Most promises kept by Horseshoe developers, with revenue goals a glaring exception

Economy, over-saturation blamed for weak numbers

CINCINNATI - Hamilton County Administrator Christian Sigman has a souvenir from the 2009 campaign to legalize casino gambling in Ohio that promised Hamilton County would see $12.2 million in new revenue annually from casinos.

The city of Cincinnati, according to that document published by the Ohio Jobs & Growth Committee, was to reap $20.9 million.

But those promises pale in comparison to estimates provided to WCPO Digital, just days before Horseshoe Casino Cincinnati is set to open its doors to the public.

Sigman estimates the county will see $5 million to $6 million in new revenue in 2013. The city of Cincinnati is now budgeting for $10 million in casino revenue for the fiscal year that starts July 1. That number was revised downward in November from $14.7 million.

Further, Sigman said it will be two years before local governments really know what to expect from Ohio’s nascent gaming industry.

But he’s certain it will be less than originally promised, because he has always thought original estimates were overinflated.

“Don’t get me wrong. I’ll take whatever we can get,” Sigman said. “But it ain’t coming anywhere near the $12 million proponents were talking about.”

PROMISES KEPT

A lot has changed since casino developer Dan Gilbert held his first press conference in Cincinnati in November 2009, where he outlined major goals for the project. For example, he wanted to break ground by mid-2010 and be open for business in 30 months, or by May 2012. He also said he was in “serious talks” about making the Cincinnati property the first casino to be LEED-certified for energy efficiency by the U.S. Green Building Council.

None of that has happened, but much of what Gilbert and his casino point man Matt Cullen described that day has transpired, pretty much the way they said it would.

They promised to hire at least 90 percent of casino employees from the Cincinnati region and to adhere to prevailing wage rules during construction. They also articulated a broader goal to make Cincinnati’s casino a catalyst for additional development, with strong connections to local companies and community groups.

“We don’t want this to be an enclave that you pull in, you valet your car. You see your car again in four hours and you get in the car and you leave,” Cullen said at the 2009 press conference. “We want it to be very open and accessible to everybody so it can be a catalyst for all of the surrounding activities, not to be an island unto itself.”

When the casino opens, it will have three outward-facing restaurants and a one-acre public square for events and easier pedestrian access – in addition to its 2,500-car garage.

The casino will have no hotel of its own, opting instead for partnership deals with seven downtown hotels. In addition, the casino announced this week partnerships with 10 local restaurants in hopes gamblers will become downtown diners. Similar partnerships in Cleveland have resulted in 37,000 room nights booked and nearly $1 million in food vouchers redeemed by patrons of Horseshoe Casino Cleveland.

“Generally, we said that we were going to bring new life to this 23-acre surface parking lot. When the doors open it will be a vibrant entertainment center,” said Jennifer Kulczycki, spokeswoman for Rock Ohio Caesars LLC, a joint venture between Gilbert’s casino development company Rock Gaming and Caesar’s Entertainment Corp., which owns the Horseshoe brand.

EXCEEDS EMPLOYMENT GOALS

By the time Horseshoe Casino Cincinnati broke ground in February, 2011, Rock Ohio Caesars had established a new promise: A 20 percent inclusion rate for minority- and women-owned construction companies. The casino achieved a 36.9 percent inclusion rate on $154 million in construction spending through December. In addition, it actively discouraged the use of front companies, or pass-through contracting arrangements, to comply with minority-spending goals, said NAACP President and Cincinnati Councilman Christopher Smitherman.

“I think it’s a model for the city,” Smitherman said. “When I’m walking through Bond Hill and people tell me they worked on the casino, that hasn’t happened before on any major project. Didn’t happen on the stadiums, didn’t happen on Fort Washington Way, didn’t happen on any city project.”

The Urban League of Greater Cincinnati said the casino pursued job candidates and operating vendors through its programs. In fact, Horseshoe General Manager Kevin Kline delivered a gift to Urban League headquarters in October because one of its job fairs led to several new casino hires.

“We arranged for a job fair here at the Urban League with that pre-screening and all the work we had done, he was getting a lot of qualified prospects,” said Urban League spokesman Matt Hughes.

IS GAMING MARKET SATURATED?

Beyond site development and workforce issues, there remains an ongoing debate about the ultimate viability of Ohio’s emerging gaming market.

In 2009, the Ohio Department of Taxation estimated that four casinos could generate $1.9 billion in taxable revenue, but it warned that the number would fall to $1.4 billion if racinos were legalized at seven Ohio horseracing tracks. With one racino open and six under development, casino estimates are falling. A recent two-year budget proposed by Ohio Gov. John Kasich estimates casino revenue will reach $957.7 million for the fiscal year starting July 1.

“If you look at the monthly revenues on a sequential basis, you’re not really seeing a lot of growth,” said Richard Hightower, gaming and lodging analyst for ISI Group in New York. “ (Ohio) properties are already starting to steal share from Indiana next door. So, that would suggest to me that you’re not really creating too much new demand. You’re just kind of stealing from where it already exists, which would suggest the market is getting close to a saturation point.”

Experts attribute Ohio’s sluggish start to several factors, including the recession and rising gas prices.

“When people have to make a decision between putting a couple of gallons in their tank or going to the local casino, you know what wins out. It’s going to be the necessary trip and not the discretionary trip,” said Edward Feigenbaum, publisher of Indiana Gaming Insight, which tracks casino gambling in the Hoosier State.

Another suspected culprit, Internet cafes, allows customers to purchase phone cards and play slot-machine style games on computer terminals for sweepstakes prizes.

Ohio Casino Control Commission Executive Director Matt Schuler has estimated up to $1 billion is spent annually in Internet cafes. The Ohio Attorney General says more than 800 such cafes now compete in Ohio. Butler County has the most locally with 15. Hamilton County has three in Cheviot, Harrison and Bond Hill.

While the casino industry has promoted a crackdown on Internet cafes, Ohio State Sen. Bill Seitz thinks their threat to the industry is “overblown.” In his view, Ohio’s under-performing casinos, in Columbus and Cleveland, suffer from bad locations.

“It cannot be assumed that every conceivable thing we’ve allowed will prosper and thrive,” Seitz said. “I have a hard time believing we’re over-saturated when we have a larger population than Indiana and fewer casinos.”

In a recent conference call with analysts, Penn National Gaming President Timothy Wilmott said the problem in Ohio was marketing, not over-saturation. Penn owns Hollywood casinos in Lawrenceburg, Columbus and Toledo.

“The primary issue is market penetration and getting into new households,” he said. “We're going to get to where we want to be; it's just going to be a slower ramp-up than we had originally thought.”

The publisher of a gaming industry magazine does not expect Horseshoe Casino to have trouble hitting its revenue goals, which Kulczycki estimated at $300 million, unchanged since the casino’s groundbreaking.

“I think they built it to the spec that will fit the market,” said Roger Gros, publisher of Global Gaming Business Magazine in Las Vegas. “They have a more mature market. Gamblers have been going to Lawrenceburg and the Indiana casinos for quite some time now. So, it should reach projections. I don’t think it’ll under-perform the way that the Cleveland casino has.”

For Sigman, there are other barometers than monthly revenue to gauge the success of Ohio’s new casinos. One is the retail occupancy rate of the Parkhaus garage in Over-the-Rhine. The county-owned garage signed a Subway restaurant to fill one of its two empty storefront spaces along Sycamore Street, ending a 15-year vacancy.

“The Parkhaus garage retail spaces have been there forever,” he said. “You’ve got to trust the private sector. If they’re willing to invest, they must see something.”

 

Print this article Back to Top

Comments

or Subscribe now so you can share your opinion! It’s only a penny for a month trial.