So the applications are in for our three Casino Clash ’17 contenders, including a pair of Cedar Crossings and a Wild Rose boutique.
These hefty works of literature generally don’t have titles. But if they did, I’d submit “Cannibals? What Cannibals?”
Applications from Wild Rose and the Cedar Rapids Investment Group each include market studies insisting a new casino in town would take only small, manageable nibbles from nearby casinos’ business. That’s especially the case, the studies argue, for the smaller Wild Rose boutique and Cedar Crossing central proposals.
Convincing the Racing and Gaming Commission a new casino would not unduly harm current casinos is the biggest obstacle standing between the applicants and a state license.
The Cedar Rapids group hired New Orleans-based TMG Consulting, which says a smaller downtown casino with 550 slots and 15 table games would get just 12 percent of its revenue through cannibalization of existing casinos. Cedar Crossing classic would take a 28 percent bite.
Contrast that with 2014 studies by Union Gaming and Marquette Advisors, both hired by the Racing and Gaming Commission. They found Cedar Crossing classic would get 70 to 80 percent of its revenue through cannibalization in a saturated market.
Wild Rose’s application has two market studies, one by Maine-based Christiansen Capital Advisors and another by Reno-based Wells Gaming Research. Wells estimates a 700-slot boutique would get 23 percent of its revenue from existing casinos while a joint with 500 slots would pull 18 percent. Christiansen’s estimates under the same scenarios found rates at 28 percent and 19 percent respectively.
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If TMG is right about Cedar Crossing central’s 12 percent bite, the project might stand a chance with the competition-averse commission.
But in January 2014, it was TMG that told the commission Cedar Crossing classic would take only a 9 percent bite from Riverside Casino and Golf Resort, with lesser nibbles from Waterloo, Dubuque and Tama. Then came Union and Marquette’s one-two punch, and Cedar Crossing’s 4-1 defeat.
Both of Wild Rose’s studies point to flaws in Marquette and Union’s analysis.
Christiansen argues previous studies relied too much on players’ club or loyalty club data provided by casinos. For example, the high number of Riverside players’ club card holders from Linn County helped fuel the conclusion that a Cedar Rapids casino would be a major league cannibal.
But Christiansen insists reliance on that data introduces a “self-selection bias,” and that card-holders would actually be “least likely” to abandon their current casino for a new one.
Wells Gaming points out Union and Marquette shot high when they estimated cannibalization rates for a new Greene County casino that opened in 2015. Studies showed it would take $6 million to $13 million from Prairie Meadows and $3.2 million to $3.6 million from Emmetsburg. The actual 12-month effect on Prairie Meadows was $3.5 million and $1.5 million for Emmetsburg. Interstate 80 road work, Wells argues, may have had a hand in Prairie Meadows’ drop.
Interesting stuff. But the commission has a history of listening only to its own studies, and a fear of cannibals.
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