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Here's what else we can we glean from today’s casino report

Crain's Chicago Business

Wednesday, August 14, 2019  |  Article  |  A. D. Quig

Gambling, Gaming

In addition to pointing out onerous taxes on operators, a feasibility study on five potential casino sites outlines much else about what we could expect from airport slots, sports betting and where a casino would likely not work.

Today, a new analysis by an outside consultant retained by the Illinois Gaming Board to review Chicago's options under state law found the five floated sites for the city’s casino were not generally financially feasible, thanks to the onerous tax structure baked in by the Illinois General Assembly.

The consultant, Union Gaming Analytics, found that of the five, the former Michael Reese site would be most profitable, but that an operator’s 1 or 2 percent operating margin likely would be wiped out "for many years, if not decades.”

Here are five other takeaways from the report.

Big casino money might not show up for some time. The report assumes that the casino wouldn’t receive its license until late 2020, “which would then be followed by a two-year construction cycle with the casino opening on or about January 1, 2023. Given the illustrative one-year ramp period, we would largely expect 2024 to represent stabilized revenue and cash flow.” That means Lightfoot shouldn’t count on any significant casino revenues for this upcoming budget. 

What about sports? Sports betting should bring in about $20 million in revenue at any Chicago casino site, the report estimates, meaning about $3 million in tax revenue starting in 2024. The state’s gaming legislation allows sports betting at racetracks and casinos. The report does not address fantasy sports revenue at other locations. Fantasy websites are allowed to partner with sports venues to run a book at a physical location. After 18 months, online sports betting can run independently of a physical location if operators qualify for a state license. 

Chicago airport slots could perform better than Nevada's. While the city can open up as many as 4,000 slot machines, the report’s authors say the city would be better served by scattering some at its airports on the Northwest and Southwest sides. If 500 slots are made available at O’Hare and Midway, with a win per day of about $200, adjusted gross receipts at Chicago’s airports could reach $37 million, and grow by about 3 percent each year, the report estimates. Nevada is the only other place with airport slots. Chicago could perform better, since most visitors coming into Nevada are aiming for a casino experience and would skip airport slots, the report said. Those leaving have usually blown their gambling budget.

The South Side is saturated. Despite calls from some lawmakers and willing aldermen to see the casino in an underinvested part of the city’s South Side, including Ald. Susan Sadlowski Garza, the authors argue those locations won’t work because of oversupply. “Not only does the recently enacted legislation introduce even more gaming supply to the south of the City of Chicago in the form of a casino in south suburban Cook County and a south suburban racetrack casino, there is existing gaming in the form of casinos in Aurora and Joliet, and multiple casinos in northwest Indiana” that serve Chicagoans on the South Side and in the south suburbs. 

A hotel helps. The report recommends placing the casino in a tourist-centric spot so it could draw not only its own hotel guests, but those nearby. The report estimates nearby guests could contribute $100 million to $150 million in adjusted gross receipts. Those staying in the casino’s hotel—with a baseline of 500 rooms—could drive receipts higher. “The addition of incremental hotel rooms would allow a casino to host more higher value gaming customers, which in turn would drive higher adjusted gross receipts. While the amount of hotel-driven adjusted gross receipts could vary widely based on the number and quality of rooms available, we estimate there could be an incremental $250+ million in AGR as a result.” The “bare minimum all-in development cost” for a casino and 500-room hotel? $750 million, the report estimates.