Ohio Gambling Numbers Could Foretell Future of Vegas Resorts

Ohio is an interesting test case for the continued expansion of gambling in the United States. Voters approved casinos there in 2009, and the first two (Penn National’s Hollywood Toledo and Caesars Entertainment’s Horseshoe Cleveland) opened in May 2012. The third casino, Penn’s Hollywood Columbus, opened yesterday, and the fourth, Caesars’ Horseshoe Cincinnati, is on schedule for a 2013 opening. The Scioto Downs racetrack in Columbus also has video lottery terminals, or slot machines run by the lottery commission, in operation as of June.

The Ohio Casino Control Commission released its gaming revenue numbers for September today, and they show an interesting—and perhaps troubling—pattern. Since June, the first full month with both casinos open, gaming revenues have declined at both casinos.

This might not be catastrophic: It’s entirely possible that the good June numbers were a case of pent-up demand bubbling forth, and that since then Ohioans have settled back down to earth and are gambling at lower levels. It’s also possible that many Ohioans might be traveling more and gambling less at home in the summer, in which case Ohio will see seasonal variations in gaming revenue year after year. That’s not bad in and of itself; Las Vegas casinos have a good deal of seasonality, which is why we usually compared year-over-year instead of month-to-month results.

But there’s also the possibility that American casino gambling is reaching its saturation point. Ohio is flanked by states with legal casinos (Michigan, Indiana, West Virginia, and Pennsylvania), and Detroit casinos in particular have seen declines since Ohio gambling went live.  It could be that there’s just not that much more underserved demand for what casinos offer in the United States.

This has profound implications for at least one Las Vegas-based company, Caesars Entertainment, which is counting on expansion into Maryland and Massachusetts to bolster its bottom line. If those states don’t produce a bonanza, the company could be in trouble. Also, there’s the possibility that Americans will be all gambled out before they get to Las Vegas—they’ll still spend on dinner and a show, but their gambling budgets will be smaller, since they can get the same odds on the same games any time they like. The past few years of data on Las Vegas visitors’ gambling and non-gambling spend suggest this is happening already, so it’s likely that Strip casinos will continue to de-emphasize gambling (except for high rollers) and ramp up their dining, entertainment and nightlife options.