The closest bird gets the worm – or rather the customer – 10 million customers

Now that every state seems to have jumped on the gambling bandwagon, gaming industry observers and other interested parties are starting to grasp the concept of market saturation; five years or so ago it was very poorly understood concept in gaming.  But not so in the waning days of 2012, in one day, October 24th, the New York Times, Hartford Courant and the Republican-American each wrote articles outlining the impact of the expansion of gaming on existing markets.  Each article is some way illustrates that there is a finite number of customers for casinos and at some point each new casino must get it customers from another casino.  As the stories related to the expansion of gaming pile up one after another, I wonder if there is anyone left, outside of some state legislatures, that still believes expansion is a simple linear process without any impact or undesirable affects on any other businesses or interests?

Imbedded within the New York Times article, in an almost throwaway fashion, is a stunning fact – 10 million people have entered the casino in Queens in a year; to put that in context that is a fourth of the number of people that visited Las Vegas or a third of the number that gambled in Macau in the last 12 months.  Ten million customers is pretty much enough to guarantee the success of any business; and the loss of ten million customers is pretty much a receipt for disaster for any business or market.  That little number contains the essence of the subject, the casino closest to the customers makes the most profit and takes business away from those farther away; it is a very old and well understood principle in retail.  It was first articulated in the 1950s as shopping malls proliferated across the retail landscape.  The first malls did very,very well; they were closer to residential neighborhoods, they had lots of free parking and they thrived on customers that had once patronized downtown businesses.  But those first malls found their business dwindling into red ink and finally closure when new malls opened closer to the customers.  As much as anything, the race to build malls close to new residential developments defines the retail industry in the second half of the 20th century.  In the first two decades of the 21st century we are seeing the same trend in the casino industry.  It makes me think there is no longer anything unique about the casino industry; in 2012 there is little to differentiate casinos from any other form of retail business – the same principles apply to both.  That is fact that needs to find its way into the halls of governemnt at every level.

 A casino that opened a year ago at the fading Aqueduct horse racing track in Queens has emerged as the country’s highest-grossing slot parlor, helping to reshape the gambling landscape in the Northeast as patrons chose less opulent, more local casinos instead of traditional gambling meccas in Atlantic City and Connecticut.  The casino, Resorts World Casino New York City, generated nearly $630 million in revenue over the last 12 months from electronic slot machines, more than the slots at any of the 12 casinos in Atlantic City or at Foxwoods or Mohegan Sun in Connecticut. The average income from an electronic slot machine is more than $370 a day, compared with $169 for slots on the Strip in Las Vegas. The success of the casino, the only one in the five boroughs of New York, suggests that no matter how luxurious the accommodations or exciting the entertainment, nothing appeals more to gamblers than a casino that is nearby. More than 5.6 million people live within 10 miles — a short subway ride or car trip — of the casino, which expects to see its 10 millionth customer by the end of October. – Marcus Yam, New York Times, 10-24-12

 In the next two weeks, Rhode Island voters will decide on a ballot measure that would bring table games to the state, an effort to solidify their position in the increasingly crowded Northeast casino scene. “It’s like a casino arms race where one state has slots, so the other state adds slots, then the first state adds a casino,” said David Schwartz…The addition of table games in Rhode Island would be the newest and closest competition to Foxwoods and Mohegan Sun… In addition to the state’s measure, voters in Maryland and Oregon will face similar ballot measures on Nov. 6. Ohio, Maryland, New York and Kansas have added casinos in the past two years. Massachusetts authorized casinos last year. Pennsylvania’s first casinos opened in 2006. Brian Dowling, Hartford Courant, 10-24-12

 The Malloy administration’s estimate of the state [Connecticut] deficit more than doubled to $60.1 million in the last month. The governor’s budget office attributes the widening gap to sizable declines in payments from the state’s two tribal casinos and revenues from the corporation tax. – Paul Hughes Republican-American, 10-24-12


3 Responses to “The closest bird gets the worm – or rather the customer – 10 million customers”

  1. 1 lynne rosner October 25, 2012 at 6:25 am

    Congratulations Reno, if I’m reading the Las Vegas Sun right.

    Now can baccarat sustain the party of geographical conquest with the clientele eventually returning to the fold of loosest slots in the west and comp offers that take you to a higher level missing in the cheap seats closer to where you live?

    I have a New York gambler friend of mine who follows the Appalachian Trail to Pennsylvania rather than AC to have her weekend fun now. And all those Motel 6 types on the path back are the closest thing she gets to a comp room when she tires from the action and is working on her new VIP rating for the closer venue. That’s just my opinion of my friend’s actions and I am sure that it is not that cut and dried and so I apologize to her for my thoughts about the words “behavior and study” and hope that she reads this as more than a disclaimer. And best of luck in the world.

  2. 2 rexdstock1 October 26, 2012 at 12:23 pm

    Nothing unique about casino gaming at all…  Actually, antiquated and vaguely nostalgic, with plenty around to divert the melancholy that only the casino operators who gaze out at the Atlantic Ocean from Atlantic City can know…


  3. 3 Ken Adams October 26, 2012 at 12:49 pm

    However antiquated it maybe, just a few years ago it was thought by most observers and operators to be unique and controlled by forces and principles that were not part of other businesses operating environment.

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