The article:

Would a Kenosha casino drain 40% of the Milwaukee casino's revenue?

By Tom Kertscher
Published on Wednesday, October 30th, 2013 at 2:14 p.m.

When it comes to the proposed Indian casino in Kenosha, disagreements between the Potawatomi and Menominee are as common as guys with facial hair shopping at Cabela’s.

But one dispute between the two tribes -- how much cash the Menominee’s Kenosha complex would drain from the Potawatomi Bingo Casino operation in Milwaukee -- highlights the potentially thousands of jobs and millions of dollars that are at stake.

Gov. Scott Walker is expected to decide in a matter of days whether to approve the Menominee’s $808 million plan.

The Potawatomi have said it would lose more than a third of its revenue to Kenosha, while the the City of Milwaukee projected the loss at 30% to 40%, although the U.S. Bureau of Indian Affairs said the plausible range was 8% to 20%. The head of the company that would develop and manage the Menominee casino, meanwhile, has claimed that never "in the history of gaming" has a casino lost 40% to 50% of its revenue because of a new competitor.

Given that we’re talking about projections, we can’t test on the Truth-O-Meter whether the Potawatomi casino’s revenue loss would be as much as 40% if the Menominee’s casino opens 40 miles to the south.

We can, however, share what we learned from seven gambling experts:

None knew of any study documenting a 40% revenue drop at one casino as a result of the opening of another, and none expected the Kenosha casino to cause such a drop at the Milwaukee casino.

But significant revenue declines have occurred and no two markets are identical.

The experts

Over the past decade, gross gaming revenue at commercial casinos rose each year between 2003 and 2007, stalled during the Great Recession, then grew each year from 2010 through 2012, when it was $37.3 billion, according to the American Gaming Association.

Wisconsin has 19 large casinos that offer slot machines and table games plus seven smaller casinos, all run by tribes. The Potawatomi’s Milwaukee casino opened in 1991.

Father Richard McGowan, who researches gambling as a professor of economics at Boston College, said he doesn’t believe any established casino would take a 40% revenue hit simply because of the emergence of a new casino.

"People are invested where they first go," so while some customers will move their money to the new casino, "the majority will not," he said.

Andrew Klebanow, principal of Gaming Market Advisors in Las Vegas, also doubted that the Potawatomi casino would suffer a 40% loss.

"It is one thing if a casino were to open within the Milwaukee city limits with a superior location and siphon off a considerable amount of business," said Klebanow, who cited examples of where revenue hits from a new casino were less than 10%. "I seriously doubt that a casino located 40 miles away would have any impact approaching 40%."

In suburban Chicago, the Grand Victoria Casino in Elgin lost 10.4% of its gross receipts between 2010 and 2011 and 17.4% between 2011 and 2012, according to calendar-year figures from the Illinois Gaming Board. The Rivers Casino opened about 24 miles away in Des Plaines in July 2011.

The Potawatomi says it calculated, using Gaming Board statistics, the Grand Victoria’s loss at 30.7% from July 2011 through June 2013.

There are plenty of examples of casinos seeing smaller declines in revenue.

A 2012 study done for the conservative Wisconsin Policy Research Institute noted that the nation’s two largest casinos -- both owned by tribes in Connecticut -- saw annual revenue declines of 5%, 7% and 4% from 2008 through 2010. But the study also noted that both competition and the recession were cited as reasons.

A few of the experts we consulted, however, noted that marketwide, revenue losses exceeded 40% among all casinos in Atlantic City after competition emerged in Pennsylvania, New York, West Virginia and Delaware.

Atlantic City’s gross gaming revenues plummeted from a high of $5.2 billion in 2006 to $3 billion in 2012, said University of Massachusetts at Dartmouth gaming policy expert Clyde Barrow.

James Butkiewicz, chairman of the economics department at the University of Delaware, cited the same figures and noted that one Atlantic City casino -- the Sands -- closed after Pennsylvania introduced casino gambling in 2006.

But that’s looking at a group of casinos and competition they faced from another group of casinos.

Butkiewicz and Mark Nichols, economics professor at the University of Nevada, Reno, cautioned against assuming how much revenue any one casino might lose to a competitor.

"There are no magic percentages (or) rules of thumb.  The effects (of a new casino) depend on the size of the market, locations, consumer preferences, etc.," Butkiewicz said.

Nevertheless, Roger Gros, publisher of Nevada-based Global Gaming Business Magazine, doubted the Milwaukee casino would see a loss of more than 20% of revenue from a new casino in Kenosha.

"The Potawatomi casino has built up a large base of customers and most will remain loyal," he said.

If you would like to comment on this item, you can do so on the Journal Sentinel’s web page.

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About this article:

Sources:

U.S. Department of the Interior, "Menominee Indian Tribe of Wisconsin Section 20 Determination," Aug. 23, 2013

Email interview, Boston College professor Richard McGowan, Oct. 29, 2013

Email interview, Gaming Market Advisors principal Andrew Klebanow, Oct. 29, 2013

Email interview,  University of Massachusetts at Dartmouth professor Clyde Barrow, Oct. 29, 2013

Email interview, Global Gaming Business Magazine publisher Roger Gros, Oct. 28, 2013

Email interview, University of Delaware professor James Butkiewicz, Oct. 29, 2013

Milwaukee Journal Sentinel, "Menominee call for outside review as Walker delays decision," Oct. 25, 2013

Growth and Change, "Casino Revenue Sensitivity to Competing Casinos: A Spatial Analysis of Missouri," March 25, 2013

Email interview, College of Charleston professor Doug Walker, Oct. 28, 2013

Email interview, University of Nevada, Reno, economics professor Mark Nichols, Oct. 29, 2013

Interview, Hard Rock International spokesman Michael Beightol, Oct. 29, 2013

Wisconsin Policy Research Institute, "Do additional casinos make economic sense for Wisconsin?" September 2012

Wisconsin Legislative Fiscal Bureau, "Tribal gaming in Wisconsin," January 2013

Illinois Gaming Board, 2011 annual report

Illinois Gaming Board, 2012 annual report

Interview, Potawatomi Bingo Casino spokesman George Ermert, Oct. 30, 2013

 


 

Researchers: Tom Kertscher

Names in this article: Scott Walker

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