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Posts Tagged ‘Maryland’

Maryland’s Gaming Situation

Posted by jkarmel on September 23, 2010

I’m back from my writing hiatus – I’ve been busy with our new baby (6 months old), other projects and the early semester professor stuff. But the first casino in Maryland – Penn National’s Hollywood Casino in Perryville – is set to open on September 30, just up the road from me off I-95: hence my return.

There’s plenty of current gaming news around the mid-Atlantic, including the opening of SugarHouse in Philadelphia today and ongoing developments in the Atlantic City gaming saga. But, this post is dedicated to my home state, where gaming has had an interesting ride since votes approved 15,000 VLTs at 5 locations in 2008.

As any Marylander within earshot of a television in the past few months knows, there’s a heated fight over the Cordish Company’s proposal for a Maryland Live! casino at Arundel Mills Mall. I haven’t seen any recent polling as to which way Anne Arundel county voters will vote – but I’ll speculate anyway. I think the anti- side is winning. They have a lot more ads out and they are fairly well-done for the purpose. They effectively resonate a simple message, whether you agree or not with it: voters should block the casino because mall-going families and casinos don’t mix. The commercials are slick and simple and well-produced. By contrast, there have been only a few commercials on the pro- side and (apparently) not as much resources expended to this point.

Last week, there was a report that the state might investigate Penn National’s (PN) funding of the anti- Arundel Mills campaign and possibly delay the opening of that firm’s Hollywood Casino in Perryville on Sept. 30: but that doesn’t appear likely right now. I can’t find anything in the Maryland legislation prohibiting such an effort, so I’m not sure how there would be any legal case for the postponement.

However, PN’s involvement as a partner with Magna Entertainment to block the Cordish proposal certainly will complicate matters if the group succeeds in stopping the Arundel Mills casino. Maryland’s gaming legislation seems clear enough: no operator can have more than one site license. From the statute, often referred to as “S.B. 3” for Senate Bill 3:

(C) A LICENSE ISSUED UNDER THIS SUBTITLE IS NOT VALID AT A
GEOGRAPHIC LOCATION OTHER THAN THE GEOGRAPHIC LOCATION OF THE VIDEO LOTTERY DESTINATION LOCATION AT THE TIME THE LICENSE IS ISSUED.
(D) (1) IN THIS SUBSECTION, “OWNER” INCLUDES ANY TYPE OF
OWNER OR BENEFICIARY OF A BUSINESS ENTITY, INCLUDING AN OFFICER, DIRECTOR, PRINCIPAL EMPLOYEE, PARTNER, INVESTOR, STOCKHOLDER, OR BENEFICIAL OWNER OF THE BUSINESS ENTITY AND, NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS SUBTITLE, INCLUDING A PERSON HAVING ANY OWNERSHIP INTEREST REGARDLESS OF THE PERCENTAGE OF OWNERSHIP INTEREST.
(2) AN INDIVIDUAL OR BUSINESS ENTITY MAY NOT OWN AN
INTEREST IN MORE THAN ONE VIDEO LOTTERY FACILITY.

So, if/when Magna-Penn National applies for the Arundel site license, there will need to be a legislative fix to allow it to go through. As well, anybody else could jump in with a new site application- including Cordish – if the referendum passes.

There was almost a precedent for a legislative fix that would allow one firm to operate more than one casino in last year’s legislative session. The Assembly almost passed a bill allowing for an existing licensee to operate a Rocky Gap casino (western Maryland) as a satellite operation.

The provision didn’t make it into the final bill, which otherwise slightly lowered the overall tax rate for the Rocky Gap site in an effort to attract a bid for the gaming license: from 67% to 64.5% for the first five years of operations. We’ll know soon how well that worked when the Maryland Lottery re-bids the site in November.

But while it didn’t make it into the final bill, the Rocky Gap proposal could provide a precedent of sorts to allow PN a way to operate both Hollywood Perryville and a new Laurel casino. In that event, Penn National would be the majority gaming operator in Maryland for the foreseeable future. Of course, that would take us into questions about the implications of market consolidation in Maryland gaming: a good topic for a future post.

Update: I just heard from a good source that the Assembly did, in fact, update the terms of the Rocky Gap site license to allow for a business entitiy other than the owner to manage the property. Theoretically this would allow an existing licensee to manage that property via some contractual arrangement, Penn National for example. This is a relatively common feature of the gaming industry: various Indian casinos have management agreements with external entities, for example. Here is the operative legislative language:

….AN INDIVIDUAL OR BUSINESS ENTITY MAY ENTER INTO A MANAGEMENT AGREEMENT TO OPERATE A FACILITY LOCATED IN ALLEGANY COUNTY THAT IT DOES NOT OWN, SUBJECT TO THE APPROVAL OF THE VIDEO LOTTERY FACILITY LOCATION COMMISSION AND THE STATE LOTTERY COMMISSION.

jk

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Maryland Update: Table Games & More

Posted by jkarmel on July 24, 2010

I’m just back from Europe after a long trip surrounding a conference in Prague: saw a bunch of small casinos from the outside, even a solitary slot a machine outside a gas station in one place, and a highway service area/mini-casino.

So today in the Baltimore Sun, reporter Hannah Cho has an update of Maryland gaming, including the news that the MD Court of Appeals ruled against the Cordish Company and will allow the referendum to take place on the Arundel Mills casino this November. Obviously, that’s bad news for Cordish — but it’s also good news for Penn National, which should have its Hollywood casino open for business by October with zero real competition in Maryland. The article also has a summary of the new table games action surrounding Maryland – in West Virginia, Delaware and Pennsylvania. Here’s a key excerpt:

Delaware Park has reported a slight increase this month in slots revenue, said Andrew Gentile, the casino’s chief operating officer.

“It would be the first month in 25 months that slots revenue is up year over year,” Gentile said. “Table games have brought a lot of energy back to the slots floor.”

Ron Marcus, who owns two hotels near the Charles Town casino, is so optimistic that he’s planning to build two new hotels and to expand his Turf Motel adjacent to the Hollywood Casino.

That table games have boosted VLT revenue at Delaware Park is very significant. Slots are still the driving force and will be the gaming cash cow in the mid-Atlantic for the foreseeable future. Yet table games can make a significant impact, for example accounting for over 30% of revenue in Atlantic City (though we’ll see if that changes now that PA casinos have table games too). Yet, they can bring in new customers to at at casino restaurants, drink at pubs, stay at the hotel, etc. — all to produce revenue.

However, table games often come with significant start-up and labor costs that have to be offset with potential revenues, now complicated for MD casinos due to the close competition. Basically, Maryland’s costly late start with slots/VLTs compared to its neighbors is now being replicated with table games. Is it too late to make them worthwhile for Maryland casinos, even if the state legalizes? Maybe.

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Arundel Mills Casino: Win For Cordish

Posted by jkarmel on June 26, 2010

Big win for Cordish yesterday when a judge threw out the anti-casino
referendum from the “Stop Slots at Arundel Mills” group, clearing the way for the Maryland Live! casino. Expect an appeal. Both sides have a lot at stake in this battle of gaming interests: Cordish vs. MD Jockey Club/Magna Entertainment:.
Fox 45 article
Baltimore Sun article

The ruling is a bit of a twist and very good for Cordish because it nullifies the principal behind the referendum drive itself, adding a significant legal hurdle to the forces to grapple with on appeal. The judge viewed the zoning approval as an “appropriation” and therefore not even subject to a referendum, using a similar failed effort to block Oriole Park at Camden Yards in the 1980s. Now, the casino opponents must demonstrate 1-why the zoning approval really is legitimate, and 2-the signatures are valid.

Importantly, the judge also noted that the 2008 voter approval would be essentially reversed if the referendum were allowed to go through and wrong. This has been a significant point for Cordish from the beginning – that Maryland and Anne Arundel voters have already spoken via the original referendum, and that decision should stand.

I’ve written this before and again want to emphasize that this really is a battle between two gaming interests, with a little NIMBY aspect thrown in. Magna and its MD Jockey Club partners have been behind the effort from the beginning, and have capitalized on the grumblings of some local residents to make their case. This reminds me a lot of the battle over the tunnel-connector in Atlantic City in the late 1990s, really a battle between gaming titans Steve Wynn (then of Mirage) and Donald Trump – but that played out publicly as a movement led by a few local homeowners.

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ARCHIVE – Mid-Atlantic VLT/Slot Machine Revenue

Posted by jkarmel on June 2, 2010

[ARCHIVE: originally published by GA on November 10, 2008]

Lately, I’ve been wondering about the potential revenue of the Maryland casinos and how the economic downturn has impacted slots revenue in the mid-Atlantic. So, I did a little research and came up with the following data:

The highest monthly revenue per machine was Harrah’s Atlantic City at $13,633 per slot machine in August and the lowest was Dover Downs at $5,145 for September. It’s a quick and dirty analysis that doesn’t yet include data from 2007, but the above graph does show that:

* VLT/slots revenue was relatively consistent for the two Philly-area casinos before September’s nosedive
* Atlantic City retains a seasonal effect: summertime revenues climbed more than in the other properties
* mid-Atlantic gaming is taking a hit this Fall as the economy declines, though the decline is especially steep in the ‘destination’ casinos of Atlantic City

What could this mean for Maryland casinos? Still much to be worked out, but I see the I-95 casinos (esp. Laurel & Baltimore) as fairly similar to the Philly properties in terms of location and local market as opposed to the ‘destination’ resorts of Atlantic City. This could mean that they are more recession-proof than the Atlantic City casinos, now experiencing their worse downturn in the 30-year history of gaming in south Jersey.

The DE racinos need more analysis, but at this point, the Ocean City, MD property will likely be more like one of these, sans hotels or any other amenities for that matter. The Ocean City location is legally banned from being much more than a bare-bones racino.

OK– just a few points here for now: a little speculation, nothing too scientific.

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Moving Fast in Maryland

Posted by jkarmel on June 2, 2010

[Originally published by GA on November 6, 2008]

According to the Baltimore Sun, the state is moving quickly to get its new casinos established within the two year window mandated by the law. Of course, this is necessary in order to meet a February 1, 2009 deadline for the license applications. The new commission may in fact be up and running next month (December) to start administering the application process. The Sun also pointed out that Baltimore moved quickly to make designated property available for purchase — something which will smooth the process for a potential gaming firm to make a bid.

Right now, the Cordish Company is clearly eyeing the area, along with other designated spots. The Maryland Jockey Club (parent company: Magna Entertainment) is pulling together its bid for the Laurel site even as slots opponents in Anne Arundel County declare intent to keep the fight going with a zoning battle (as I predicted in yesterday’s post).

With all the potential for sensationalized obstruction, I’m confident that Maryland officials will go about this efficiently & publicly to get things done fast. The pitfalls otherwise loom large in the charged political climate surrounding Maryland casinos. I doubt that local forces will be able to block the new casinos via zoning, but in Laurel & Ocean City, they could delay proceedings for a while. There appear to be no substantive local hurdles in Baltimore, which is good news for bidders there. From an industry standpoint, the fact that Maryland is a closed market could also be advantageous: despite the restrictions, gaming companies won’t need to constantly be concerned over competitors opening up and carving up the market.

I’m still wary of the financial commitment involved in a stalled gaming market, but also encouraged that things are moving in a more positive direction. The great locations of MD’s three I-95 corridor casinos should attract sufficient interest for viable casinos to open within the law’s 2-year timeframe. The Rocky Gap location is a big question mark right now: will its remote location hinder development?

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Big Slots ‘Win’ in Maryland

Posted by jkarmel on June 2, 2010

[Originally published on GA on November 5, 2008]

Maryland voters made their point decisively yesterday, passing the VLT referendum by 59-41%. Support for the amendment was clear across the state, including in the Ocean City area, which had been the epicenter for opposition.

The result was no surprise, as polling has shown popular support for slots in Maryland since the subject first drew political scrutiny over a decade ago. My prediction (55% for, 45% against) was off by just a few points, though I knew that opponents had closed the gap some since the Washington Post’s last poll. Now is where it gets really interesting, as gaming firms begin the process leading to the opening of Maryland casinos, projected by GA for 18 months to 30 months from this date: approximately April 2010 – April 2011.

What’s next? The following is GA’s brief analysis of what’s to come over the next few months as gaming comes to Maryland:

* VLT commission: according to the Maryland legislation, the MD legislature will set up a commission with appointments from the Governor (3), state Senate president (2) and speaker of the state House of Delegates (2). I’ll speculate that this won’t take place until January, at least, when the legislature opens its 2009 session.

* License bidding: this is going to be fun. Of the five licenses, the spotlight will clearly be on the three along the extremely lucrative I-95 corridor: in Laurel, in Baltimore and in Cecil County. While Magna Entertainment clearly has an inside track for the biggest facility (Laurel- 4,750), the license is not yet a done deal for Magna & the Maryland Jockey Club despite the company’s $2 million contribution to the pro-slots effort. Other firms may see a great opportunity for a facility that could bring in $600-700 million in gross revenues. Baltimore is even more wide open. To date, the Cordish Company has expressed interest, but other major players may get in, including a group led by wealthy lawyer and Orioles owner Peter Angelos. Along with a few associates, Angelos contributed lots of money towards the end for the pro-slots effort. For Cecil, Penn National is more advanced with an option to some prime property in Perryville, MD for a facility. PN Gaming also has an impact study underway and plans for another of its ‘Hollywood’ casinos already in place. However, Cordish has also expressed interest in the Cecil license and may be in a very good competitive position, as may also be the case with the Angelos group.

* Legal action and/or zoning plays by the anti- side: This may still occur as more zealous slots opposition forces may just not be ready to concede defeat. They already employed the courts in trying to thwart the referendum. They may keep going with local legal challenges to new properties similar to Philadelphia casino opponents who have managed to delay that city’s casinos for two years.

* OK — this is just a start– GA will have much more on this in coming days, weeks, months….

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MD Slots Referendum Today!

Posted by jkarmel on June 2, 2010

[Originally published on November 4, 2008]

OK — today’s the big day: 14 years of debate culminating in a vote for legalized gaming in Maryland. Both sides have been active over the weekend, but the clear edge must go to the pro- side with signs everywhere, numerous commercials, a compelling budgetary argument and favorable recent polling (even if the gross revenue numbers are somewhat speculative).

Yet, in conversations with friends, colleagues, students and others, there are clearly still many concerns over bringing VLTs to Maryland via this referendum- both from a pro-gaming and anti-gaming perspective. Plus, there’s lots of political baggage left over from the long process in Maryland. Here’s a prediction: 55% for vs. 45% against for the final vote. But this is really just a step in the beginning of the process for Maryland gaming, regardless of what happens today. Much more to come in future postings…

(FYI — I’ve been invited to discuss the referendum on a Baltimore news channel tonight, somewhere between 9 & 9:30PM, webcast here: WMAR ch. 2 Baltimore. – jk)

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Archive: Markets, Taxes & Maryland Casinos

Posted by jkarmel on May 27, 2010

[Note:  This is an archive version of GA’s original post-  published November 1, 2010]

In recent days, there’s been some discussion about the possibility that Maryland’s tax rate (67%) may be too much to attract desirable gaming operators. I think there’s some validity to these concerns, having spoken with various people in the know and having studied this a lot over the past year. This is especially the case if major gaming firms remain in constriction mode for a while if the market stays soft.

In an article from the Oct. 31 Baltimore Sun, an MGM Mirage executive underscored the potential difficulties facing the problematic market timing of Maryland’s nascent gaming industry:

Alan M. Feldman, senior vice president for public affairs with MGM Mirage, scoffed at Maryland’s proposed tax rate as incompatible with the type of high-end developments civic leaders are hoping for. “Clearly, the state of Maryland has decided … they want boxes with slots in them,” he said. “That’s all you could do at that tax rate.” A national crunch has “tightened up credit incredibly,” Feldman said, causing MGM to suspend two $5 billion projects in Atlantic City and Las Vegas.

Now, the likes of MGM Mirage, Las Vegas Sands or Wynn Resorts were very unlikely to bid on one of the projects anyways, with only a few thousand VLTs allowed. More importantly, the high tax rate may limit the interest of mid-size players like Penn National or dynamic, expansion-oriented operations like Mohegan Sun and Foxwoods, both of which have now expanded to Pennsylvania. Remarkably, yesterday’s Sun piece quoted MD House of Delegates Speaker Michael Busch – a powerful gaming critic- on the potential for legislative flexibility with regard to the tax rate depending on the bids that do come in.

Yet, so far, the high tax rate hasn’t prevented interest in the Maryland facilities and its doubtful that Magna Entertainment owner of Laurel & Pimlico, would have kicked in $2 million for the pro-slots campaign if it didn’t see great revenue potential regardless of the high tax.

This may have to do with the great locations of at least 3 of the Maryland properties just off I-95 (Laurel, Baltimore & Cecil County) AND the reality that Maryland will be creating a closed market, so that once-established firms need not be concerned about competitors moving in to carve up the market share — at least in the short term, maybe 3-5 years.  As of this writing, I’m aware of at least two potential bids for the Baltimore site from solid players and one for the Cecil site (Penn National). And this is what will be good for the state and the industry: a genuinely competitive bidding process for the five licenses.

However, a big question mark is the extent to which the Rocky Gap site will attract good bids with its current limitation of 1,500 VLTs.  That’s a relatively small property and with the requirement of $25 million investment for every 500 VLTs may be viewed by firms as simply not worth the price.

What’s vital for Maryland voters to realize is that what’s good for the gaming firms that do invest in the state is also good for Marylanders. If voters decide to commit to gaming on Nov. 4, they should also be prepared to take measures to support the industry’s viability: the more succesful the companies are, the more revenues come in and the more money the state has for it’s budget- the entire point of the venture in the first place.

What’s clear amidst the ambiguity above is that Tuesday’s vote is really just the beginning of this process, even if it has a culminating feel given the many years it took Maryland to evevn get to this point.

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Archive: Welcome! Some Thoughts on Maryland’s slots referendum

Posted by jkarmel on May 27, 2010

[Note: This is archived from the original GA blog, first posted on October 28, 2008]

Welcome to the new Gaming Atlantic blog!  This blog exists to track the American east coast’s casino industry, with a special emphasis on mid-Atlantic casinos and racinos. Check in frequently to read gaming news and analysis. Feel free to comment on postings and engage in discussions to come on a variety of topics relevant to gaming, including:

  • politics of gaming
  • gaming finance/investment
  • individual casinos
  • gaming companies
  • gaming community impact
  • gaming regulation
  • compulsive gambling

On to Maryland: I’ve lived in the state for 11 years and legalized gaming has been an issue for that entire time.  In fact, discussions over bringing slot machines to the free state go back 14 years or so, in response to moves by Delaware & West Virginia in the 1990s.  So, finally, on November 4 we’ll know whether the state will have legal gaming.   The referendum will authorize an amendment to the state’s constitution to allow 15,000 Video Lottery Terminals (VLTs) at five different locations (Cecil County, Baltimore, Laurel, Ocean City and Rocky Gap State Park).  According to a recent Washington Post poll, Marylanders favor the proposal by 62 to 36%, a substantial margin.  Yet, polling on the referendum has been sparse of late, and a September poll from Gonzalez Research & Marketing showed a much closer margin: 49% for VLTs, 43% against VLTs.

So, should gaming advocates rest comfortably or not in these final days of the campaign?  Probably they should not, despite cause for optimism of late.  The lousy economic and budgetary situation in Maryland has probably helped build support for the amendment over the past month.  As well, the commercials flooding the airwaves from the pro-slots group For Maryland, For Our Future have likely increased support for the amendment.  However, local media gives lots of attention to gaming opponents and they will inevitably ratchet up their rhetoric over the next week, and possibly air some commercials with their remaining resources.

I’ll have more on the Maryland situation soon, on the referendum & its aftermath.  The big question of the moment is: will the 67% tax rate prove too high to attract desirable operators, even if the referendum passes on 11/4?

There are lots of other issues, topics and questions to address regardless of whether the referendum passes or fails. In the meantime, I would love to hear more from everybody on the MD referendum as election day nears- what do you think?

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