Time is Money in the Casino Industry
December 21st, 2007
The new casino debate going on in the gambling industry as of late is how fast a casino can actually make money. While some analysts claim that it should only take four years to raise $3 billion, others say it takes much more time once you factor in negative costs.
Atlantic City, the second largest casino gaming destination in the United States, surpassed only by the splendor of Las Vegas, took twenty-two years to generate $3 billion in annual revenue from their slot machines. But supporters of the Pennsylvania casino gaming industry predict that the slot machines predicted to be open by the end of 2008 should bring in at least $3 billion by 2010.
Three billion dollars in two years? Now as unlikely as it sounds say some casino industry analysts. States like Delaware and Michigan have casino slot machine revenue similar to what Pennsylvania is hoping for. However those numbers focus on the incoming revenue and taxes generated by gambling, and do not take into account the costs of such a venture.
New casinos don’t just bring in added revenue; they also bring in certain economic costs such as dealing with an increase in traffic and the cost of treating citizens with gambling addictions.
“You would never hire an accountant to just put in the income side of how much you earn if you have a business. You put in the income and expenses and come up with a net figure,” said author of The Luck business, Robert Goodman.
Pennsylvania’s Gaming Control Board is holding public hearings this week on applications filed by 22 separate groups competing for 14 new gambling licenses. Each applicant filed local impact reports earlier this year, each promising millions of incoming tax and tourism dollars, thousands of new jobs and little increases in local crime.
Brian McGill, of the Susquehanna Financial Group LLP, believes that Pennsylvania looks to bring in $3 billion in revenue form slot machines alone.
“Even though $3 billion in gaming ‘win’ [incoming revenue] is achievable, it will likely take several years before this number is achieved,” McGill said.
Pennsylvania needs to build a customer base, and faces high levels of competition due to its neighbors; Delaware, Connecticut and New York all have some casinos and legalized gambling. However Pennsylvania’s biggest casino competition comes from it’s proximity to New Jersey, home of Atlantic City. Atlantic City is so closely linked with many of Pennsylvania’s citizens many will be hard pressed to move their casino gambling within state limits.
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