It is a dog eat dog world out there

This week many casino jurisdictions reported gaming revenues for August, except Nevada which reported for July.  The results are mixed, but in general positive.  Nevada (17%) and Atlantic City(13%) were both up by double digits, although for separate reasons; Atlantic City casinos closed for a couple of days because of storm last year and there is one new casino – Revel.  And in Nevada, baccarat revenues were up over 100%, a sure way to drive up state numbers.  Even within those two states there is more than one storyline – in Nevada there other jurisdictions besides the Strip and those jurisdictions did not have big baccarat wins.  Reno and northern Nevada are still struggling and were down 8%.  In Atlantic City, not all casinos are thriving and the brand new casino Revel, built at the cost of 2.4 billion dollars generated $20 million in gaming revenues, less than Horseshoe Casino in Cleveland, Ohio ($22 million) and the Rivers Casino in Chicago, Illinois ($26 million).   In Missouri, the casinos were up less than 1%, but the casinos in Kansas City the casinos were down. In Indiana, gaming revenues were up less than 1%, but the casinos in the northwest part of the state were up 5,5%.

That kind of mixed results will be true across the country as other jurisdictions report; the industry is improving as the economy improves.  But as the economy improves so does the competition.  Professor Bill Eadington, of the University of Nevada in Reno, has been a keen observer of the gaming industry for the last 35 years or so, Bill knows as much as anyone about the industry and carefully follows the developments in every jurisdiction.  He is frequently asked to comment on gaming revenue results in Reno and northern Nevada.  When the numbers go down as they do most months in the Reno area, it is hard to have something new to say, however this month Professor Eadington said something that merits bearing in mind in the future and not just in Reno, but all across the country.

“There’s nothing out of line in the July numbers with long-term trends. No real encouragement,” Eadington said.  Moreover, he said ongoing competition with tribal casinos in California will get tougher, especially for the San Francisco Bay Area-Sacramento market, which is home to much of Northern Nevada’s tourist base.  “As they mature, those Indian casinos will get better at what they do, so it’s only likely to get more competitive in coming years,” he said. “And as they compete more among themselves, Reno-Tahoe is almost forgotten. “With the geographical distance, that’s very hard to overcome.” Reno  Gazette-Journal, 9-10-12

Reno will always have to contend with Indian casinos in California, Oregon and Washington; and even without adding any new casinos, (However, California will be adding at least 3 in the next couple of years) each year those casinos gets better at competing.  That is the nature of competition and capitalism, to survive a casino must (as any business must)  constantly strive to improve and innovate.  All across the country casinos are faced with the same problem that Reno faces, increased competition and very often the new competitors are closer to key feeder markets.  Michigan, Illinois, Indiana, West Virginia and Pennsylvania are just beginning to face the competition from Ohio.  The casinos in all of those states will have to get better to survive, but so will the casinos in Ohio.

In California, in the beginning most Indian casinos did well just eating Nevada’s lunch, but now they are going to have to eat each others lunch to grow and prosper.  In a year or so, there will be a new, bigger and more expensive casino in the market, and it will be closer to the San Fransisco market.  As with all of the other casinos in California, it will have an impact on Reno – but it will have a grater impact on the two largest casinos in the region – Cache Creek and Thunder Valley.

This is a new era in gaming and it is not temporary; each month the results in one jurisdiction will have some significance to results in neighboring ones.  At the moment, Atlantic City is in the worse position, but even that will change as Ohio starts to take a real bite out of Indiana and Pennsylvania.  The battle has been joined and not everyone will survive – Reno has lost 20 casinos since the Indian Gaming Regulatory Act passed in 1988.  There will be causalities in other states too, not tomorrow and not probably next year – but there will be casualties.  It is a dog eat dog world in the world of casino gambling.


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