget, which is $500 million less than the current year, would cut aid to hospitals and higher education and eliminate at least 3,000 government jobs…December income tax collections were 1.4 percent below targets, while casino tax revenue was off by 24 percent and motor fuels tax revenue was 33 percent under budget, according to treasury department figures. (Terrence Dopp, Bloomberg, 3-14-08)
There are some expansions underway and new plans for Atlantic City are still being announced, but with the credit market challenges nothing is certain. That Trump and Tropicana are still for sale is certain. For the rest, we will just have to wait and see what changes a year or two make in Atlantic City. And while we wait, Pennsylvania continues to grow and cut into Atlantic City's core market.
PhiladelphiaPark Casino in Bensalem will hold a groundbreaking for its new $350 million casino. PhillyPark, owned by Greenwood Gaming & Entertainment Inc., is one of seven slots parlors that have opened in Pennsylvania in the past year…Last month, PhillyPark grossed $28.6 million in slots revenue, edging out Chester Casino and Racetrack in Delaware County at $28.5 million, for the top spot among the seven Pennsylvania gambling halls. PhillyPark and Chester Casino and Racetrack are cited by Wall Street analysts as the two Pennsylvania facilities that have had the most impact on Atlantic City's slots business since they are the two closest. (Suzette Parmley, Philadelphia Inquirer, 3-14-08)
There is some hope. Pennsylvania and Connecticut may both ban smoking in casinos, and that at least would level the playing field. Although a spokesperson for the Group Against Smoking Pollution (GASP) says there is no evidence smoking has hurt the casinos business, the casinos believe the non-smoking regulations are a severe handicap.
"So far, no empirical-based data has been set forth that isolates the Atlantic City smoking restrictions as a source for a downturn in revenues," said Karen Blumenfeld of the New Jersey Group Against Smoking Pollution, known as GASP. "The fact that table games revenues haven't changed shows that people are not going elsewhere for table games, like Connecticut, even though they have the choice."
"One of our industry's primary concerns with the current smoking-ban circumstances is the lack of a level playing field across all gaming jurisdictions," said Joseph A. Corbo Jr., association president. "This results in a situation in which gaming customers who smoke, which is a significant sector of our market, choose to patronize casinos where they can smoke, including the Pennsylvania racinos and the tribal casinos in Connecticut."
New Jersey casino operators moan that smoking restrictions in Atlantic City have caused many of their best customers to flee to the smoker-friendly casinos of Pennsylvania and Connecticut. But a legal opinion issued in Connecticut may allow lawmakers to extend a state smoking ban to the American-Indian casinos, which claim that smoking restrictions would be a threat to tribal sovereignty. Also, Pennsylvania lawmakers have been debating legislation this week that would make casinos completely smoke-free or limit smoking to only 25 percent of the gaming space. (Donald Wittkowski, Press of Atlantic City, 3-14-08)
In his 27 years working in Atlantic City casinos, Vinnie Rennich developed lung cancer and a passion for protecting casino workers from the dangers of second-hand smoke…he told a House-Senate conference committee that is working on legislation to ban smoking in most public places in Pennsylvania…the first of two hearings being held this week by Sen. Stewart Greenleaf, R-Montgomery. After a second hearing is held, the committee will meet privately for two weeks and then, Mr. Greenleaf hopes, adopt its version of a smoking ban bill on March 31. (Tom Barnes, Pittsburgh Post-Gazette, 3-14-08)
A law prohibiting smoking at the state's two tribal casinos could withstand a challenge in federal court, but the process would be long and expensive, Attorney General Richard Blumenthal said Thursday in a legal opinion. Blumenthal said the best course of action would be for the governor and legislative leaders to begin discussions with the Mashantucket Pequot Tribe and the Mohegan Tribe over how to implement a smoking ban. (Mark Peters, Hartford Courant, 3-14-08)
Looking for money is an annual ritual of budgeting in most states; that process is a lesson in history as much as a lesson in politics. The politics get more coverage, as each side in most of these debates characterizes the opposition and the opposition's proposals in the most extreme and negative terms possible. But the history side can be just as interesting. Not since Nevada authorized casino gambling or New Hampshire authorized a state lottery has any state done anything new or original. Rather each state as it enters into the gambling-gaming debate follows a well-trodden path – except that most of those doing the treading do not know the history of those who went before. And that leaves them, as the saying goes, doomed to repeat the mistakes and errors of history.
Most recently a number of state lotteries, New Hampshire, Kentucky, Missouri and Ohio, are looking for ways to increase their revenues. Due to the competition from expanded gaming inside the state and increased competition from surrounding states, lotteries have to work harder and harder to maintain their share of contributions to state revenues.
The New Hampshire Lottery Commission yesterday made the case for expanding gambling in the state, saying that new games must be offered if the lottery is going to meet revenue targets set by Gov. John Lynch. The commission didn't back any particular form of gambling in a press release, but it listed a range adopted in other New England states, including Connecticut's casinos, Maine's "racinos" – slot machines at racetracks – and Rhode Island's Keno, a fast-paced game with elements of bingo and lottery. New Hampshire established the nation's first lottery, commissioners wrote, but other states have pushed ahead. (Lauren R. Dorgan, Concord Monitor, 3-27-08)
The Senate approved a version of the state's two-year, $19 billion spending plan Monday that reverses some of the cuts proposed for education programs by Gov. Steve Beshear…the Senate raises $384 million over the biennium through several "efficiency" measures, including one that would require the Kentucky Lottery Corp. to contribute 35 percent of its revenue to the General Fund, up from 26 percent…lottery officials immediately lambasted the plan and warned that it would lead to smaller prizes and declining lottery sales – not higher state revenue. (John Stamper, Lexington Herald-Leader, 3-27-08)
When a new Missouri governor takes office next year, an old political battle over state lottery advertising will heat up again…Over the past six years state appropriations for lottery advertising have been slashed more than 80 percent, from $8 million to $1.3 million this year. "We're hoping they'll let us run this more like a business," the Missouri Lottery director said. "The message has been clear to us for the last couple of years that the leadership in the legislature and the governor's office don't want to increase lottery funding of any kind." (Rick Alm, Kansas City Star, 3-27-08)
The part of history that most are failing to recognize is simply the evolution of business, the impact of inflation, and the effect of economic trends on every piece of revenue-producing legislation. Each time legislators vote, it seems they believe they have solved a problem, rather than understanding that they have simply assisted in the evolution of an industry or advancement of a trend. The world of gaming is now one giant chess game; each move by one player requires a counter move by another. While some states are debating strategies for lotteries, other states –Ohio, Maryland, Massachusetts and Kentucky –are debating different expansions of gaming,and the reasons are almost identical: the need to raise revenues and the desire to keep the gaming money being spent in other states at home.
And while the legislatures in those and other states debate gaming and funding in general, states with gaming are seeing flat to declining revenues. Nevada is predicting nearly a billion-dollar shortfall in revenues from gaming and sales tax revenues. And that will bring Nevada and other states back to the debate as they look for ways to protect their gaming revenues and to find new sources. Nevada will again debate adding a lottery and New Hampshire will discuss slot machines and casinos, whilelurking ominously in the shadows is the looming specter of raising taxes to increase revenue – and that too will be debated in Nevada and across the landscape of gaming jurisdictions.
Atlantic City February gaming revenue rose 1.5% to $384.1 million. (Gaming Industry Weekly Report, 3-17-08)
Colorado February gaming revenue fell 10.1% to $57.9 million. (Gaming Industry Weekly Report, 3-24-08)
Delaware February gaming revenue rose 2.5%. (Gaming Industry Weekly Report, 3-17-08)
MGM Grand Detroit increased revenues by 27.88% this year compared with February 2007. MotorCity and Greektown casinos were down by 2.25% and 6.89%. (Detroit Free Press, 3-11-08)
Connecticut February slot revenue fell 5% with Foxwoods down 7% to $57.5 million and Mohegan Sun down 3.3% to $68.9 million. (Gaming Industry Weekly Report, 3-24-08)
Illinois February gaming revenue fell 12.9% to $130.8 million. (Gaming Industry Weekly Report, 3-17-08)
Indiana gaming revenue fell 1.2% in Indiana in February to $211.5 million. (Gaming Industry Weekly Report, 3-17-08)
Iowa gaming revenue rose 13.3% in February to $115.1 million. On a same store basis, gaming revenue rose 7.5%. (Gaming Industry Weekly Report, 3-17-08)
Louisiana February gaming revenue rose 10.2% to $234 million with same store revenue up 6.7%. (Gaming Industry Weekly Report, 3-17-08)
Mississippi February gaming revenue rose 2.4% to $254 million. (Gaming Industry Weekly Report, 3-17-08)
Missouri February gaming revenue rose 7.2% to $141.5 million but on a same store basis was down 2%. (Gaming Industry Weekly Report, 3-17-08)
Nevada gaming revenues also dropped nearly 5% to $1.06 billion. (Reuters, 3-8-08)
Macau's gaming revenue for January was $1.3 billion, up 67.3%. (Gaming Industry Weekly Report, 3-10-08)
However, in breaking news, the movie "21" was the largest grossing movie of the week the weekend it opened. The movie did not get very good reviews, but everyone agreed it was exciting, sexy and very Vegas. Some industry insiders were quoted as saying they thought it would increase play on blackjack tables. Indeed the audience for the movie appears to have been very Obama-ish – that is, young and hip. It is a longshot, but maybe the movie will do for blackjack what tournaments, television and the Internet did for poker; something the book that gave birth to it, "Bringing Down the House," did not do, which is give players a feeling that blackjack can be beaten and, even more, that it is hip and sexy and that smart, hip, sexy young people play it. Just maybe, the game of "21" will get a jump start the way poker did.