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Betting on region’s drawing power

The operators of the state’s fourth casino and two yet-to-open racinos are betting they each hold the winning hand in the battle for southwest Ohio’s gambling dollars.

By the end of 2014, the region will be awash with 2,000 slot machines, 3,300 video lottery terminals, 87 table games and two horse racing tracks. And when all is said and done, more than $825 million will have been spent to erect the Horseshoe Casino in downtown Cincinnati and racinos in Dayton and Turtlecreek Twp. in Warren County.

The $400 million Horseshoe Casino, which opens Monday, is projected to draw 6 million people and generate $100 million in annual gaming tax revenue. But is the 60-mile stretch of Interstate 75 between Dayton and Cincinnati so crowded with gambling opportunities that some are destined to fail, or wind up playing for smaller stakes?

Officials from all three venues said they’ve done their homework on the region’s demographics and aren’t concerned with their proximity to one another. They said they are confident each place will be a world-class regional facility and draw enough business to help them create and grow a loyal and expanding customer base.

Penn National Gaming, one of the largest regional gaming companies in the nation, is set to spend $125 million to construct the Dayton racino and an additional $75 million to move its existing Toledo race track to Dayton, said spokesman Bob Tenenbaum.

“That’s not the kind of investment you make unless you’re very sure you can be successful,” he said.

Gambling experts would seem to agree, noting southwest Ohio’s dense population — a combined 2.1 million people live in Montgomery, Preble, Butler, Warren, Hamilton and Clermont counties — means all three gaming destinations should have no problem turning a profit. How big of a profit, however, is another matter.

“I think there’s a huge market … but I’m not sure if every operator is going to be happy with the revenues,” said Alan Silver, a professor of restaurants, hotels and tourism at Ohio University, who also teaches casino operations.

Silver, who has two decades of experience in the gaming industry, said projections are always a “pie in the sky” endeavor that paint a rosier picture than reality shows. The casinos that opened last year in Cleveland, Columbus and Toledo have underperformed the “lofty” revenue projections made in 2009 before Ohio voters approved an amendment that cleared the way for legalized gambling, Silver said.

Those casinos were projected to generate $1.4 billion in adjusted gross revenue, which takes into the account the impact of video lottery terminals at race tracks, according to a 2009 report from the Ohio Department of Taxation. Now, all four casinos are projected to make $938.8 million by the time they’ve been open for one year, according to the Office of Budget Management.

The proliferation of Internet sweepstakes and Internet cafes are said to be one reason for lower returns.

“With any kind of market research, it is difficult to hit the target exactly,” Silver said. “A lot of times you’re going to be off-target.”

Still, the mix of casino and racino in southwest Ohio should work well for each establishment because they cater to a different kind of audience and offer different levels of gaming perks, Silver said.

Horseshoe Casino is located within Cincinnati’s downtown, which is likely to attract “higher caliber” gamblers who put down larger wagers than a typical racino guest, Silver said. It also helps, he said, that Horseshoe is under the Caesars Entertainment brand, which has a reputation for being “a high-end gaming establishment.”

Racinos often hit the jackpot when it comes to attracting slot devotees, as such businesses typically charge less for food, pay out slightly greater percentages on their slots and offer more complimentary items than traditional casinos, he said.

Creative marketing, such as offering gas cards, can also help a gambling establishment create and maintain customer loyalty, Silver said.

A possible trump card for the casino comes in the form of Total Rewards, a Caesars Entertainment loyalty program offered at its Horseshoe, Harrah’s and Caesars brands.

“Already, in the greater Cincinnati area — about a 100-mile radius, there’s 250,000 registered Total Rewards members and the casino’s not even open yet,” said Jennifer Kulczycki, spokeswoman for Rock Ohio Caesars, a joint venture between Rock Gaming and Caesars Entertainment Corporation. “Surely, we anticipate that many of those people will visit, given they’re probably going to Caesars (Entertainment) properties in Las Vegas or other places much further away than where they live.”

The casino is betting its Total Rewards partnership with 10 downtown restaurants and seven hotels also will be a draw.

“This full-service casino design offers a very distinct experience and people will go to racinos for a different experience, and that’s great because variety is the spice of life,” Kulczycki said.

Pacey Mindlin, a longtime standard-bred owner from Middletown, said the racinos and casinos will give the community “a big financial boost” and he’s looking forward to their openings.

“It’s a good thing,” said Mindlin, 71. “It gives us more entertainment, makes for a better area. It’s about time Ohio came into this century.”

A different impact of the three southwest Ohio gambling options will be played out in how Indiana deals with projected losses of income tax revenue from riverboat gambling, which is expected to drop by $73.6 million by 2015, a decrease of approximately 15 percent.

“Most observers will say Indiana will never regain the total numbers of dollars it was used to getting,” Ernest Yelton, executive director of the Indiana Gaming Commission, told the New York Times. “I think the goal, more realistically, is to minimize the amount of dollars that is going to be lost.”

Horseshoe and the two racinos also will be competing against southeast Indiana casinos, including Hollywood Casino Lawrenceburg. That facility saw a 9 percent drop in revenue and a 14 percent drop in attendance in 2012, said Todd George, who became general manager last October, a month after 160 workers were let go.

Revenues in 2012 were $375 million, about $50 million less than 2006, the casino’s best year, he said.

George said he believes the goal of Horseshoe, which is less than 30 miles to the east, isn’t necessarily a negative for his business.

“If they can succeed in their goals of growing the market instead of just doing a market share, it’s beneficial for all of us because it brings new customers to this market,” George said.

The casino is conducting a $5 million hotel renovation, improving existing eateries and boosting customer service levels, all of which were planned before Horseshoe’s opening.

“(The changes were) necessary but I think it expedited the process,” George said. “Things that may have been capital expenditures in upcoming years, we’re trying to get these things done rather quickly.”

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