Problems in Illinois, as predicted

When Illinois rasied taxes on its casinos, operators predicted a buffet of doom and gloom. That gloomy day has come to pass. From the St. Louis Post-Dispatch:

Illinois casinos, their customers and employees are feeling the bite of higher state taxes.

Some of the state's nine casinos, including Argosy Gaming Co.'s Alton Belle, have cut hours in a bid to reduce operating costs and to maintain their bottom lines. Others have started charging $5 entry fees to offset their increased expenses.

A few operations, including Argosy's Joliet Empress Casino and Hotel, have laid off workers to cut costs.

To be sure, the higher tax rates that took effect July 1 are generating additional revenue to address the state's $5 billion budget deficit. But the flow of fresh money has not kept pace with Gov. Rod Blagojevich's projections.

Casinos say they're losing business to Indiana boats that have lower tax rates and, by extension, more money to spend on marketing and incentives.

"We continue to lose market share," said Tom Swoik, executive director of the Illinois Casino Gaming Association, a trade group.

The shift has been most noticeable in the Chicago area, where boats on the Illinois side have been losing ground to boats on the Indiana side for more than a year.

Also, the two Illinois boats in the St. Louis market have posted slight declines in revenue, Swoik said.

Illinois has shocked the casino industry by sharply raising taxes two consecutive years. The first round, which took effect July 1, 2002, lifted the top tax rate to 50 percent, up from 35 percent.

The taxes are assessed on a casino's adjusted gross receipts, which essentially are total bets minus total payouts. The top rate, which applied to receipts above $200 million, was the highest in the nation.

But this year, Illinois imposed more increases, boosting the top rate to 70 percent for receipts above $250 million. The state Legislature boosted tax rates as much as 7.5 percentage points for lower levels of receipts.

Also, lawmakers raised the admission tax to $5 a customer, up from $3.

Blagojevich projected that the moves would raise an additional $200 million in annual revenue for Illinois.

But a state economic panel says the revenue gain this year will total $160 million, or 20 percent below the original estimate.

FULL STORY

The article goes on to detail exactly how badly the news taxes are hurting casinos there. It seems simple logic that casino companies will divert their limited resources to markets where they are taxed less.
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(Sun)downer in Reno gaming

The Sundowner, a downtown Reno casino hotel, is going to close permanently on December 1. From the RGJ:

George Karadanis, co-owner of the Sundowner, wrote in a letter to his employees that the casino “cannot continue to operate in the gaming industry climate as it currently exists; therefore, I am directing its closure on Monday, Dec. 1, 2003.

“I wish it could be otherwise, but the Sundowner Hotel and Casino can no longer sustain the economic losses we have incurred and continue to incur.”

“Ever since the Silver Legacy came on line (in 1995) we have had some struggles,” said Rob Whittey, the Sundowner’s chief financial officer. “I think that the overall image of Reno and its ability to attract new tourists and develop new markets just hasn’t been there. And we, at our particular location, just really suffered from that.”

Whittey, who has been at the Sundowner for 15 years, said the 300 full-time and 75 part-time employees would all be paid what is owed them, including vacation pay, but that no severance packages are planned. He added that all vendors also would be paid in full.

Employees said they expected the closure.

“There have been so many back-and-forth rumors. But no Christmas bonus last year said a lot,” said Cindy Sutterfield, a dealer standing behind an empty craps table at midday Thursday.

FULL STORY

It's too bad for the employees who find themselves unemployed through no fault of their own, but this seems to be an example of a self-fulfilling prophecy. Giving a property a name like "Sundowner" suggests twilight and decline--it's like naming your racehorse "I'm the slowest!" I wasn't surprised when Elsinore's Atlantis in Atlantic City went under (even though I was 14 or so at the time) because I knew instinctively that it would metaphorically sink under the sea. So this is a story, but its not a surprise.
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Also expected, but unfortunate

The Glass Pool Inn on the southern end of the Strip has been closed and may be demolished soon. It is a Strip icon for its above-ground pool with underwater portals. Read the story from the LV Sun.
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Amid the bad news, the big picture is good

For people investing money in casinos, anyway. According to Standard & Poor's analyst Michael Screbo, 80% of gaming industry debts are "stable," which I guess is a good thing. Here's a big picture excerpt from the LV Sun:

Last month, following one of the biggest acquisition announcements in recent years -- Harrah's Entertainment Inc.'s $1.45 billion purchase of Midwest riverboat gambling operator Horseshoe Gaming Holding Corp. -- S&P said it may raise Horseshoe's credit ratings. The agency affirmed senior credit ratings for Harrah's.

The Las Vegas Strip market is expected to strengthen in the near term, while performance in the rest of the U.S. gaming industry also is anticipated to gradually improve over the next several quarters in line with the overall economy, he said.

Industry stability is characterized by gradual improvement of gaming performance over several quarters, further strengthening of the U.S. economy, continuation of "positive momentum" in Las Vegas, relatively stable performance in Atlantic City and riverboat gambling markets and continued growth in tribal gaming, he said.

Overall, the gaming industry has also outperformed other leisure industries, he added.

FULL STORY

That's probably the most positive news I can give you today. You certainly won't find it in a headline like Gambling-related suicides soar. Try to have a great weekend, though.
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posted by Dave at 3:55 PM

Indian political clout growing in CA

The Washington Post has an interesting article that lays out the increased power of Indian tribes in California politics, and speculates that this power may cause a backlash:

In California's raucous recall campaign, the gaming tribes have emerged as influential players -- they are the most deep-pocketed givers, surpassing even organized labor as the biggest campaign donors this season. But their support comes with a price: Candidates accepting their money open themselves to attacks that the Indians will gain even more power in state politics at a time when many voters resent their growing clout.

"The tribes are the most powerful political contributors in the state, and they've already crossed the $11 million mark, and that is likely to rise in the last week. The amounts are extraordinary," said Jim Knox, executive director of Common Cause in California. The Indian money accounts for one of every six dollars of the $66 million contributed to candidates or spent by independent committees so far on the recall effort.

Bustamante is the Indians' go-to guy in Sacramento, and he hit the jackpot with the tribes; they have spent $6 million on the Fresno politician in the past few weeks. The huge infusion of Indian casino contributions has exposed Bustamante to charges that he is pandering to his Indian pals, whose 53 casinos around the state have revenue estimated at $5 billion a year.

The tribes have also given $2.5 million in support to conservative Republican state Sen. Tom McClintock, who has been a longtime backer of the Indians. Analysts here say the contributions may be intended to help undermine the GOP front-runner, actor Arnold Schwarzenegger.

FULL STORY

For decades, Americans have pushed Indian tribes onto the most marginal lands in the nation. Now that some Indian tribes have found an industry that they can acutally use for development, it seems that many hold it against them.

Some day, historians will be able to appreciate the absolute change in Anglo-Indian relations that tribal gaming is bringing about. In the meantime, there are people who continue to see anything connected with gaming as inherently anti-democratic. And it seems that champions of political correctness never get upset about anti-Indian attacks, curiously.

Cruz Bustamonte had a rebuttal in and article about the undue attention focused on tribal contributions to the CA gubernatorial recall campaign in the Mercury News:

"There are corporations that are giving money to Arnold Schwarzenegger in the millions of dollars, and no one says anything to them. Why not? Because they are Indians? Because they are indigenous people? Why?" Bustamante said in a transcript released Tuesday. "No one is asking me how much money I get from the Latino community, or from African-Americans, or from people in the Jewish community, or any other group. No one else, just the indigenous tribal governments. Why is that?"
FULL STORY

Bustamonte makes a good point, even if he doesn't have Murilo Bustamonte's submission skills (sorry, I had to get a BJJ reference in there somehow). The selective attention paid to tribal political action is indefensible.
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Maybe they can use the proceeds to buy retro jerseys?

Vancouver Canucks instant lotto tickets are quite the thing in British Columbia. From the Vancouver Sun:

The new Canucks scratch-and-win tickets are proving to be a good bet.

After just two days of sales, the $10 tickets are flying off the shelves at lightning speed and retailers are demanding new shipments from the B.C. Lottery Corporation.

"It is a resounding success," said Jim Lightbody, vice-president of lottery gaming.

"We've had over 400 of our retailers call with emergency re-orders saying that they've sold out."

The scratch-and-win tickets, which went on sale Monday morning, are being sold in batches that feature two Canucks players each. The tickets on sale now feature either Trevor Linden or Brendan Morrison and the next batch will feature Todd Bertuzzi and Daniel Sedin.

Ticket-buyers have a one in three chance of winning, but some people are undoubtedly buying the tickets to add to their collections of Canucks memorabilia.

"People are absolutely buying them as collectors' items and trading cards," said Dave Cobb, Canucks chief operating officer.

FULL STORY

This is cool--hockey meets the lottery. As I alluded to in the headline, I would like to see this lottery fund the return of the greatest NHL jersey ever--the famous Vancouver Canucks "flying v" jersey. That would be a good thing.
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Vice isn't nice

Well, there is another group that thinks investing in peccadillos is a great way to make a buck. The Vice Fund puts your $2500-minimum investment into gaming, alcohol, tobacco, and defense contractors. Certainly not for the eco-friendly investor. From the Vice Fund's prospectus:

“It is our philosophy that although often considered politically incorrect, these and similar industries and products...will continue to experience significant capital appreciation during good and bad markets. We consider these industries to be nearly ‘recession-proof.’

Yes, I imagine people with their money sunk into the tobacco industry are feeling very good now. The site notes that gaming has had a nearly 25% return on investment in the past year, compared with negative numbers for the S & P 500, but things don't look so hot in the tobacco and alcohol fund areas.
So why wouldn't you just take your money and invest it in gaming stocks? They seem to be buoying this whole "vice" thing anyway.

This is an interesting phenomenon, though, because it shows (just like the Indian gaming story) that many people still consider gaming to be a deviant industry--something that I lose sight of, living next to the Las Vegas Strip.
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That's all for today.
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posted by Dave at 5:58 PM

Harrah's sends a message

Harrah's Entertainment spent last Friday telling the public just how much people love to gamble. From the AC Press:

Harrah's Entertainment unleashed a blitz of state-specific press releases, using data from company-funded studies to note how many times residents from each of 11 states gamble at casinos.

Gamblers in casino-less Pennsylvania, for instance, made 8.9 million trips to casinos last year, Harrah's found.

"Pennsylvania residents are voting with their feet and pocketbooks for casino entertainment," Harrah's CEO Gary Loveman said. "Unfortunately for them, Pennsylvania public policy insists they cross state lines to do so."

Loveman had a similar message in press releases customized for Arkansas, Florida, Kentucky, Maryland, Massachusetts, New York, Ohio, Oklahoma, Rhode Island and Virginia.

Loveman believes casino-style gambling is benign entertainment that should be widely available to adults.

Each Harrah's release pointed out that adult gamblers took anywhere from 1.3 million (Oklahoma) to 13.5 million (New York) casino trips last year.

Each of the listed states has little or no casino-style gambling and in each state the gambling debate is ripe.
FULL STORY

Harrah's also summarized the results of their survey on casino entertainment. I will post the press release to the reading room soon. Although the company says it is not trying to lobby for gambling expansion, it seems a likely conclusion that the press releases were meant to encourage debate (at the very least) over new casinos.
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Speaking of expansion...

New York Mayor Michael Bloomberg made an interesting point, although one that might have been unpremeditated. From Reuters:

New York City Mayor Michael Bloomberg on Friday said he was "honestly annoyed" that the state only allows gambling on Indian reservations, adding that the city might as well have a casino too.

The Republican mayor made it clear he disliked gambling because it draws the people who can least afford to lose money. But he added: "If everybody from New York City is going across a (nearby) border, why not keep the money here?"

Bloomberg's comments on his weekly radio show were the most positive he has made about gambling.

His remarks contrasted sharply with the cold reception he gave the governor's mid-May proposal to help the city solve its fiscal crisis by installing 4,500 video poker machines in Times Square.

Both the state and city already take part in gaming, Bloomberg noted on Friday, noting that they both have lotteries and the city owns Off-Track Betting Corp.

Taking a swipe at upstate towns that have pinned their economic revival on million-dollar casino projects, he added that casinos should be located where they help everybody, "not just a small community."
FULL STORY

He obviously didn't read Suburban Xanadu, which explains why casinos thrive in otherwise-marignal places and why they aren't found in major cities. A casino in New York City would represent the absolute refuation of the original model for the Las Vegas Strip, that of containing gaming far from the cities. An interesting proposition, but not one that is likely to happen anytime soon.

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But not everyone wants more casinos

The Attorney General of Maryland, J. Joseph Curran, had a decidely negative cast on the prospect of his state legalizing casinos. From the Thoroughbred Times:

Curran spoke during the National Coalition Against Legalized Gambling’s annual conference, which was held near the Baltimore-Washington International Airport. During his speech, Curran stated that law-enforcement costs increase an average of 8% in communities where gambling is legal.

"The way I can help is by saying here is the data. Here is the catch. Here are the consequences," Curran told the Washington Post. "Someone should be speaking for the public interest as opposed to the racetrack owners, and that is how I hope to be instrumental."

Although state legislators defeated Governor Robert Ehrlich Jr.’s plan to add 11,500 slot machines to the four Maryland racetracks earlier this year, the House of Delegates is currently in the midst of a four-month study on how gambling would affect the state’s economy.

So while there are many voices clamoring for expansion, there are still many urging caution.
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Review of Zumanity

Here's something I pulled from Reuters: parts of a review of Zumanity at New York-New York. It is an interesting read:

LAS VEGAS (Reuters) - Nubile women caress each other as they swim in a huge, see-through fish bowl; two male dancers indulge in a long, lingering kiss and a nearly nude female trapeze artist groans with simulated sexual pleasure.

The master of ceremonies is a drag queen cabaret singer who croons, ``Sex is beautiful,''

Welcome to the latest hit act in Las Vegas, a town that has now dropped any pretense of being there mainly for fun-filled family weekends.

Sex and commerce have always been close in Vegas and even the world-famous acrobats of circus troupe Cirque du Soleil is now getting into the act.

The desert gambling oasis has hit a winning streak over the last few years with new erotic shows and risque nightclubs.

Cirque du Soleil, a staple of the Las Vegas strip for a decade with its classy artistic shows that cost up to $100 a ticket, has now stripped most of its lithe troupe down to G-strings for ``Zumanity,'' which debuted this month for an open-ended run.

``Zumanity'' is billed as ``another side of Cirque du Soleil,'' whose amazing acrobatics and New Age artsiness are a highlight at the 1,259-seat theater at the New York, New York casino, owned by casino operator MGM Mirage....

``Zumanity'' is still evolving. It failed to wow some early audiences, and Felix Rappaport, head of the New York-New York casino which hosts the show, said some tasteless acts were taken out, such as a scene of bound and gagged men hanging from the ceiling that had sadomasochistic overtones.

But audiences are still pouring in. The two nightly performances over the last month have helped raise casino revenue by 30 to 40 percent.

``People who go to see Zumanity have money,'' Rappaport said.

It's great to see something new like this do well. The review also rehashed the now-tired observation that Las Vegas is becoming less family-friendly and more adult oriented. Just like the "family fun" story was overstated in the mid1990s, the "skin city" angle is getting more print than it deserves now.
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That's all for today.

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posted by Dave at 3:40 PM