Michigan Casino Market Stagnant

Old news….

From the K’zoo Gazette:

The gaming-market “pie” has grown only slightly while being sliced into smaller pieces, analysts say

BY CHRIS KNAPE | Gazette News Service

Michigan’s economy is down, its unemployment is up and the auto industry is in a battle for its life.

But when it came to spending on lady luck at casinos, the state bucked national trends until winter set in.

Revenue at Michigan’s three commercial (non-Indian) casinos was up 1.3 percent in 2008, while commercial casinos around the country saw revenue decline 4.7 percent from record 2007 levels, according to state data and a study by the American Gaming Association.

Michigan’s tribal casinos, though not tracked by the association, also saw some revenue growth, based on records of payments they made via their state revenue-sharing agreements.

But growth in that sector was scattered, driven by the first full year of operations at the Four Winds Casino in New Buffalo.

“It’s a dynamic where you don’t know if it’s an aberration, or if it’s a peculiarity of the Michigan market,” said Eric Bush, administrative manager for the Michigan Gaming Control Board, which regulates the state’s casinos.

“It doesn’t seem to be making a downturn and following the economy.”

The upward trend is not expected to continue, however. Eric Kalm, executive director of the MGCB, said the big question now for the state is how big of a revenue drop it should expect.

Already, Detroit’s three casinos have seen wagering receipts decline by about 6 percent from January to April 30. Reports on tribal gaming have not been reported yet in 2009. But state and casino officials said the state’s sagging economy is taking its toll.

“It took us a lot longer to be affected by the economy at large than most people expected,” Kalm said. “There’s going to be a decrease this year. … We just don’t know how significant it’s going to be.”

The state has 22 casinos, with the Firekeepers casino set to open in August near Battle Creek.

The nation has more than 1,600 casinos, slot parlors and other gambling halls. The number of casino jobs fell 1 percent to more than 357,000 last year, according to the AGA.

Employment at Michigan’s casinos, though not officially tracked, was a mixed bag.

Detroit’s casinos hired in late 2007 as they opened their permanent casino-hotels, but two out of three also announced some layoffs in 2008.

Some tribal casinos cut staff to make up for falling revenue, though the opening of Four Winds in August 2007 may have meant an overall increase in the state for in 2008.

Soaring Eagle in Mount Pleasant, offered buyouts to some employees last year and said it would lay off employees if it didn’t meet its internal cost reduction goals.

Little River Casino Resort near Manistee announced layoffs last fall.

Four Winds’ employment today is “a little bit less” than the 2,400 employees that it hired when it opened as a result of efficiencies and attrition, not layoffs, said Matt Harkness, general manager.

In Michigan last year, state and local revenues from casinos dropped 10 percent to $170 million, even though overall receipts were up.

The decrease was because Detroit’s casinos were required to pay a smaller percentage of their gross revenue to the state and city after opening permanent casino-hotels in late 2007.

Tribal casino payments — a share of slot revenues paid to communities and the state — were up in 2008, almost entirely due to Four Winds. Local governments’ 2008 revenues from Soaring Eagle and Little River — 2 percent of slot money — was virtually even with 2007.

Nationally, the gambling halls paid $5.7 billion in taxes to state and local governments last year. That’s down slightly from $5.8 billion the year before.

While overall gaming at casinos has been on the rise in the state, analysts say the gaming-market “pie” has grown only slightly while being sliced into smaller pieces.

That larger pie is being cut into smaller wedges thanks to new venues like Four Winds and the anticipated Sunday opening in August of Firekeepers Casino near Battle Creek taking a portion of the money that would otherwise have gone to other casinos. Add the long-planned Gun Lake casino and proposed Muskegon-area casinos and the slices may get even thinner in years ahead.

“The market is not saturated, but most of the growth will come from the other casinos,” said Jacob Miklocik, president of the economic development consulting firm, Michigan Consultants and a member of the Greektown Casino board.

“There is latent or unmet demand in Michigan, and that’s people who don’t go to casinos now because they’re not close enough.”

Miklocik said he thinks the proposed Gun Lake casino will do well by tapping the Grand Rapids and Kalamazoo markets, which now are major feeders to casinos in Mount Pleasant and New Buffalo.

Plans for construction of the $200 million facility are still unannounced as the tribe works through the last of its legal challenges and tries to secure construction financing.

Las Vegas-based Station Casinos, the company slated to operate the casino, is the process of trying to restructure its debt and may file for Chapter 11 bankruptcy protection. The tribe denies Station’s issues are affecting its plans.

Harkness, at Four Winds, said he could not discuss the financial condition at his casino, which paid more than $20 million in 2008 to state and local governments.

“Like every operator of any business in the country we look at the economy and we all have our concerns,” he said.

As for the August opening of Firekeepers and eventual competition from Gun Lake, Harkness expressed confidence in Four Winds’ ability to keep the slots rolling.

“Competition is good for the consumer,” he said. Lower revenue expectations mean everyone must work harder to retain loyal customers and weather the downturn, said Michael Garrow, general manager of Little River.

“Loyal guests continue to visit us, but they’re not spending as much as previously,” he said. “We look forward to an economic upturn in Michigan.”

A stop at a casino is still popular. The AGA study found one-quarter of the adult U.S. population visited a casino in 2008.

In Michigan, as it is around the country, the casinos’ fate lies in the amount of money consumers have to wager.

“I think it has a lot to do with the auto industry,” Miklocik said. Gambling “tracks with disposable income. When there is a lot of disposable income a lot of that goes to leisure. Casinos are a big part of that.”

One thought on “Michigan Casino Market Stagnant

  1. Cadence Taylor June 1, 2009 / 2:33 am

    I don’t know if I I understand it!

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