By the Numbers
The breakdown of gambling options in the Dayton-Cincinnati region once the Hollywood Dayton Raceway opens in the fall:
7 casinos/racinos
292 table games
11,280 slot machines
Interactive map: We've compiled details about racinos and casinos in the region for you. Explore them on our interactive map at MyDaytonDailyNews.com/local.
When new racinos open in Dayton and Cincinnati later this year, an already crowded field of gambling venues will get more crowded, turning southwest Ohio and southeast Indiana into one of the industry’s most competitive markets.
Some 11,000 slot machines and nearly 300 table games will be spread among seven major gambling outlets — this in a market that may already be reaching its saturation point.
Revenue for southeast Indiana’s three riverboat casinos tumbled 27 percent in calendar year 2013. They took a big hit after the Horseshoe Cincinnati opened in March.
The downtown Cincinnati casino, meanwhile, enjoyed a fast start before its revenue dropped in three consecutive months, hitting a low of $14.2 million in December. Miami Valley Gaming, a new racino in Warren County, opened Dec. 12, which experts say cut into Horseshoe’s profit.
“That’s a lot of machines. It’ll be interesting, after it’s totally built out, to see if anyone downsizes or if the state relaxes tax revenue (rates) so companies can re-invest and keep up the properties,” said Derris Newman of The Innovative Group, a leading consultant for the gaming industry.
Newman said some properties may be forced to consolidate or fall out of the market entirely.
The seven casinos and racinos that will stretch from the Ohio River in southeast Indiana to north of downtown in Dayton are projected to bring in close to $800 million in revenue this year.
But there is concern within the industry that the ceiling is only so high.
Tim Wilmott, president of Penn National Gaming, which will open Hollywood Dayton Raceway this fall, conceded as much at the 2013 Global Gaming Expo.
“The market is crowded in Ohio,” he said.
Competitive market
Ohio’s four casinos — the Horseshoe Cincinnati was the last to open on March 4, 2013 — reported adjusted gross revenue of $821.3 million last year.
Add to that total the $249 million in racino slot machine revenue and the total take for the state’s casinos and racinos last year was $1.07 billion, which would rank Ohio among the nation’s top 10 gambling markets.
And there is more to come. By year’s end, the state of Ohio will have seven racinos competing against its four casinos. In addition to the new Dayton racino, Belterra Park (formerly River Downs) is opening in Cincinnati and another racino is opening in northeast Ohio.
There’s also plenty of competition across the border. Ohio is bookended by gambling powers Pennsylvania and Indiana, which ranked first and fourth, respectively, in casino tax revenue collected in 2012. To the north, Detroit casinos took in $1.4 billion in revenue in 2012, according to The Innovative Group.
Ohio joined the game later than neighboring states, and it bought in with an eye toward keeping money within its borders. A Spectrum Gaming Group report commissioned by the state in 2011 estimated that Ohioans were pumping $1.1 billion annually into out-of-state gambling establishments.
Voters approved casino gambling in 2009 and the first casino opened in Cleveland on May 14, 2012.
“The increase of supply is the greatest number I can remember in a two-year period, with four casinos and four racinos opening in one state,” said John Payne, Caesars Central Markets President. The Horseshoe Cincinnati is a joint venture between Rock Gaming LLC and Caesars Entertainment Corporation.
‘The next thing’
The Hollywood Casino Lawrenceburg in Indiana posted revenues of $44.8 million in March 2007, when it was known as the Argosy. That also was prior to the Great Recession and six years before big-time competition arrived 30 miles to the east in downtown Cincinnati.
Last month, Hollywood’s revenues fell to $17.1 million — its fourth straight sub-$20 million month. But Penn National Gaming, the casino’s owner, has plans to reverse its fortunes. Penn is joining forces with the city of Lawrenceburg on a project that will bring a new 180-room hotel and events center to town.
Down the river, the smaller Rising Star Casino Resort opened a 104-room hotel in November.
The fight for gambling dollars, experts say, will be won by those who offer the best amenities.
“Slot machines are really commodities, let’s face it. It’s like getting a carton of milk,” said Alan Silver, an Ohio University professor and gaming industry expert. “You can go into any casino and play the same game, so what distinguishes where players are going to go is the amenities to get people in the door.
“People are going to use discretionary entertainment funds to enjoy themselves, going to a concert or having a nice dinner and then playing a bit. That’s going to be a key factor. Las Vegas has gone in that direction.”
According to the 2013 Nevada Gaming Abstract, the 150 largest casinos in Clark County, Nevada — home to Sin City — reported $20.5 billion in revenue last fiscal year. Less than half — 44 percent — came from gambling. Hotels, food and beverage brought in $39 million more than gambling.
The Horseshoe Cincinnati has three street-facing restaurants, including Jimmy Buffett’s Margaritaville. It also features a bar, buffet and a Starbucks. Last summer, the casino staged 18 concerts on its outdoor entertainment lawn.
Miami Valley Gaming has four restaurants and a large bar situated in the middle of the gaming floor. It offers live music on Fridays and Saturdays, and plenty of big-screen TVs to watch sports.
“It’s an entertainment destination,” said Jeff Nelson, MVG director of marketing. “It’s not only gaming, it’s food, entertainment and the music. Most casinos and racinos would agree that you’re always looking at the next thing.”
Tax revenue
State governments have a huge stake in the performance of gambling establishments. Ohio’s casinos and racinos are taxed at 33 percent. Across the nation, casinos are taxed at rates ranging from 6.75 percent in Nevada to 55 percent in Pennsylvania.
Before Ohio voters approved casino gambling in 2009, the state estimated that four casinos could generate $1.9 billion in taxable revenue. They generated less than half that total in fiscal year 2013, which ended in June.
For fiscal year 2014, which just passed the halfway point, the state expects to collect $278.8 million on projected casino revenue of $836 million. Ninety percent of that tax money goes to local governments and schools, while 10 percent goes to the state.
“With as much competition and overlap as there is, we are in the process of finding out what the market will bear,” said Fred Church, OBM deputy budget director. “We feel that the modeling done in the 2000s doesn’t work anymore.
“Cincinnati, like the other casinos, we’re seeing fall off. Our message is be cautious in budgeting this. The news from around the country — from St. Louis, Foxwoods, Atlantic City — is a lot of established gaming locations are really struggling.”
Indeed, New Jersey reported last week that Atlantic City’s gambling revenue last year dropped below $3 billion for the first time in 22 years.
Adding racinos
Intense competition could someday prompt regional racinos to ask the state for permission to operate table games. That happened in West Virginia, where racinos morphed into full-fledged casinos with the addition of games such as blackjack.
“The racino operators are going to be pressuring for table games,” Silver said. “I’ve seen that across the country, where a lot of jurisdictions start with the slot machines and later cry that they can’t compete. Down the road, table games are added.
“Of course, the casinos will fight them because if Scioto Downs (a Columbus racino) adds tables games, Hollywood Casino isn’t going to be very happy.”
Silver said the debut of Miami Valley Gaming in Warren County “definitely” hurt Horseshoe Cincinnati’s bottom line in December, a challenging month marked by bad weather and only four Saturdays on the calendar.
Payne, from Caesars, understands the competitive landscape but says his establishment plans to grow the market in a region that is home to more than 2 million people.
“Obviously, when a new product opens, people are going to try the new racino,” Payne said. “The key is, where do customers settle? Do they come back? We feel good about our business short term and long term.”
If Payne is correct about the impact from new facilities, Miami Valley Gaming can expect to take a hit when Hollywood Dayton Raceway opens in September. MVG, with 1,577 slot machines, took in $5.7 million in its first 20 days of operation, according to the Ohio Lottery, which oversees racinos.
“Competition keeps everyone on their toes and benefits the guests,” MVG president and general manager Jim Simms said. “We see it as manageable in our situation. It’s probably too early to make a statement about the number of players in the market, but every company knows going in what they’re getting into.”
Bob Tenenbaum, Ohio spokesman for Penn National, which is moving its Toledo racetrack to the new $125 million racino north of downtown Dayton, said it might take until 2015 to get an accurate picture of the market.
Tenenbaum said the new racino’s Needmore Road location is favorable because it is “somewhat removed from other facilities south” and it is an easy drive from Springfield and points north. He acknowledged that the facility might take a bite of the profit from one of Penn National’s other properties, Hollywood Columbus.
“Is there competition? Of course. It’ll come down to the offerings,” Tenenbaum said. “For a customer, it’s a good thing. Crowded is an accurate word, but I don’t think you’ll hear us use terms like saturated or oversaturated.”
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