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The Impending Gambling Arms Race PDF Print E-mail
News/Features - Local News
Wednesday, 29 November 2006 03:15

Last week's announcement that the Rhythm City Casino's parent company, Isle of Capri, was reconsidering its contentious casino-hotel project on the Davenport riverfront tells you all you need to know about the future of casinos in Iowa: It's bleak.

In Quad-City Times articles on Friday, Isle of Capri officials claimed that competition from the Riverside Casino & Golf Resort - which opened south of Iowa City on August 31 - has dramatically cut into admissions and revenues at the Isle's two Quad Cities properties. The Isle of Capri in Bettendorf and Rhythm City in Davenport saw their combined adjusted gross revenues drop by nearly 12 percent in September and October compared to those months in 2005.

From here gaming companies will engage in casino arms races in which they will need to continually build bigger, more extravagant facilities merely to maintain market share.

That wouldn't be a big deal, except for three things: (1) The Isle of Capri is either panicking prematurely or smartly laying the public-relations groundwork for its next big proposal; (2) inevitably the gaming company will be asking local governments to help foot the bills for the radical improvements it will say it needs to remain competitive; and (3) the Isle's claims are exaggerated.

"Since we began working on this project three years ago, a lot has changed," Isle of Capri Regional Vice President Nancy Donovan told the Times. "There is new legislation and new competition. We have to look at where we are at. Riverside has set a whole new bar."

The articles go on to say that Isle of Capri has hired a consultant to explore other possible sites for Rhythm City. (Mo Hyder, general manager of the Isle of Capri's Quad Cities properties, did not return a phone call for this article.)

The undeniable message is that Isle of Capri believes that the gambling market in eastern Iowa and western Illinois has been tapped out, and the only way to survive is to out-spectacle the competition.

This stands in stark contrast to what Donovan told audiences at public meetings late in 2004 about the casino-hotel project: "The future is looking very bright for the gaming industry," she said.

Last year, the Iowa Racing & Gaming Commission approved four new gaming licenses - including for the Riverside Golf & Casino Resort in Washington County. There are now 20 gaming facilities operating in Iowa: 14 riverboats, three race tracks, and three Native American casinos.

Mary Ellen Chamberlin, president of the Riverboat Development Authority, suggested in the Times that the State of Iowa might have too many gambling licenses.

The Isle of Capri's backtracking has the whiff of desperation or shrewd positioning. Consider all the reasons that the company's moaning is unfounded:

  • Both Isle of Capri properties were already seeing declines in adjusted gross revenues in 2006. According to figures from the Iowa Racing & Gaming Commission, revenues at Isle of Capri from May through August dropped 7.8 percent compared to the same period in 2005. At Rhythm City, revenues dropped 2.0 percent for that period.
  • The long-term impact of Riverside on the Quad Cities gambling market won't be known for a long time. The casino's opening has obviously affected the Isle of Capri and Rhythm City, but it's a short-term impact.
  • The Norovirus outbreak at the Bettendorf Isle of Capri casino in mid-October surely cut into October revenues at both of the company's Quad Cities properties. While Rhythm City's revenues dropped 7.1 percent in September 2006 compared to September 2005, they fell 15.0 percent in October 2006 compared to October 2005.
  • It was expected that Riverside would hurt the Quad Cities' market share. A 2005 report from Cummings Associates ( predicted that the Riverside casino would cut into Quad Cities gaming revenues by between 4 and 5 percent.

It will take months for the local gambling market to settle. The Riverside novelty will wear off, and the public will forget about the Norovirus problem and return to the local casinos. Only then - perhaps when the January or February numbers come in, but possibly even later - will we have a real sense of how deeply Riverside has hurt the local Isle of Capri properties.

But Isle of Capri is obviously preparing the community for the possibility that it will scrap the riverfront-hotel plan for something far more grandiose - possibly near an interstate, possibly away from the Mississippi River. More than likely, the company will ask local governments to help out with the financing, promising that new revenues will more than cover whatever contributions come from government bodies and the Riverboat Development Authority.

The community needs to be highly skeptical of those claims. The Isle of Capri's knee-jerk (or opportunistic) reaction to Riverside's early performance is a clear indication that the gambling pie in this area is as big as it's going to get.

We're just fighting over how big our piece is.

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