An Indiana lawmaker wants to protect the Hoosier State?s casino industry, which was the nation?s third-largest commercial gaming market by revenue in 2011.
Ten of Indiana?s 13 casinos are in counties adjacent to Illinois, Michigan and Ohio ? states that have provided Indiana casinos with a wealth of customers.
Not anymore.
Those patrons no longer have to cross state lines to satisfy their gambling fix. Over the past 24 months, casino expansion in neighboring states has caused Indiana gaming revenues to decline.
In 2011, Indiana?s 13 casinos collected $2.721 billion in gaming revenues, a 2.5 percent drop from 2010. In October, gaming revenues statewide suffered their largest percentage decrease since January 2008.
Michigan has allowed American Indian-owned casinos to expand into the southern and western parts of the state, including the Station Casinos-operated Gun Lake Casino, which opened in February 2011.
Illinois is contemplating expansion. A casino in downtown Chicago or a resort on the Indiana border would not only keep Illinois money at home, but might draw Indiana residents across the state line.
The biggest challenge is from Ohio.
Four full-scale casinos in the state?s largest cities ? Toledo, Columbus, Cleveland and Cincinnati ? and seven racetrack casinos with just slot machines are opening in the next few years. Some analysts believe Ohio?s gaming revenue potential could crack the upper tier of the annual commercial casino rankings.
Macquarie Securities gaming analyst Chad Beynon recently visited markets in Ohio and Indiana and came away telling investors the jurisdictions will be key locations to watch as new casinos open and older resorts are renovated.
?Shaky consumer patterns and increased competition are key issues for both markets,? Beynon said. ?The Indiana properties have gone into reinvestment and defensive mode, while the newly opened Ohio properties are still getting their feet wet.?
Increased competition worries Indiana State Senate President David Long, a Republican from Fort Wayne.
He told media outlets that continuing decreases in state tax gaming tax revenues are troublesome. Gaming taxes are Indiana?s third-largest revenue source after income and sales taxes, but their percentage of the overall pie has dwindled to just 4 percent.
?There is an all-out assault on the system that Indiana has implemented, which was to take other people?s money,? Long told the Northwest Indiana Times. ?They?re out to get it back.?
Interestingly, Nevada casino operators are both hurt by what is happening in Indiana and are a cause of the problem.
Seven of Indiana?s casinos are owned by five Nevada-based gaming operators (Boyd Gaming Corp., Caesars Entertainment Corp., Pinnacle Entertainment, Ameristar Casinos and Full House Resorts), and a company with ties to Nevada (Penn National Gaming).
Caesars Entertainment and Penn National are responsible for keeping Ohioans out of Indiana. The companies will operate the four Ohio casinos and own three of the seven planned racetrack casinos.
At the same time, Caesars operates the Horseshoe Southern Indiana in Elizabeth, which draws customers from Indianapolis, Evansville and nearby Louisville, Ky.
But the casino also draws patrons from Cincinnati. That will change next spring when Caesars opens the $400 million Horseshoe Cincinnati.
Penn?s Hollywood Casino Lawrenceburg, Ind., just a few miles across the border from Cincinnati, has long controlled the market. That dominance will be taken away by the Horseshoe.
Beynon said Penn National won?t allow its cash cow to go down without a fight. A new general manager is examining the operations while mid-level customers will soon be inundated with a heavy promotional campaign. Maximizing profitability is the key.
?Several under-utilized areas of the resort are also being converted or improved, starting with the new poker area,? Beynon said.
This brings us back to the question of what Indiana can do to halt the bleeding.
Additional Hoosier State casinos are not the answer.
Making the existing casinos more competitive seems to be the consensus. But how to accomplish that mission is an active debate.
To compete with potential growth in Chicago, city leaders in Gary, Ind., may find success next year in persuading legislators to allow a Lake Michigan riverboat casino to move onshore. But, the mayor of Hammond, Ind., wants a concession to protect the Horseshoe Casino Hammond.
Also, will the maneuvering hurt Boyd Gaming?s Blue Chip casino in nearby Michigan City, Ind.? The company spent $165 million in 2005 to replace the gambling vessel and another $130 million in 2009 to double the number of hotel rooms at the property.
Ed Feigenbaum, who edits the Indianapolis-based Indiana Gaming Insight newsletter, told the Northwest Indiana Times the decline in casino revenues was both ?distressing? and ?a matter of concern.?
With casino expansion on the move nationwide, this may be trend repeated in other states.
Howard Stutz?s Inside Gaming column appears Sundays in the RJ. He blogs at?lvrj.com/blogs/stutz. Follow @howardstutz on Twitter.
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Copyright 2012 Stephens Media Interactive GamingWire.
All rights reserved.
Source: http://pokerati.com/2012/12/indiana-regional-casinos-face-market-gluts-as-action-spreads/
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