September 2019

July Was Encore Month

In July, the combined national win for casinos, VLTs, and sports betting was up 3.4 percent to $3.815 billion. Year-to-date, total gaming win is up 3.3 percent to $25.972 billion. July 2019 had one less Sunday than in July 2018, so the theoretical calendar effect for the month would be a decrease of 0.73 percent. Obviously factors other than the calendar –continued expansion, particularly – explain the 3.4 percent increase for July, and calendar effects are virtually nonexistent over the longer period of seven months, through July 31 st .
 
The larger the market share of a state, the more impact that changes in that state will have on the national total. Nevada, with a 27 percent market share, has the largest potential impact. The next-largest states are Pennsylvania, at 7.5 percent; Atlantic City (7.3 percent), Illinois (6.7 percent), New York (6.1 percent), and Indiana (5.9 percent). The market share percentages of that group could easily change over the next twelve months as Pennsylvania, Illinois, and Indiana are in the process of adding more gaming options.
 
Massachusetts has only a 4 percent market share, but its newest casino, Encore Boston Harbor was a big story in July, the first full month for the $2.6 billion property. The win was $48.5 million, with slots averaging $216 per machine per day, less than the state’s racino. Tables averaged $3,829, three times as much as MGM Springfield, but a third less than MGM National Harbor. The property management says it has yet to bring in any of its high-rollers and that when it does, revenues will go up dramatically.
 
In July, sports betting continued to play a very important role in the national gaming narrative, as more states added legalized wagering. And Illinois and Pennsylvania are adding more VLTs. With the increase in product and gaming options, it is difficult to imagine - short of a national recession – a remaining month in 2019 where total revenues will not increase on a year over year basis.
July 2019 Casino and VLT Revenue:
 
Atlantic City gaming revenue rose 7.8% to $323.3 million. Gaming Commission, 8-19
 
Delaware revenue rose 3.3% to $34.1 million. Lottery Commission, 8-19
 
Detroit casino revenue fell 0.25% to $119.0 million. Gaming Commission, 8-19
 
Colorado casino revenue fell 3.47% to $75.0 million. Gaming Commission, 8-19
 
Florida slot revenue unchanged at $45.4 million. Gaming Commission, 8-19
 
Illinois gaming revenue rose 4.1% to $250.0 million. Gaming Commission, 8-19
 
Indiana gaming revenue fell 2.7% to $185.8 million. Gaming Commission, 8-19
 
Iowa casino revenue rose 0.64.0% to $125.0 million. Gaming Commission, 8-19
 
Kansas gaming revenue fell 0.5% to $34.3 million. Gaming Commission, 8-19
 
Kentucky historic racing win rose 133.6% to $18.4 million. Racing Commission, 8-19
 
Louisiana gaming revenue fell 6.6% to $252.1 million. Gaming Commission, 8-19
 
Maine gaming revenue rose 3% to $13.3 million. Gaming Commission, 8-19
 
Maryland gaming revenue rose 1.9% to $149.3 million. Gaming Commission, 8-19
 
Massachusetts gaming revenue rose 438% to $81.30 million. Gaming Commission, 8-19
 
Mississippi gaming revenues fell 0.32 to $185.6 million. Gaming Commission, 8-19
 
Missouri gaming revenue fell 4.0% to $144.4 million. Gaming Commission, 8-19
 
Nevada gaming revenue rose 2.9% to $1.024 billion. Gaming Commission, 8-19
 
New York revenue rose 4.3% to $231.6 million. Gaming Commission, 8-19
 
Ohio gaming revenue rose 2.3% to $162.2 million. Cleveland Plain Dealer, 8-8-19
 
Pennsylvania gaming revenue rose 1.1% to $281.44 million. Gaming Commission, 8-19
 
Rhode Island revenue fell 6.1% to $50.8 million. Gaming Commission, 8-19
 
South Dakota gaming revenue rose 4.6% to $29.3 million. Gaming/Lottery Commission, 8-19
 
July gaming revenue rose 3.4% to $3.815 billion . David Rohn, 8-19
 
Year-to-date gaming revenue rose 3.39% to $25.972 billion . David Rohn, 8-19


The other categories:
 
Connecticut slot win fell 14.0% to $84.7 million. Associated Press, 8-19
 
Macau gaming revenue fell 3.5% to $3.0 billion. Reuters, 8-1-19
 
Dow Jones Industrials rose 0.99% to 26,864.27. Yahoo Finance, 7-19
 
Adams Gaming Index rose 2.65% to 605.61. CDC Gaming Reports, 7-19


Across the Country

Atlantic City is still rolling along, but the narrative is becoming more complicated. The total gaming win in July was up 10.7 percent from 2018. But the casino win was up only 1.8 percent to $277.2 million; that consisted of slot win of $193.3 million, down 0.5 percent, and table game win of $83.8 million, up 7.5 percent. Six of the nine casinos had revenue decreases. Offsetting the slow growth of the regular casino win, internet win was $39.3 million, up 51 percent, and sports betting added $17.9 million to the total.
 
Borgata is the market leader in Atlantic City with $87.9 million in total gaming win, up 14.8 percent from 2018, giving it a 27 percent market share. Hard Rock was in second place with $40.7 million, up 24 percent, a 12.5 percent share. The Golden Nugget was third with a 10.6 percent share from a win of $34.5 million, a 17.4 percent increase. The slots and table revenue for the Golden Nugget casino fell by 3.3 percent to $19.4 million, but its online win went up 59.7 percent to $14.8 million, 42.9 percent of the property’s total revenue. Without the online revenue, Golden Nugget’s market share would drop from 10.6 percent to 6.0 percent, which would put the property on the endangered species list.
 
The internet is the now the most important factor shaping the narrative for Atlantic City. Three casinos that look to be on the endangered species list are Resorts, Bally’s, and Ocean Resorts. Bally’s was down 11.3 percent to $18.2 million in July, Resorts had $18.1 million, up 1.8 percent, and Ocean Resorts reported a total of $20.1 million for July, up 18 percent. However, the number for Resorts is misleading because it has a separate online company, Resorts Digital, which produced $10.5 million, enough to take the casino off the list. On the other hand, Caesars, which includes Bally’s, Caesars and Harrah’s, has an internet unit that generated only $5.0 million in July, not enough to prevent Bally’s from being one of most at-risk casinos in A.C., along with Ocean Resorts.
 
In Maryland , casinos reported a 1.9 increase in gaming win to $149.3 million. MGM National Harbor had a win of $60.7 million, up 4.1 percent, and a 40-percent market share. Live! won $49.2 million, up 3.2 percent from 2018; Horseshoe Baltimore was down 5.2 percent to $19.3 million; Hollywood was up 5.9 percent to $6.5 million; Ocean Downs fell 5.5 percent to $8.1 million; and Rocky Gap reported $5.1 million, up 0.6 percent. The new 800-pound gorilla in the East Coast is Encore Boston Harbor, but that is 400 miles and 7 driving hours away. It may affect other markets, but Maryland and MGM Boston Harbor should be fine.
 
In Massachusetts , Encore is clearly going to be the dominant force. In July, Encore had $48.5 million in win and a 59-percent market share in the state. It may not disrupt business at MGM National Harbor, but it is going to impact New York, Pennsylvania, New Jersey, Rhode Island, and Connecticut. Foxwoods and Mohegan Sun in Connecticut reported a 14 percent drop in slot win to $84.7 million, while Rhode Island’s casino win fell 6 percent to $50.8 million. Closer to home, MGM Springfield (not open in July 2018) reported $20.3 million in revenues and Plainridge Park reported $12.5 million, down 17.2 percent from 2018.
 
According to its management, Encore is in the ramping-up phase. It has a way to go to catch MGM National Harbor’s $60 million in revenue. Even if it does, the regional crown is certain to remain for a long time at Borgata in Atlantic City, with its $87 million. Still, Encore took a bite out of Rhode Island and Connecticut casinos and was probably responsible for part of the 17 percent decline in win at Plainridge.
 
New York total gaming win from casinos and racinos was up 4.3 percent to $231.6 million. Racinos make up the majority of that - $175.7 million in July; that amount, from 17, 219 VLTs at ten racinos, was down 0.05 percent for the month. The big dog of the racinos, Resorts World New York City, which has a 41 percent market share, was down slightly to $59.5 million, but its $15.6 million of revenues from its Nassau off-track facility more than offset the decline; the combined win was $75.1 million, up 2 percent. Empire City at Yonkers Raceway had $50.2 million in July, down 0.57 percent from 2018. Monticello Casino & Raceway closed in April, making it the first casualty of the casino expansion; in July 2018 its win was $3.0 million, a 1.7-percent market share. Vernon Downs generated $2.6 million in July 2019, suggesting it too might be at risk.
 
Each of New York’s four casinos reported an increase in win, with a total of $55.9 million, up 23.7 percent from last year. Resorts Catskills was up 59 percent to $20.7 million, del Lago had $14.2 million, Rivers $14.0 million, and Tioga $7.0 million. The combined win of $95.8 million for the three Resorts World properties in New York gives the corporation a 41.3 percent market share of New York’s gaming market. But while Resorts World Catskills is improving significantly, it is still dramatically underperforming. It cost $1.2 billion to build and has struggled to meet its obligations. In August, Genting purchased the publicly-held shares of the company, an action intended to save the casino from filing bankruptcy.
 
Illinois reported total gaming win of $250.0 million, up 4.1 percent. Casino revenue dropped 3.6 percent to $115.7 million and admission fell 3.6 percent to 931,285, while VLT revenue grew by 11.1 percent to $134.3 million and the number of VLTs increased by 9.7 percent to 32,314. Though July’s narrative is the same as it has been for several years, Illinois is entering another period of dramatic change with new casinos, more VLTs, and sports betting.
 
Missouri’s win fell 4 percent to $144.4 million and admissions fell 7 percent to 1,675, 394. The four casinos in the Kansas City market were down 4 percent to $49.6 million, St. Louis’s four casinos reported a 3.4 percent decline, and the five casinos in the “Out State Markets” category fell 6 percent to $20.5 million. The reasons for the declines are not clear, but the problem could be No-Chance gaming machines, which look like slot machines. They have spread to gas stations, taverns and convenience stores. There are no good estimates as to the numbers, but regulators, lottery officials, and casino operators agree these machines are hurting regulated and tax-paying gaming options. One only has to look to Illinois to see what happens to casino revenues when there are lots of slot machines in non-casino locations. Missouri wants to either shut down these unregistered machines or find a way to regulate and tax them, but taxing the no-chance games would do little to help the casinos.
 
Mississippi win fell by less than 1 percent. The costal casinos were up by 4.5 percent to $117.4 million, and the central region was up 1.2 percent to $24.1 million, while the Tunica region fell 15.3 percent to $42.4 million. Sports betting added $1.5 million in win, 0.8 percent of the total. The sports win is not much in itself, but the availability of sports betting is still drawing customers from the state’s neighbors, particularly Louisiana.
 
In Louisiana , combined riverboat and land-based casino revenue fell 9.4 percent to $173.4 million, with admissions off by 14.9 percent to 2,138,134. Total riverboat revenue was $152.7 million, down 9.1 percent from July 2018. The riverboats by market: Shreveport/Bossier was down 4.6 percent to $53.4 million, Lake Charles fell 12.6 percent to $60.4 million, New Orleans fell 9.8 percent to $20.7 million, and Baton Rouge was down 9.1 percent to $18.0 million.
 
Louisiana VLT win was up 2.4 percent to $49.9 million, while slots at the tracks were off by 5.5 percent to $29.1 million. Local media blamed a hurricane warning over one weekend for some of the decline and cited a 32 percent drop in revenue at the Belle of Baton Rouge as a reason for the state’s woes. Others are putting the blame on sports betting in Mississippi. To those reasons one can add the negative 0.7 percent for the missing Sunday.
 
Ohio gaming revenue from four casinos and seven racinos was up 2.3 percent to $162.2 million. At the casinos, table game revenue was up 4.7 percent to $22.2 million but slot revenue fell 0.6 percent to $47.6 million. The casinos have 7,236 slot machines, down 4 percent from July 2018, and 413 table games, 6 more than the previous year. The two Jacks casinos, in Cincinnati and Columbus, both reported revenue increases. By contrast, both Hollywood casinos reported decreases in win; still, the one in Columbus had the highest casino win in the state at $18.9 million, down 2.0 percent. Total racino win was up 3.3 percent to $91.8 million, with 11,648 slot machines, an increase of 3.5 percent. Two racinos reported revenue decreases: Belterra in Cincinnati and MGM in Northfield. The latter is the racino revenue leader in the state with $21.1 million in revenue; that was down 5.8 percent from 2018.
 
Pennsylvania had a 1.1 percent increase in total win. The components were $199.6 million from slots, down 1.9 percent from 2018; $76.9 million in table game win, up 4.2 percent; $1.2 million from fantasy sports, up 41 percent; and $2.8 million from sports wagering ($2.1 million from brick-and-mortar wagers and $665k from online sources). Parx Casino reported total revenues of $52.9 million, up 5 percent, while Wind Creek, formerly the Sands, had $45.3 million, down 3.3 percent; SugarHouse had $32.6 million, up 8.7 percent; Rivers $27.2 million, up 7.2 percent; and in fifth place, Hollywood at Penn, $20.8 million, up 2.4 percent.
 
Nevada win was up 2.9 percent to $1.02 billion. "Back-to-back $1 billion win and the fourth time this year," said Michael Lawton, the board's chief analyst. "These are welcome numbers for sure." The Strip was up 1.6 percent to $541.8 million, but baccarat was down 23.9 percent to $77.1 million. Downtown Vegas was up 7.5 percent to $52.5 million, Boulder Strip up 3.8 percent to $81.7 million, Laughlin up 5.82 percent to $43.7 million, and North Las Vegas down 0.8 percent to $26.9 million.
 
In the north, Reno was up 1.5 percent to $57.3 million, Sparks fell 2.4 percent to $11.6 million, South Lake Tahoe was up 16.8 percent to $34.9 million, and North Lake Tahoe was up 3.7 percent to $3.6 million. The Carson Valley was up 3.7 percent to $9.9 million and Elko Country rose 4.2 percent to $25.9 million. For the month, only Sparks, rural Washoe county, and North Las Vegas reported revenue decreases.
 
For the games, statewide blackjack fell 6.5 percent to $87.2 million; craps was up 12 percent; roulette fell 1.6 percent to $32 million; sport win was $10.5 million, up 155 percent, on a handle of $235 million; poker was up 86 percent to $22.2 million; and slots were up 4.4 percent to $695.8 million. By comparison, New Jersey had a sports handle of $251.4 million and a $17.9 win, making Atlantic City the king of the sports hill for July.
 
To return to the headliner: Encore Boston Harbor got attention in July because it finally opened after years of delays and controversy. Encore also got headlines because of the pain it inflicted on Rhode Island, Connecticut, and other states. Encore has also sparked a serious debate about the viability of new casinos in the region. Even a $2.6 billion, brand-spanking new casino is not guaranteed success in a very crowed regional market. The northeast region simply has too many casinos and not enough customers to go around.
 
Overall, July was a good month for gaming. And for the first seven months of 2019, at least on the surface, the industry looks very healthy. However, as Encore indicates there is a dark undertone. The northeast is overbuilt. Elsewhere, the region that includes Illinois, Pennsylvania, Ohio, and Indiana is moving toward the same situation. Overall revenue numbers are likely to continue to grow in 2019, but growth from expanding capacity doesn’t necessarily equate to growing – or even steady – profitability.

This report is written by Ken Adams