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Gamblers betting on close-to-home casinos

New options draw patrons away from regional venues by Glen Chase | September 28, 2014 at 2:16 a.m.
A Central Arkansas Transit Authority bus promoting Oaklawn’s casino in Hot Springs stops for passengers at the River Cities Travel Center in Little Rock earlier this month.

Signs on the sides of buses in downtown Little Rock send a clear message: "Better Odds. Fewer Miles."

Ongoing expansions at two Arkansas gambling locations -- Oaklawn Gaming & Racing in Hot Springs and Southland Park Gaming and Racing in West Memphis -- reflect a national trend of players preferring to bet their money at nearby casinos rather than traveling longer distances to try their luck.

And, as the competition for gambling dollars heats up between states, older regional destinations, such as Tunica, Miss., are seeing sharp drops in the number of patrons from surrounding states, including Arkansas and Tennessee.

"It's states competing with each other for gambling revenue," said Rev. Richard McGowan, an associate professor at Boston College who studies legalized gambling. In general, the only real destination spot for resort casinos is Las Vegas, McGowan said. "Everybody else is strictly what we call ... regional casinos. Since you can't really differentiate [regional casinos] from each other, yeah, how about that: people would rather go to the closer one."

Since the start of betting on "electronic games of skill" in 2006 at Arkansas' two pari-mutuel tracks -- Oaklawn, a thoroughbred track, and Southland Park, a greyhound dog racing track -- Arkansas' gross gambling dollars have ballooned from about $400 million in 2007, the first full year of wagering, to about $3.2 billion in 2013.

Arkansas law requires that a minimum of 83 percent of the amount bet be paid out in winnings over the life of a gambling machine, said Ron Oliver, director of the Arkansas Racing Commission, which oversees gambling operations at Oaklawn and Southland.

However, Oliver said the payout typically averages more than 90 percent as the two facilities work to attract patrons.

The state's tax share in the fiscal year that ended June 30: $39.5 million, or about 15 percent more than projected.

Over the same time period, Mississippi casinos along the Mississippi River and the Gulf of Mexico have seen their gambling revenues decline, according to the Mississippi Gaming Commission.

In 2007, Mississippi casinos reported that their "casino gross gaming revenues" -- the difference between the amount wagered and the amount paid out in winnings subject to tax -- amounted to $2.9 billion. By 2013, gross gambling revenues fell to $2.1 billion -- a trend that officials said at least in part comes from a loss of Arkansas' patrons as Southland, about a 10 minute drive from Memphis, and Oaklawn expanded their operations.

With the rise of gambling at Oaklawn and Southland, the percentage of patrons from Arkansas and Tennessee gambling in Mississippi casinos has fallen as well.

In the first quarter of 2007, about 863,000 people who identified themselves as Arkansans made up about 8.7 percent of the patrons who traveled to Mississippi's casinos, according to commission reports. Most went to Tunica, which opened its first casino nearly two decades ago. In the same quarter this year, the percentage from Arkansas dropped to 5.3 percent, as the number of Arkansans fell to 307,000. The drop in patrons caused one Tunica casino, Harrah's, to close in June, leaving seven in operation there.

At the same time the number of Arkansas patrons fell, Tennesseans also cut back on their trips south. The commission said that the share of bettors from Tennessee fell from nearly 14 percent of Mississippi casino patrons in 2007 to 8.1 percent in the same quarter of 2014.

That change doesn't surprise Troy Keeping, president and general manager of Southland Park Gaming and Racing.

"The majority of our play is what I would call our mid-South Market," Keeping said. "It's a regional market. A lot out of Memphis metro. A lot out of Jonesboro, all the way to the east side of Memphis."

Where the Tunica casinos were a regional destination for Oklahoma, Missouri, Arkansas, Alabama and even Florida, that changed with the advent of gambling venues in surrounding states, he said.

"People choose to play and stay where there is a convenience factor, provided you have a competitive product. If you didn't have a competitive product, they'd still go to Tunica," Keeping said.

After a slow start in 2006 and 2007, Southland worked to improve its facility and gambling options, Keeping said. Mississippi River flooding in 2011 that swamped some Delta casinos shifted even more weekly players from eastern Tennessee and surrounding areas to Southland. At that point, word-of-mouth helped to build a reputation that Southland was a good facility, he said.

In January, Southland, owned by Buffalo, N.Y.-based Delaware North Co., announced plans to spend $37.4 million to add 41,000 square feet of gambling space to enable it to accommodate nearly 2,000 gambling stations, as well as a new restaurant and sports bar. At the time, Southland officials said the expansion would add 100 jobs to the 650 people already employed there.

Southland expects to hold a soft opening in mid-November for the expansion.

Oaklawn is expanding its casino operations as well.

As part of a $20 million project, workers are adding about 55,000 square feet to the facility, bringing its casino area to more than 145,000 square feet so it can eventually add about 500 gambling positions to the nearly 1,000 it currently has spread out over 90,000 square feet.

The expanded casino is expected to be ready for patrons beginning in early November, but Oaklawn's overall expansion won't be completed until January, said Oaklawn spokesman Jennifer Hoyt. Oaklawn Gaming, which now has about 500 employees, will add another 100, she said.

Keeping said that in today's casino markets, location is crucial. But casino operators must provide the latest games, as well as good food to ensure patrons enjoy their overall experience. He said Southland has been able to chip away at Tunica's market share by being competitive in these areas. And it's a quicker trip for those living in and near Memphis.

Keeping doesn't view Oaklawn as a direct competitor because Southland draws relatively few players from the Little Rock market because of the two-hour drive.

Other casino operators are eyeing Arkansas as well. Five Oklahoma-based Indian tribes, including the Cherokee Nation, have opened facilities near the Arkansas-Oklahoma state line. Some have expanded to include additional gambling space and amenities that include new hotel rooms and restaurants.

McGowan said that Arkansas isn't unique. He said casinos in Atlantic City, N.J., were hit hard when Pennsylvania legalized casinos.

"Atlantic City went down immediately by around 12 to 15 percent when Pennsylvania opened up," McGowan said. "Clearly it was Pennsylvania reclaiming the revenue from New Jersey." And the same thing is happening to casinos in western Pennsylvania and Indiana since Ohio allowed casinos to reclaim revenue being lost to those states.

Larry Gregory, executive director of the Mississippi Gaming and Hospitality Association, said casinos across the country are sorting out how to deal with regional competition, which he acknowledged has cut into Mississippi's casinos, particularly in Tunica.

"There is no doubt that people are attracted to convenience gaming," Gregory said.

As more states allow casinos and gambling, the industry is trying to sort out how to respond. He said Mississippi casino operators are looking at ways to take advantage of existing draws, such as sports venues and beaches on the coast and ties to blues music in the state's north.

He said Mississippi, unlike most other states, gives operators more flexibility to choose where and how to operate their casinos -- unlike states such as Arkansas and Missouri that have imposed strict limits on casinos.

"To be more competitive, we're going to have to change," Gregory said.

McGowan doesn't see the trend toward regional casinos changing. He said patrons will opt for the closest tables, as long as they get better odds and good entertainment value.

"What the state has to do is make sure that these casino operators will invest in the properties in order to keep people going 'Wow!,'" he said.

SundayMonday Business on 09/28/2014

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