Pay No Attention to Money-Losing Casinos. Let’s Build More Casinos

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Increased competition is making it more difficult for casinos to keep locals employed and pass along hefty payments to host states—which are the two biggest selling points for allowing gambling in the first place. This isn’t stopping even more states and more casinos from entering the competition, however.

The gambling industry has traditionally been based on a “build it and they will come” philosophy. But where will customers come from? The recent expansion of casinos to states such as Maryland and Ohio, combined with corresponding declining revenues in casinos in neighboring states, gives us a pretty clear indication that casino customers don’t just appear out of nowhere. Instead, when a new casino wins over a gambler’s business, that probably represents a loss of business for the casino that used to be favored by that same gambler.

Based on the number of new casinos currently in the works, in upstate New York and Massachusetts among other places, the problems faced by casinos (and states and cities that rely on them for tax revenues) seem like they are only bound to grow. Here are a few spots where the casino business is showing signs of struggle:

The Foxwoods casino in southeastern Connecticut is in the process of eliminating 120 table game dealer positions due to declining gambling revenues, the Associated Press recently reported. This is on top of a reduction by the debt-ridden company of more than 1,000 workers in the past fiscal year, according to the Hartford Courant. The Courant noted the staff reduction in an article about Foxwoods’ ambitions to expand into a market where it would seem to be competing with itself: It’s hoping to open a new casino across the border in Fall River, Mass.

(MORE: Too Many Casinos? Looks Like We’re Reaching a Gambling Saturation Point)

Foxwoods isn’t the only Connecticut-based casino seeking what could be a self-cannibalizing expansion. Critics have said that one of the reasons Mohegan Sun wants to build a casino in the Boston area is because at least then it will be losing money to a sibling, rather than another casino company, specifically Wynn Resorts. “We’re their worst nightmare,” Wynn owner Steve Wynn said of Mohegan Sun, when making his pitch to the Massachusetts Gaming Commission in January.

Since casinos opened in Maryland and other nearby states, Delaware’s gambling revenues have taken a nose dive. According to an NPR report, the state took in $192 million thanks to gambling proceeds in 2013, down from $239 million in 2010, during a time when projections had called for revenues to rise. Struggling casino operators have asked state legislators to lower the tax rate on slots and other games, which would further cut into revenues Delaware is banking on. And jobs—the biggest selling point to locals for the presence of casinos—are likely to take a hit as well. “Some degree of layoffs could be inevitable in the near term, no matter what action legislators decide to take,” the News Journal of Delaware explained.

(MORE: Why Casinos Are Becoming Like Landfills)

Online gambling doesn’t appear to be the savior either, not in Delaware, nor in other states that have begun hosting legal gaming sites. “Delaware was averaging only 18 players online at any given time over the past seven days,” the News Journal recently reported, noting that online gaming revenues are on pace to fall well short of the $5 million projected for the first year. “Nevada and New Jersey, the other two states to have authorized the practice, also have reported revenue that fell far below expectations.”

Revenues at Detroit’s casinos fell by around 5%, according to the Michigan Gaming Control Board, and in addition to continued economic strife and a relatively weak jobs market, experts point to heightened competition through the opening of casinos in Ohio in 2012 as a big reason for the decline. The Detroit News estimated that the city could lose out on $10 million annually as a result of gamblers being drawn to casinos in Toledo, rather than Detroit.

New Jersey
In an article about Atlantic City’s hopes that this year’s Super Bowl (held in New Jersey) might yield the state some added gambling revenues, the Asbury Park Press summed up the fading gambling center’s recent struggles with some key data points:

Atlantic City will be closely watched in 2014, as betting revenue has fallen 41 percent since the 2006 peak of $5.2 billion.

(MORE: Atlantic City’s Next Big Bet: Legalized Online Gambling)

Based on the timing of this decline, it’s fairly obvious where the business went: to freshly opened casinos in Pennsylvania, Maryland, and other nearby states. There’s already been one “victim of the casino saturation taking place in the Northeast,” as the Associated Press put it: Atlantic City’s Atlantic Club, opened originally in 1980 by Steve Wynn, shut its doors earlier this month.