Mom and pop ride again in Cripple Creek

Photo of the Colorado Grande Casino in Cripple Creek, Colorado. Visit the Message Forum.

This story is not a universal story, nor is it one that will interest very many people.  However, it is one I like.  Somewhere in the mountains of Colorado is Cripple Creek, the mountain peaks around it reach 14,000 feet and the town itself is 9500 feet up in thin and often cold air.  In the late 19th and early 20th century, it was  a booming gold mining town until the veins ran dry; in the middle of the 20th century Cripple Creek made a come back as a place for tourist to photograph old buildings, buy some souvenirs, eat something and then move off before the sun set.  In the summer the colorful old store fronts were filled with trinkets and treats – but it was hardly enough to keep the town from turning into a ghost town in the long-run.

In 1991 the voters of Colorado authorized limited stakes gaming in Cripple Creek, Central City and Black Hawk.  The legislation was meant to provide funds to keep the old mining communities alive – noble and by some measures a successful goal.   The casinos were to be built to resemble the style of the buildings in the heydays of the mining boom.  And in fact most do, with a slight stretch in Black Hawk where the casinos are genuine casinos with hundreds and hundreds of slot machines, table games, restaurants and hotel rooms. The casinos in Black Hawk generate 80 percent of the gaming revenue in the state.

In Central City and Cripple Creek the casinos are much smaller casinos, some are still in original buildings from the 1890s and for the most part they have slot machines, maybe a restaurant and or even a few hotel rooms. The difference between Black Hawk and Cripple Creek is easily explained – customers – one has lots and the other does not.

Black Hawk casinos have 2.3 million potential customers within 40 miles.  Denver is just down the road and the road is very good one, easily driven any time of the year.  Cripple Creek is an hour from Colorado Springs and 400,000 people (25 percentage of which are Christian fundamentalist – not the best casino customers in the world), half of the distance is covered by a road as good as the one between Denver and Black Hawk.  The other half, on the other hand, is a two-lane, winding mountain road subject to all of the disruptions that can occur at 9000 feet in the mountains of Colorado in the winter.  Today there are 14 casinos (some are really one casino with two or three different names) in Cripple Creek, since 1991 twice that many have come and gone all victims to competition, the mountain roads and a lack of capital.  It is a tough place to do business.  But for those that have found a formula it is also a place where success can be found.

One such operator, with 20 years experience in Cripple Creek, covering 4 or 5 different casinos appears to have found a formula.  This week it was announced that the Colorado Grande has been sold. The buyer, as yet unnamed, is the operator of another casino very near-by.  The buyer hopes, according the press release from Nevada Gold the seller, to apply an already successful formula to the Colorado Grande, which has declined dramatically under the ownership of Nevada Gold.  For $3 million dollars the buyer gets 44 parking spaces, 7 hotel rooms, 1 restaurant, 200 slot machines and a chance to face yet another winter in Cripple Creek.

Cripple Creek is not much of a gaming market, it has too many challenges and too few customers, but it does offer one thing that is almost non-existent in the casino industry today; Cripple Creek is a place where a small operator with very little cash can get a chance to own a casino.  Give a big cheer for the little guy; the mom and pop operators.  They are a very rare breed, not just in gaming but in all major industries.  They once dominated the economy, but like the gold mining in Colorado, their vein went dry in a world of mergers, public equity offerings and high finance.  In 2011 in gaming it usually takes not a couple of million, but hundreds of millions of dollars (and sometimes billions) to buy a seat at the table.  Take Florida – the suggestion is $65 million for a license and $500 million minimum investment (Genting is promising nearly a $4 billion investment)- not too many moms and pops have that much money in the cookie jar.  So once again give a cheer for mom and pop, they deserve their chance at the brass ring too.

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November 2011
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