Too Many Casinos: Looks Like We’ve Reached Gambling Saturation

Even as more casinos open around the country, there are indications that gambling revenues are leveling off—that we're reaching a saturation point, with too many casinos for everybody to win.

  • Share
  • Read Later
Vincent Besnault / Getty Images

Americans are gambling more lately. From 2011 to 2012, U.S. casino gaming revenues rose 4.8% and hit $37.3 billion, just under the record high of $37.5 billion reached in 2007. And yet even as states push forward with plans to open more casinos around the country, there are indications that gambling revenues are leveling off—that we’re reaching a saturation point, with too many casinos, in too close proximity, for everybody to win.

The casino business in Atlantic City, for example, has been on the decline for half-a-dozen years, and it’s no secret why: What with increasing gambling options available in nearby Pennsylvania and Delaware, gamblers have had less reason to bother making the trek to A.C.

Surely, some gamblers from Maryland have decided to skip the trip to the Jersey Shore and stay closer to home. Gambling revenues in Maryland hit an all-time high in August, mainly because a new casino had recently opened up, and because existing casinos had introduced new table games. Two more casinos are planned to open in Maryland over the next three years, but despite the local gambling boom, industry insiders foresee a glut in the market.

“Somebody in the market is going to close,” said Bill Fasy, chief operating officer for the Casino at Ocean Downs, told one Maryland newspaper.

(MORE: Sin City Meets the New Low Rollers)

At Connecticut casinos, declining gambling revenue reports have been making regular appearances—and that’s before local gambling venues even have to start dealing with competition from casinos planned for the near future across the border in upstate New York and Massachusetts. The Hartford Courant highlighted how slot revenues at Connecticut’s Mohegan Sun rose 0.03% in August 2013, compared to the same month a year prior—notable because the revenues had been on a steady year-over-year decline dating back to December 2011. Slot revenues for its in-state competitor, Foxwoods, have remained on the decline.

A recent story in Milwaukee Journal Sentinel cast a heaping dose of skepticism on the idea that more and more casinos can possibly bring on more and more revenues indefinitely. “Many markets are seeing a point of saturation,” said Michael Paladino, a Fitch Ratings gaming analyst. “New casinos … are just cannibalizing the existing market.”

Casinos “certainly do reach that point where they just start essentially cannibalizing each other,” agreed Mark Nichols, an economics professor at the University of Nevada-Reno. “You’re seeing signs of that now.”

In late September, a panel of gaming executives in Las Vegas had the consensus point of view that there are very few places in the U.S. where it made sense to open new casinos. “New England is saturated,” said Penn National Gaming President Tim Wilmott, according to VegasInc.com. “The market is crowded in Ohio. It’s a little underserved in Florida.”

(MORE: Atlantic City Casino Promotion Bashed by Watchdogs Is a Big Hit with Gamblers)

While gambling revenues in Kansas soared by 600% in 2012, the growth came likely at the expense of Nevada, where gaming revenues inched up just 1.5% last year. Employment at casinos, by the way, was down 1% nationwide from 2011 to 2012, according to the Associated Press.

A TIME story published over the summer explored the new reality in Las Vegas, which has recovered after the recession in terms of visitor numbers, but which is suffering because visitors just aren’t gambling as much as they used to on their Sin City getaways. The trend makes sense: After all, when you can play the slots or black jack within an hour of your hometown, there’s less of a sense of urgency to gamble on a visit to Vegas.

Increasingly, destinations associated with gambling have been forced to look beyond tables and slot machines for revenues. In the past, restaurants, shops, clubs, and shows in Las Vegas were “usually loss leaders to bring in the gamblers,” Jon Gray, vice president and general manager of The Linq, a $550 million open-air retail, dining, and entertainment center opening near Caesars Palace, told the Las Vegas Review-Journal. But as visitors have grown less focused on gambling, the math has changed, and nongambling amenities must bring in revenues. “Now we are driving visitation to Las Vegas. A DJ at a club can make $300,000 a night, but the club is making $1.2 million.”

“A property really can’t compete for the upscale visitor if it doesn’t have shopping,” Stephen Brown, director of the Center for Business and Economic Research at UNLV’s Lee Business School, said in another Review-Journal article. “High-end retail is really what’s propelling the growth in taxable sales in Las Vegas.” In addition to The Linq, Las Vegas is moving forward with large-scale projects that don’t involve gambling like Downtown Container Park, a section of downtown with space for 40 restaurants and businesses, where patrons will be able to stroll and carouse in a pavilion with alcoholic beverages in hand.

(MORE: Casino Revenues Are Up in 2012, Thanks in Part to Gambling in Kansas)

Back in Connecticut, Foxwoods, which is $2.3 billion debt, is placing a very big bet not on gambling, but shopping as its salvation. In late September, Foxwoods broke ground on a 312,000-square-foot outlet mall that’s expected to open by early winter of 2014. The hope is that the mall will draw visitors who might otherwise be attracted to forthcoming casinos in Massachusetts and elsewhere, and also encourage guests to extend their stays.

But just as consumers today are facing a glut of convenient gambling options to choose from, and therefore gambling feels less special, the novelty of outlet mall shopping may also be on the decline. Of the dozens of stores announced for the new mall at Foxwoods, the Hartford Courant noted, “Just one — Steve Madden, the shoe and accessory store — will be new to Connecticut.”

0 comments