News in brief about the gaming world

Does Half the Revenue Mean Half the Hoped-For Casino Market?

It's always risky to project too much from early returns. That said, the first four months of operations for the SugarHouse casino in Philadelphia auger poorly for the market for a second casino in that city. Since opening Sept. 23, 2010, SugarHouse's weekly slots revenue has been running at less than half the projected rate. Since the state's 2004 gaming law sends 55% of a casino's gross slots revenue to the state, a shortfall in slots revenue has particularly strong impact on the public benefits from a casino. The lower return to the state can only hurt the chances for approval of the proposed Foxwoods casino in Philadelphia—the city's second casino—which is appealing a revocation of its license due to delays and financing problems. As former Pennsylvania governor Ed Rendell—a gambling advocate—said recently, “The one thing we don't want to do is cannibalize business” among PA casinos.

The problem is the extensive competition in the greater Philadelphia market: as SugarHouse's general manager acknowledged, “We've got two established competitors [Parx and Harrah's Chester]—one 15 miles south and one 15 miles north—and 11 casinos 50 miles east of us in Atlantic City with great amenities and established [player] databases.” That total does not even count casinos in Connecticut, New York, and Maryland, all of which compete at least in part for the same potential customers as SugarHouse.

Not that many years ago, Pennsylvania had no casinos. Now it has 10, at a time when surrounding states are also building up gambling. Even the most compelling product can have its potential diminished by oversupply and overexposure; that may be what is happening with casinos in the greater Philly area.

Audit Board Probing Possible Money Laundering at Korean Casino

370 Korean civil servants have visited Kangwon Land Casino—the only location in Korea where Korean nationals can legally gamble—more than 60 times in the last four years. Some have gone hundreds of times—up to 626 times out of 1,200 days—and the aggregate value of their losses is estimated to run into the billions of won. Since there are roughly 1,000 won to US$1, that means that the civil servants under investigation have collectively lost hundreds of thousands of dollars. The number of trips and the volume of losses have raised suspicions that the casino is being used to launder money obtained through bribes or misappropriations of government funds. The government workers under review range from teachers and police officers up through vice-ministerial officials.

Gamblers on a Hot Streak: Casino Fire Doesn't Deter Patrons

You know you have a compelling product when customers won't leave just because the roof over their heads is burning. At the Mystic Lake tribal casino in Minnesota, part of the casino roof was on fire, smoke was in the air, but gamblers kept playing. One gambler said, “I had $110 bonus on my [slot] machine …[and] I'm not moving until I cash out.” The fire was a small one, contained within an hour-and-a-half, and no one was injured; even though firefighters had to cut through the roof and spray water into the building, it was hardly the ‘70's The Towering Inferno. However, a small fire is still a fire, and when you can count on your patrons to keep playing as the roof burns, you've got a hot product.

UK May Ban Overseas Online Gaming Operators from Advertising

Amidst fears of increasing gambling addiction—including by children—UK Culture Secretary Jeremy Hunt proposes preventing overseas gambling operators from advertising in the United Kingdom. A ban on the use of credit cards for Internet gaming is also under consideration, with the goal of preventing people from indebting themselves to gamble with money they don't actually have.

The UK's 2005 Gambling Act relaxed many gambling restrictions—including those on advertising and off-shore operators. The Gambling Act requires UK online gaming license holders to take steps to prevent underage and other problem gambling, including strict identity checks. However, only operators located in Britain need the license and therefore are subject to these restrictions. Offshore operators in other European countries, as well as in jurisdictions on a “white list”—which includes Alderney, the Isle of Many, Antigua, and Tasmania (an Australian state)—can advertise their online services in the United Kingdom without obtaining a license. Since it's estimated that UK citizens spend £2.5 billion on online gambling, of which less than a quarter goes to UK-licensed operators, the concern is that most online gambling is not subject to effective UK regulation—particularly that pertaining to the prevention of underage gambling. Since UK gambling experts believe that a million minors there are addicted to gambling, the potential dimensions of the problem are considerable.

Also considerable is the impact of the Culture Minister's proposed moves, which would drive hundreds of operators out of the UK market and effectively gut large parts of the liberalizing 2005 Gambling Act.

New Orleans Casinos Reduce Full-Time Staff in Response to Recession

As further evidence (if any were needed) that gambling and casinos may be more recession-resistant than many other industries but are hardly recession-proof, Harrah's New Orleans Casino has been steadily cutting back on its full-time staff, increasing the use of part-time and “on-call” workers. Over the past two years, the percentage of full-time staff has fallen from 84% to 78%, reducing total staff hours. The total number of workers of all types has also declined. As a result of the cuts, the casino has fallen below staffing levels mandated in agreements with the state going back to March 2001, which agreements provided for a tax break for the operation to encourage it to remain in New Orleans following a bankruptcy filing. At present—under terms amended post-Hurricane Katrina—the casino must maintain 2,400 employees, but currently has 2,357. Harrah's New Orleans is hitting a second key metric, however, total payroll, due to the inclusion of senior executives and managers in payroll calculations.

Harrah's is not alone in cutting work roles, though by many measures, it is holding up better than other local entertainment and hospitality businesses. Battered by recession and Mother Nature, food and drink businesses in and around New Orleans have lost 9,000 jobs—one-sixth of their workforce—since 2004, while area hotels have shed 5,000 jobs—almost one-in-three workers—over the same period. The reduction in total workers and payroll, as well as the shift from full-time to part-time and on-call staff (which reduces benefits obligations) are a response to a continuing weak economy.