For the Gaming Industry, How Much Is Too Much?

As casinos close (and open) up and down the Eastern seaboard, it’s reasonable to ask if the industry is becoming oversaturated

Illustration by Cierra Pedro

Illustration by Cierra Pedro

One-third of Atlantic City’s casinos have closed this year. Simultaneously, new casinos are under construction or on the drawing board in surrounding states. So how many casinos are too many? More pressingly, has the industry reached the saturation point?

Answer: By one standard, saturation is already here. Losing four casinos is a clear indicator that at least one major casino market is tapering. But it’s not the only one. In 2007, 20 states had commercial casinos; of those, 11 (including Nevada) have seen net gaming revenue declines since that year.

Casinos, it seems, aren’t such a sure bet. Don’t say that in Baltimore, though. Caesars Entertainment, in partnership with Rock Gaming, opened a Horseshoe casino there last month. In six days, it brought in $5.7 million. If it sustains that pace, it will clear well over $300 million in gaming win in its first year of operation, despite the already-thriving Maryland Live! Casino only 12 miles away. With another casino under development in the Old Line State—MGM Resorts’ $925 million resort at National Harbor—at least one other major player is betting that there is even more room for growth.

New York apparently sees potential upside, too: In April, 22 developers paid $1 million each for a chance to win one of the state’s four new casino licenses that are up for grabs; the field is now down to 16 and remains hotly contested.

Why are would-be developers paying $1 million to get into the casino game when New York is surrounded by cautionary tales? In addition to the recent Atlantic City headlines, the tribal casinos of Connecticut are also in decline. Slot revenues there have fallen 33 percent since 2007 in the face of new competition, particularly from New York, where racetrack casinos have blossomed over the past decade into a $1.9 billion-a-year industry.

That figure is why industry insiders are optimistic in the face of declining markets. As a whole, the Northeast casino corridor, stretching from Maine to Maryland, has grown by 71 percent since 2001. Nevada, in the same period, has gained only 18 percent, and it still hasn’t surpassed its pre-Great Recession high. With billion-dollar resorts again being mooted here, investing a few hundred million for a share of the still-expanding Northeast market actually makes sense.

The next logical question, then, is this: Why are revenues burgeoning in New York and Maryland but slipping in nearby Atlantic City, Connecticut and Delaware? In one sense, the market for what those latter states have offered—not-so-close places to gamble for a few hours—is saturated. In the past decade, states with large urban areas have come to embrace casinos, meaning their citizens no longer have to drive an hour or three to play. With a new, full-service casino or two in their own metropolitan area, Americans don’t need to visit a distant racetrack or a riverboat to play. So while there may be more casinos on the horizon and opportunities for the companies that build them, the market for the status quo—“convenience casinos” that are no longer quite so convenient—has played out.

Americans have gambled for a very long time, and in all likelihood will continue to do so. There is no guarantee, though, that they’ll continue gambling the way their parents did. Which is why—for now, at least—there are too many quasi-regional casinos and not enough urban or destination ones.

What does this mean for Las Vegas? As the gaming giants based here extend their national reach, they will continue to promote the city as the ultimate casino and leisure destination, driving more visitation here. So more urban casinos won’t hurt the Strip the way they have the Boardwalk—rather, much like casinos in Macau, they will help.

David G. Schwartz is the director of UNLV’s Center for Gaming Research.

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