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It appears likely that come November Rhode Islanders will decide whether to expand the state’s two slot parlors into full-fledged casinos. State legislators have already approved holding a referendum on a proposal to allow table games at Twin River, in Lincoln, and are considering doing the same for Newport Grand.
On March 6, before the House passed legislation to put the Newport Grand question on the ballot, Rep. Robert Jacquard raised concerns about allowing casinos in Rhode Island.
"Let's face it: there are a lot of casinos across the country that have gone bankrupt," the Cranston Democrat said. "Just because you give them a casino license is not a guarantee that you are going to save all this money for the state and guarantee all this revenue. It is just not true at all. Management is the most important factor."
But doesn’t the house always win? Have a lot of casinos around the country really gone bankrupt?
We called Jacquard, who explained that he’s not necessarily opposed to casinos in Rhode Island, but he does want to make sure that if the state opts to go down that route, responsible operators with a lot of experience in the industry are brought in.
He told us that he’s read about a number of casinos failing around the country, and although he hasn’t kept a list, he recalls bankruptcies occurring particularly in the South.
"I know what I read in the paper," Jacquard said.
We couldn’t find a central repository of information on casino bankruptcies, but we did come across numerous news reports about casinos and their financial struggles.
Donald Trump has filed four corporate bankruptcies -- in 1991, 1992, 2004 and 2009 -- in connection to his casinos in Atlantic City, N.J. Tropicana Entertainment, which operates casinos in Nevada, New Jersey, Louisiana, Mississippi and Indiana, filed for Chapter 11 bankruptcy in 2008 and 2009. Station Casinos, which owns or operates 18 casinos in and around Las Vegas, made a similar filing in 2009.
And on a side note, Rhode Islanders will be familiar with the struggles of Twin River, which filed for Chapter 11 bankruptcy in 2009 and emerged under new ownership the following year. It’s not technically a casino, but it is a local reminder of the potential pitfalls of the gambling industry.
I. Nelson Rose, distinguished senior professor of law at Whittier Law School, in Costa Mesa, Calif., who writes about gambling and legal issues, has kept a partial list of gambling companies that have closed or filed for bankruptcy protection in the last three years as the recession has dragged on. He has counted 18 companies so far.
Rose said that other casino operators, including MGM Resorts International, Caesars Entertainment and Foxwoods, may not be facing bankruptcy but have struggled because of mounting debts and falling revenues.
David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, said gambling revenues in all major U.S. markets have declined since 2007 as discretionary spending has dried up.
He also pointed to heightened competition in the gambling industry as another factor that’s squeezing casinos. For example, Atlantic City has lost business to newer casinos in Pennsylvania, whose residents can now gamble closer to home instead of making the trip to New Jersey.
It’s in that sort of competitive market when management can be particularly important. Rose referred to Colorado’s experience in the early 1990s when 68 casinos opened in two or three years. A third of them eventually went bankrupt, and, said Rose, it turned out that the operators of those failed casinos had no previous experience in the industry.
Gambling is a boom or bust industry. Even when times are good, casinos fail. And when times are bad, even more fail.
As Schwartz told us, casinos "definitely are not a sure thing." Good management matters -- a point Jacquard made as well.
We rate Jacquard’s statement True.
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The Providence Journal, "Newport Grand bill advances," March 7, 2012, accessed March 8, 2012
Forbes.com, "Fourth Time’s a Charm: How Donald Trump Made Bankruptcy Work for Him," April 29, 2011, accessed March 8, 2012
USAToday.com, "‘Bad Times:’ Several major casinos saddled with heavy debt," Feb. 29, 2012, accessed March 8, 2012
Interview, Robert B. Jacquard, Rhode Island state representative, March 8, 2012
Interview and emails, I. Nelson Rose, distinguished senior professor of law, Whittier Law School, March 12, 2012
GamblingandtheLaw.com, "Of Course It Was a Depression," I. Nelson Rose, 2010, accessed March 12, 2012
Interview and emails, David G. Schwartz, director, Center for Gaming Research, University of Nevada, Las Vegas, March 12, 2012
Gaming.UNLV.edu, "Major Gaming Jurisdictions: Ten-Year Comparison," March 2011, accessed March 12, 2012
Interview, William Eadington, director, Institute for the Study of Gambling and Commercial Gaming, University of Nevada, Reno, March 12, 2012
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