Chicago: Lightfoot’s folly; Penn mulls Trop expansion

Between 72% taxes and 30% operating costs, a Chicago casino is a money-losing proposition, at best one eking out a 3% profit. Union Gaming Group minced few words, reporting, “The [$15 million] reconciliation fee alone would wipe out any profits generated for many years, if not decades. The return on investment profile for all five sites is subpar, if not negative over the five years projected.” Translation: You’d have to be awfully desperate to bid on this project. The hits kept on coming. “Tourists generally will not patronize a casino in an area that is inconvenient relative to where they are staying or perceived as unsafe, nor will tourists be eager to book a room at a casino’s hotel if there are no other easily accessed attractions nearby. For these reasons and more we would not expect a material number of tourists to patronize any of the five sites analyzed herein. Instead, these sites will primarily draw patrons from persons living within close proximity.” Which, since Mayor Lori Lightfoot (D) wants to put the casinos in the slums, means the “persons living within close proximity” won’t have much money with which to gamble.

Lightfoot tried to paper over the negative finding with happy talk about looking forward “to working with the governor and legislative leaders to revise the legislation.” That got precisely nowhere with state Sen. Terry Link (D), who said no to any tax reduction, adding that the casino would wonderfully profitable, no matter who built it. Even Lightfoot isn’t willing to take a penny less than the 33% gross-receipts tax that goes directly to the Windy City.

Lightfoot doesn’t want to put the casino anywhere near (a logical location) McCormick Center, for fear it would siphon off conventioneers from the older property. Also, Lightfoot may opt for a city-owned casino, which doesn’t make much sense if you’re going to run it as a big-ass loss-leader. More promise is shown by the 500-machine slot routes at Midway Airport and O’Hare International, which could net $37 million a year. However, unless the Lege (and Lightfoot) are willing to temper their greed for taxes, that Chicago casino is going to get mighty few peeps of interest.

* Louisiana gaming revenues took a swan dive last month, down 9% for a $202 million gross. JP Morgan analyst Joseph Greff fingers Hurricane Barry as the culprit. It closed Boomtown New Orleans for a weekend, just when it would hurt the most. Boomtown took in $9 million (-10%), while Treasure Chest grossed $8.5 million (-9%) and Fair Grounds racino was flat at $3.5 million. Amelia Belle fell 12% to $3.5 million and Harrah’s New Orleans spiraled downward 13% to $20.5 million. In Lake Charles the hardest-hit was L’Auberge du Lac, plunging 19% to $25 million, while Golden Nugget shed 5.5% to finish at $28 million. Delta Downs faded 8.5% to $15 million while Isle Grand Palais slid 14.5% to $8 million.

The snakebitten Baton Rouge market did almost better than expected. One says “almost” because Belle of Baton Rouge toppled 33% to $2 million (how low do the grosses have to get before Eldorado Resorts shutters the place?). Casino Rouge slipped 8% to $4 million and L’Auberge Baton Rouge was down 3% to $11.5 million. As for Shreveport/Bossier City, market leaders Horseshoe Bossier City ($15 million) and Margaritaville ($14 million) were both down 6%. Diamond Jack’s ($3 million) and Harrah’s Louisiana Downs ($4 million) were both flat, while Eldorado Shreveport shed 8% to $10 million and Boomtown Bossier fell 10% to $4 million. Sam’s Town was the lone gainer, up 6.5% to $6 million.

* In investor meetings, Penn National Gaming pouted a bit, saying Wall Street insufficiently appreciated its Prairie State Gaming slot routes and the Tropicana Las Vegas. As for the latter, Penn is still brainstorming how to monetize the 4.5 vacant acres it owns but “has no plans to expand the property using its own balance sheet.” Penn is sky-high on sports betting, which it thinks will benefit Charles Town Races in particular. And, since most bettors are not myChoice members, their business will be incremental to what Penn already enjoys.

* As long as Penn customers are sports betting, they might be interested in the Super Bowl odds posted by BookMaker.eu. The latter has the New England Patriots favored to win the big game (4/1), narrowly edging out the Kansas City Chiefs and Indianapolis Colts. Worst odds (200/1) were posted for the thuggish Cincinnati Bengals, who have never won a playoff game under Marvin Lewis, a trend that seems unlikely to change anytime soon. Also, forget about mortgaging the house to buy Las Vegas/Oakland Raiders playoff tickets: They’re at 140/1.

* While the Senate takes it easy, the House of Representatives has thrown a lifeline to the Ysleta Del Sur Pueblo and Alabama-Coushatta tribes in Texas, approving them for Class II gaming, which will keep the doors of Alabama-Coushatta’s Naskila Entertainment Center open, presuming that the legislation keeps on moving.

* Oklahoma Gov. Kevin Stitt (R) has issued another mass mailing to the state’s gaming tribes, calling for autumn negotiations on compact renewal. However, he appears to have softened his stance, making no reference to compact expiry on New Year’s Day. If serious, it’s a step towards an amenable middle ground with the tribes.