Is Ohio's casino industry living up to expectations? Competition from racinos creates questions
John Kosich, newsnet5.com
8:30 PM, Feb 7, 2013
8:55 PM, Feb 7, 2013
CLEVELAND - The promise was big in 2009 when Ohio voters approved four casinos in Cleveland, Columbus, Cincinnati and Toledo. Original estimates from the Ohio Department of Taxation put potential annual gross casino revenue at about $1.9 billion.
It was a figure they warned would go down about a half-billion dollars if gambling was expanded to the state's seven horse racing tracks, which is in the process of happening.
But in the budget rolled out in Columbus this week, the estimated take in the first fiscal year with all four casinos open is just under $1 billion. Officials with the state said they always believed the initial figure was high, but the fact that it's estimated so far below original projections raises questions moving forward.
"It's a tougher market than anybody thought it would be," said casino analyst Roger Gros, publisher of industry trade magazine Global Gaming Business.
"There's a lot of disappointment with the Ohio market right now, not just in Cleveland, but in Columbus and Toledo. I mean, the numbers looked good in the beginning, but they trailed off after that," Gros said.
The state's three casinos combined brought in $53.2 million in adjusted gross revenue, their lowest take since the state's first three casinos opened to full-time gambling in October and down about 6 percent from December's $56.6 million high mark.
Horseshoe Casino Cleveland's January drop was around 16 percent from its December numbers, which were fueled upward by the casino's "Holidays at the Higbee" promotion.
"We expected January to be a somewhat slower month," said Horseshoe spokesperson Christina Karas. "A number of external factors impacted numbers this month. including many days of severe weather."
"We expect revenues to fluctuate month to month given the seasonality of the entertainment industry."
David Schwartz, Director of UNLV's Center for Gaming Research, said he believes it's too early to draw conclusions on the Ohio market.
"It's going to take a while to see exactly what the norm is here," he said.
What is clear, he said, with the exception of Erie's Presque Isle Downs, whose numbers have been down more than 20 percent the past two months, is that Ohio's casinos aren't having a drastic negative impact on neighboring state's casinos.
"If you look around the region, Michigan; Detroit did better than many people expected to, he said. "They only declined by less than one percent for 2012.
"A lot of people thought with more competition from Ohio they would've been hit harder. So that's definitely one of the question marks I had," Schwartz said.
The Rivers in Pittsburgh is another example. While Presque Isle Downs has suffered, The Rivers has consistently posted modest gains.
Ohio's four casinos, Horseshoe Cincinnati set to open March 4, are spaced far enough apart to avoid competition, that's not to say they don't have any.
The 2011 agreement that cleared the way for slots at the state's seven horse racing track is already having an impact in Columbus ,where Scioto Downs became the first track to open with VLTs last June, followed by Hollywood Columbus in October.
In that market though, the slots-only Scioto has remained competitive with the full-blown Hollywood.
"It's kind of a strange market and a lot of people are scratching their heads not knowing what's going on there," Gros said.
Hollywood Columbus has 3,015 slots to Scioto Downs 2,116 machines, but Hollywood's slot revenue was $11.5 million in January compared to Scioto's $10.1 million.
"Scioto Downs is competitive and they're actually doing better on a win-per machine basis than Hollywood Columbus," said UNLV's Schwartz. "Hollywood Columbus was about $124 per day per machine, Scioto Downs is about $155."
Gros said that's something that will bear watching at Thistledown Racino gets set to open its doors this spring. "There's a lot of questions whether the Ohio market is saturated already."
"It's going to dilute the market to a certain extent," he said. "Luckily, Thistledown is owned by the same people that own the Horseshoe so they're just going to share the market."
He thinks the impact on Rock Ohio Caesars' bottom line will come when the Hard Rock Rocksino opens in December at Northfield Park.
"I'm sure, knowing the Hard Rock people the way I do, they're going to have a lot of entertainment and a lot of other things that you're not going to have certainly at Thistledown," said Gros. "It's a tougher market than anybody thought it would be."