Casino revenue drops while video gambling in bars rapidly rises

News-DemocratJanuary 25, 2014 

Video games at bars, clubs and truck stops in Illinois brought i almost $270 million from December 2012 to November 2013.

NEWS-DEMOCRAT FILE PHOTO — photo@bnd.com

Video gambling at bars, truck stops and other local establishments saw rapid growth in its first year of being legal in Illinois, while revenue slid at the state's casinos in 2013.

The long-term impact on casinos is a matter of debate and speculation, but one thing is certain: Casinos are concerned.

"There's no question there's been an impact," said Jeff Watson, manager of the Casino Queen in East St. Louis. "The St. Louis gaming market is fully saturated, and any time you add more gaming positions into a saturated market, you're just diluting the existing operations. Basically, you're just cutting the pie up into more and more pieces."

Adjusted gross revenue at the Casino Queen in East St. Louis was $101.9 million in 2013, down about 6 percent from 2012 revenue of $107 million.

The dropoff at the Argosy Casino in Alton was more harsh, a roughly 9.7 percent decrease. Adjusted gross revenue at Argosy was about $56.3 million in 2013, compared to about $62.4 million in 2012.

At the state's 10 casinos combined, adjusted gross revenue fell 6 percent from $1.27 billion in 2012 to $1.19 billion in 2013.

Tom Swoik, director of the Illinois Casino Gaming Association, points out that Illinois now has more gaming positions at the bars, clubs and truck stops than at casinos.

As of November, there were 12,100 video games online across the state at the bars and truck stops and fraternal clubs.

"That's equivalent to 10 more casinos in the state," Swoik said. "It's had a significant impact."

The state has 10 casinos, each with a limit of 1,200 gaming positions, for a total of 12,000 positions.

Statewide, the video games at bars and clubs and truck stops had revenue of $269.7 million from December 2012 to November 2013. But the Illinois Gaming Board still is processing applications video games. If the bars, truck stops and clubs had a full year of revenue like they had in November -- $36 million -- their annual revenue would be around $432 million.

Swoik said he thinks revenue from the small joints eventually "could get very close" to equaling the revenue at casinos.

But John W. Kindt, a gambling industry expert at University of Illinois, said the casinos might suffer in the short term, but they should be OK in the long run. He said Nevada, for instance, has gambling machines all over the place, but the casinos still do fine.

"The casinos have other draws that bring people in -- the card games, the shows and that sort of thing," Kindt said. "The local slot machines are a different market."

Watson said the Casino Queen hasn't had to lay off any employees during the past year, but it has reduced staff by about 35 through attrition. The casino has 667 employees. At one point the Casino Queen had about 1,200 employees, but there have been other factors besides the new competition, such as loss limits and the state smoking ban.

Watson said the mom-and-pop operations have about 650 video gaming machines within a 30-mile radius of the casino, and combined they've generated about $1.5 million in revenue.

"That's basically revenue that would have come to the Casino Queen," he said.

In November in the metro-east region -- St. Clair, Madison, Bond, Clinton, Monroe, Randolph and Washington counties -- players lost about $1.33 million on the video games at bars, clubs and truck stops. The take was about $1.06 million in April.

Revenue from the machines at clubs, bars and truck stops is shared. The establishment gets 35 percent, the owner of the machine gets 35 percent, the state gets 25 percent, and 5 percent goes to the city or county where the machine is located.

For the city of Troy, the take in November was about $1,600. Mayor Al Adomite said the city decided to use the revenue from the first several months to make a donation to the Scott Air Force Base retention campaign being conducted by Leadership Council Southwestern Illinois.

Adomite said the revenue isn't going to make or break Troy, but it's nice to have nonetheless.

"We're not expecting to eliminate our municipal property tax because of it, but it does give us a little flexibility to support some causes that we otherwise might not have had," Adomite said.

Adomite said he expects Troy's gambling revenue to increase because some truck stops are getting the machines.

The Casino Queen's Watson said the casino's tax on gross revenue is about 35 percent -- versus the 30 percent on games in bars and clubs. So shifting revenue from the Casino Queen to bars and clubs only hurts the state's finances, Watson argues.

MORE COMPETITION?

The bars and clubs are each allowed to have up to five gaming machines. Estimates are that there could eventually be up to 70,000 machines at the bars and clubs statewide.

But the mom-and-pop joints aren't the only threats to casinos. Horse-racing tracks also want in on the action. One legislative proposal to expand gambling in Illinois would allow horse tracks to each have 900 slot machines. That would give the Casino Queen 900 new competitors, as Fairmount Park is in neighboring Collinsville.

Fairmount officials, who naturally support the gambling expansion, say slot machines are essential to their survival. They say revenue from slots would allow the track to offer bigger race purses and remain competitive with tracks in other states, where slots are allowed at tracks.

The proposed gambling expansion, which last year cleared the state Senate but wasn't called for a vote in the House, also would have allowed a new casino in Chicago as well as new casinos in Rockford, Danville, Lake County and the south Chicago suburbs.

A gambling-expansion proposal is still being considered in the legislature. State Rep. Robert Rita, D-Blue Island, who is the House's lead negotiator on the issue, announced Thursday that he'll be conducting a series of public hearings to gather input for another expansion bill.

The first hearing is 6 p.m. Tuesday at the Casino Queen.

"I'm a firm believer that gambling expansion can provide great benefits to the state of Illinois and the communities where it comes," Rita said. "But it is important that we put a bill together that is transparent and that deals fairly with taxpayers and all of the interests involved. My hope is these hearings put us on the path to getting that done this spring."

Watson said he plans to speak at the hearing.

"From our perspective, the Casino Queen is the only employee-owned casino in the United States, and the only locally-owned casino in Illinois and the St. Louis market," Watson said. "When we have initiatives to add additional gaming positions to this market, you're not hurting a large, faceless corporation, you're hurting the people who work here -- the people who deal cards, the people who serve food."

Contact reporter Brian Brueggemann at bbrueggemann@bnd.com or 239-2511.

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