Illinois improves but Ohio sets record; Is Cuomo on crack?

Criticizing Illinois‘ casino performance is usually like tripping a dwarf: much too easy. But the Land of Lincoln posted some surprising results last month. Yes, it out performed March 2020 (+122%) but we’re comparing a full month of business with the onset of the Great Shutdown. Measured, apples to apples, against March 2019, Illinois was only -16% and that’s with casinos currently operating at 50% capacity. Think what they could do if completely full. One casino posted standout results, Harrah’s Metropolis, gaining 86% to $5.5 million. Best of the rest was (you guessed it) Rivers Casino Des Plaines, down 11.5% to $38 million. Harrah’s Joliet slipped 13% to $14 million and Grand Victoria (above) was 13.5% down to $12.5 million.

Others were less fortunate. Empress Joliet tumbled 31% to $7.5 million, Hollywood Aurora slid 25.5% to $8 million and Argosy Belle was down 31.5% to $3 million. Maybe a rebrand to Bally’s will help Casino Rock Island. Something needs to, as it toppled 44% to $4 million. Par-A-Dice shed 19.5% to finish at $6 million, while Casino Queen ceded 23.5% to $7 million. The total statewide gross was $1o6 million, not great but a good deal better than what we’ve seen in quite a while.

By contrast, in Ohio gaming grosses were at an all-time-record level of $216 million, 17% better than 2019. This was achieved in spite of 50% capacity constraints, which tells you how strong player sentiment was. Adds JP Morgan analyst Joseph Greff, “these GGR results don’t reflect meaningful improvement in the important older demographic, which to us is encouraging as it’s a segment that possesses attractive recovery potential in the coming months.” Hollywood Toledo continues to retain business captured from Detroit, up 20.5% to $24 million. Hollywood Columbus gained 15.5% to $25 million, while Penn National Gaming‘s racinos performed yet more impressively. Hollywood Mahoning Valley was up 28.5% to $15 million and Hollywood Dayton vaulted 44% to $16 million.

Other companies weren’t left out of the party. Jack Cleveland gained 12% to $22 million while Hard Rock Cincinnati managed a 4% gain to $21 million. Jack Thistledown leapt 37% to $18 million, Scioto Downs jumped 28.5% to $22.5 million, MGM Northfield Park led the state with just over $25 million (+3.5%) and Miami Valley Gaming galloped 11% to $19 million. Even Belterra Park got in on the good news, managing a 3.5% uptick to $8 million. Ohio has been surprising us throughout the recovery and will doubtless continue to do so.

Speaking of surprise, even perpetual optimist Tilman Fertitta is taken aback by the ebullience and speed of the recovery. Taking to his favorite forum, CNBC, the mogul said “The high-end restaurants, my hotels, the casinos, are having record numbers right now … Even in California and New York, where you don’t have the business traveler, people are still going out in huge numbers now,” he said. “In Texas and Florida, they’re just blowing numbers away. People are tired of being locked up.” His comments echoed the Conference Board, which found consumer confidence at its highest level in a year, predicting 2021’s economic performance would be the best in four decades. (Music to Big Gaming’s ears.) Cautioned Navy Federal Credit Union‘s Robert Frick, “What remains to be seen is how quickly services industries such as travel and leisure will open up, allowing venues for consumers to release their pent-up demand.” In the meantime, purchases of big-ticket items and homes are expected to increase.

Fertitta wasn’t the only gaming executive exuding confidence. Penn National CEO Jay Snowden reported that “The month of March has been incredible. What we’re seeing right now in the business … is revenues and volumes that I haven’t seen in years.” A once (and future?) gaming exec also weighed in. Starwood Capital Group CEO Barry Sternlicht told CNBC that one of his Miami hotels was “ahead of 2019.” He continued, “We see all of this pent-up demand coming back. It’s going to be a frenzy this summer.” Sternlicht might want to rethink his choice of words: A “frenzy” isn’t exactly the image one wants to envision in the midst of a pandemic, as cases continue to climb across the U.S.

PlayUSA weighed in on the New York State online sports betting bill we critiqued yesterday. While calling it “an improvement” on the status quo, Zack Hall wrote that the legislation contained “significant shortcomings.” Quoth Hall, “Assuming a 50% revenue split between the state and the winning operators and a 9.2% hold, which is the U.S. average in markets with state-run monopolies, PlayNY projects New York sports betting will generate at most $400 million in revenue for the state in Year 3. More likely depending on the variables, though, the market should generate somewhere between $7 billion and $9 billion in wagering and $200 million and $400 million in revenue for the state in the market’s third year.” However, he went on to note that the metrics would probably be lower and the revenue-split/hold assumptions were “generous.” PlayUSA analyst Eric Ramsey was even more damning, calling the bill “a largely unproven and legally dubious state-run online framework.”

Gov. Andrew Cuomo‘s projections of annual revenue of $500 million by Year Three were, Hall opined, “overly optimistic.” Also, the costliness of participating in the Empire State would leave OSB operators with less money for marketing and customer retention. “Because of this, it is also likely that this structure will limit future growth and prevent the state from becoming the largest sports betting market in the U.S., while leaving enough of an opening for the black market to continue.” We don’t like the sound of that. As for Cuomo’s expectations, they’d require $1 billion of gross gaming revenue from sports. New Jersey, the leading American market, does only $400 million. To get to $1 billion in GGR, there’d have to $10 billion in annual handle, Ramsey projects, necessitating ever adult New Yorker to bet $615 a year at a 10% hold. Besides, how many operators will be willing to be taxed 55% (Cuomo’s target)? Only DraftKings, maybe. It pays 51% in New Hampshire where no other operator was willing to cross the 20% threshold. It’s no coincidence, surely, that DraftKings got face time with Cuomo, as the governor put a smudgy thumb on the scales of competition.

Jeff Gural, owner of Tioga Downs, went even farther. “It’s the dumbest thing I’ve ever seen,” he fumed. “I consider this a gift to New Jersey and to me at the Meadowlands, and my only regret is that Andrew won’t be around to see this totally fail.” The Oneida Indian Nation threatened a shutoff of its revenue sharing with the state, adding that the Cuomo plan would breach 2013 exclusivity agreements. What’s worse, to achieve his pie-in-the-sky numbers, Cuomo needs to turn his constituents into a horde of problem-gambling junkies. As Ramsey—who targets the annual haul at $260 million for the state—summarizes (emphasis his), “Even if we include an exaggerated nine figures of licensing fees to account for the possibility of more than two licensees, there isn’t a universe that exists in which New York can collect $500 million from this industry annually.” Amen. Let’s hope other states mulling sports betting don’t screw the pooch as Cuomo has done.