Casino industry faces increased competition, regulation

Casino operators are facing many competitive and regulatory challenges at the state and national level.

Paul DeBole, an assistant professor of political science at Lasell College in Newton, Mass., monitors developments and trends in the gaming industry, and Steve Geller is a former Florida state lawmaker, attorney and past president of the National Council of Legislators from Gaming States. Both see growing pressure on the casino industry from new and emerging forms of gaming, as well as increasing regulatory and compliance issues.

Online gambling

Geller said casinos and lawmakers are coming to grips with the impact of online gaming, and particularly daily fantasy sports. Debate still rages as to whether daily fantasy sports are actually gambling or games of skill. Even so, Geller and DeBole said fantasy sports and Internet gambling, such as online poker or online casino games, are becoming bigger players in the gaming market.

Except for daily fantasy sports, Geller and DeBole agreed states such as New Jersey that have legalized other forms of Internet gaming initially debuted to modest if not disappointing results. However, online gaming revenues do appear to be on the rise.

When combined with declining revenue from slot machines across the country, the casino gaming industry must find ways to address the problem of market saturation, according to Geller and DeBole. That problem often is only exacerbated when state lawmakers and regulators — many of whom for years have grown accustomed to easy money from the casinos — find a growing number of casinos are weakening their states’ existing gaming properties.

Geller, who specializes in the practice of land use and gambling law for the Fort Lauderdale, Fla.-based firm of Greenspoon Marder, pointed to the casinos in Atlantic City to illustrate the situation. For decades, casino operators in Atlantic City were essentially the only game in town for legal gamblers for hundreds of miles around. But that changed relatively quickly as surrounding states approved new casinos, many operated by Native American tribes or commercial ventures.

“What really killed them (Atlantic City casinos) was when Pennsylvania opened their casinos,” Geller said. “What was a Northeast gambling monopoly was suddenly gone.”

Nongaming revenue

In response, DeBole said many casinos across the country have begun to change their business models, switching from casinos with hotels to resort-style hotel destinations that include casinos.

“The entire industry is on the verge of changing to this super-resort style,” DeBole said. “This will only accelerate as gaming revenue decreases and nongaming revenue rises, and everyone realizes they’re just not making as much money.”

Declining gaming revenues have led lawmakers in some states to consider increasing regulation and raising taxes even higher. This, in turn, will produce tension between casino operators looking to pivot to more nongaming attractions to maintain market share and state officials seeking to maintain their states’ share of gambling revenue, DeBole said.

For casinos to take the needed next steps, DeBole said state officials will need to step back a bit, and disabuse themselves of the notion that casinos are money factories. Those misconceptions often arise when supporters of casino gaming expansions oversell the economic virtues of gaming by using overly rosy revenue projections.

“A lot of these operations have consulting firms they hire who come up with gross gaming revenue numbers that look so great,” DeBole said. “But there’s very little digging into how they came up with those numbers, even though it’s the job of the regulators to say, ‘Those numbers are little high.’ There is room for a robust regulatory environment; it will make for a healthier environment for everyone if there’s a healthy skepticism of the numbers being projected.”


Freelance writer Jonathan Bilyk contributed to the writing and research of this article.

By |2019-11-25T08:25:28-06:00June 21st, 2016|Financial Services|0 Comments

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