The US Gambling Market is Saturated, yet the Casinos Keep on Coming

The word “saturated” is commonly applied to the casino industry these days. It is more than a word; it is a reality. A few years ago, the saturation of gaming seemed inconceivable. In those long-gone days, everyone thought the pot of gold at the end of the casino rainbow was unlimited. No longer- now one and all have learned to sing the Saturation Song. Casino operators, lawmakers, gaming regulators and newspaper reporters in Delaware, West Virginia, Indiana, Ohio, New York, New Jersey, Maryland, Connecticut and Michigan all know the words.

The casino market in the northeastern United States is saturated, yet that’s not stopping some states from approving gambling legislation and companies from building new gambling halls…Eugene Johnson, of Spectrum Gaming Group, says by the end of this year, there will be 60 casinos in the northeast. That figure will grow to 65 by 2018, according to his colleague, Joe Weinert. “There’s not a politician in the land who is going to choose a tax increase when gaming looks so good on paper,” said Wendy Hamilton. “We have to avoid the siren song. There’s not a zip code in the region that doesn’t have four or five (gambling) options within an hour.” Wayne Parry, Associated Press, 5-28-15

There are exceptions, however; some lawmakers still believe in the pot of gold. In Illinois there are several bills working their way through the legislature to add casinos. One would put slot machines at the racetracks and another puts casinos in five locations around the state. The mayor of Chicago is a major advocate for expansion; he wants Chicago to have and to own a casino.

An effort to approve a Chicago casino and other new casinos throughout Illinois to generate much-needed revenue could be pushed into the summer…lawmakers are considering a bill that would allow Chicago to keep all casino revenue for seven years. It would add casinos in Chicago’s south suburbs, Rockford, Vermilion County and Lake County. It also calls for smaller “satellite” casinos that could be located in Decatur and far southern Illinois. Sara Brunett, Associated Press, 5-28-15

The owners of an East St. Louis casino plan to purchase the struggling Fairmount Park racetrack, provided Illinois lawmakers agree to allow a gambling expansion that would bring slot machines to the state’s five horse racing venues. Associated Press, 5-26-15

Illinois is the least logical place to add more gaming. The gaming marketplace is already saturated, but not necessarily by casinos. Illinois has too many slot machines and more are being added all the time. But, the expansion of slot machines is under the radar of lawmakers and the media. In a little noted article, the Woodstock Independent mentioned a hotel getting a liquor license – which also makes it eligible for a slot machine license.

Hotels in Woodstock will be able to apply for liquor licenses under the terms of a new classification approved by the Woodstock City Council May 19. The new E-5 classification, commonly known as the Hotel Small Bar and In-Room Minibar license, will allow licensed hotels to sell alcohol for consumption on premises… state law also will allow hotels with liquor licenses to apply for video gambling licenses. Katelyn Stanek, Woodstock Independent, 5-28-15

There are already 19,800 slot machines in Illinois; in April they did $76.4 million in revenue, up 46 percent. Casino revenue was $126 million, down .8 percent. To put the casino revenue in perspective, the $126 million was 24 percent less than in 2007. And though, I said everyone knows the words to the Saturation Song, that is not really the case. A legislature in search of money is a dangerous thing; it hears no songs but its own and finds it easy to ignore reality.

Pennsylvania is also discussing illogical expansion in the face of saturation. The state’s casinos are feeling the pressure of casinos and racinos in Ohio. That pressure will increase when more casinos open in New York and possibly New Jersey. But the legislature is in need of money. It is exploring ‘satellite casinos’ – slot machines in locations outside of casinos, ala Illinois and it wants to legalize internet gambling.

Mohegan Sun Pocono would be able to place slot machines potentially at its off-track betting parlors in Carbondale, East Stroudsburg and Allentown if a new gambling expansion bill becomes law…would allow racinos to have up to 250 slot machines at OTBs for a fee…solo casinos would have the same option for slot machines…The main thrust of the bill is to allow casinos to offer internet gaming. Robert Swift, Scranton Times-Tribune, 6-8-15

Pennsylvania and Illinois have budgets to balance and are not thinking about saturation. Illinois has a $6 billion deficit; balancing is not going to be easy. Pennsylvania and Illinois are not alone; according to the Associated Press 22 states have budget deficits. Those deficits can be expected to fuel even more expansions talks.

With the nation’s economy at its healthiest since the Great Recession, a surprising trend is emerging among the states – large budget gaps…at least 22 states project shortfalls for the coming fiscal year. The deficits recall recession-era anxiety about plunging tax revenue and deep cuts to education, social services and other government-funded programs…The forces at work today are somewhat different than when the recession took hold in 2008. In some states, revenue growth has been stagnant, missing projections and making it difficult to keep pace with expanding populations and rising costs for health care and education. Other states have been hurt by a steep decline in oil prices or seen their efforts to promote growth through tax cuts fail to work as anticipated. Christina A. Cassidy, Associated Press, 5-10-15

Legalizing casino gaming has become acceptable to the majority of Americans over the course of the last forty years. As a result, gaming is very often seen as a solution to a state’s financial problems; gaming is an easy tax to impose. It is an indirect tax, meaning those who actually pay the tax are unaware they are paying it. Every year brings renewed budget discussions; lawmakers trying to balance a budget are not necessarily concerned with the state of the market or the health of existing business. They just need money and they need it now to balance the budget today. Lawmakers have just two concerns, solving an immediate problem and retaining voter approval. Regardless of how many times we hear that the gaming market is saturated, we are a very long way from the end of expansion and the glut of gaming that will ensue.


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June 2015
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