What Is The Answer?

by Ed Meyer

posted on January 12, 2009 in News | No Comments >>

Fewer gamblers, and less betting at blackjack tables and slot machines in Indiana’s 11 riverboat casinos last year, caused a sharp revenue decline statewide, compared to 2007.

Casino executives and the head of the state’s gambling trade group blamed the worsening economy, rising unemployment and last summer’s $4-a-gallon gasoline prices for the decline — the first time in the Hoosier industry’s 13-year history that year-to-year revenue and attendance have dropped.

Statewide figures released this week by the Indiana Gaming Commission showed an 8.6 percent decline in gross casino revenues during 2008 compared to 2007, while admissions were down 6.3 percent. The drop was offset, however, by the launch in June of slot machines at the state’s two Indianapolis-area horse tracks.

The bottom line: The existing casinos and two horse tracks that added slot machines still trailed the previous year’s revenue total by 1.3 percent — $2.70 billion in 2007 compared to $2.67 billion in 2008.

“Obviously the economy has taken a big toll on Indiana casinos,” said Mike Smith, president of the Casino Association of Indiana, the state industry’s trade group. “It’s taken two more casinos to do same amount of business that 11 casinos did.”

Horseshoe Southern Indiana, formerly Caesars Indiana, saw its gross revenues decline 9.5 percent in 2008, while admissions sank by 12.5 percent. The Harrison County boat drew nearly 367,000 fewer visits from patrons in 2008, according to an analysis by The Courier-Journal of year-end gaming commission figures.

“I think we’re all just holding our breath,” said Horseshoe spokeswoman Judy Hess. “We’re all waiting for this to pass.”

Analysts and gambling executives noted that the weaker business climate hit all forms of legalized gambling after the financial markets tanked — horse-racing, some state lotteries and casinos — as well as most retail businesses.

Despite the less-than-ideal economic environment, the so-called “racinos” — casino operations at Hoosier Park near Anderson and Indiana Live in Shelbyville — opened in June, attracting Indianapolis area gamblers. The two tracks’ slot-machine revenues totaled nearly $195 million through December.

Neither track is required by the gaming commission to report admission figures. But at least one of them drew more than a million people because a prize was awarded to the millionth visitor, said Ed Feigenbaum, publisher of a newsletter that follows the Hoosier gambling industry.

Feigenbaum cited several factors that make it difficult to analyze 2008’s casino numbers, including:

The surge in gasoline prices reduced people’s willingness to drive as much, so the racinos probably took in some money that might otherwise have gone to Ohio River casinos or the one in French Lick.

A smoking ban at Illinois casinos likely caused some gamblers to take their business to Indiana.

“We really have no idea how the casinos would have performed” but for those situations, Feigenbaum said. “It’s difficult to isolate.”

Hess said potential bettors facing a job layoff will tighten their discretionary spending and won’t go out as often to movies, restaurants and casinos.

“Whenever you trim your budget, you look at your entertainment dollars first,” she said.

At Horseshoe in particular, executives knew that construction during the first six months of the year to replace the Caesars brand, would cut into admissions and profits. When Horseshoe was then unveiled last summer, Hess said, the financial markets collapsed.

“We know business is going to come back,” Hess said. “It’s just, when?”

Despite the rough year, Smith said he is optimistic about the prospects for a recovery starting later this year. The multibillion-dollar stimulus package Congress is weighing could boost all types of businesses during the second half of 2009, he said.

“You’ve got to believe that sooner or later, some of that money is going to get into the pipeline,” Smith said.

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