CEDAR RAPIDS — Experienced Iowa casino executive Jonathan Swain, who is part of the management and development team for the proposed Cedar Crossing Casino here, says Iowa’s casino markets grow and improve in the face of fresh competition.
Case in point is Dubuque, where Swain, former chief operating officer at the Diamond Jo Dubuque casino, said the Diamond Jo and the Mystique casinos have gone back and forth with each other over the years as each has worked to make sure they continue to profit.
In the last decade, he said the Mystique has added gambling positions in its casino while the Diamond Jo has moved from a riverboat setting to a new land-based casino site. No one imagined that the two-casino market in Dubuque would grow significantly with the new investment, but it has, Swain said.
In 2005, the two casinos totaled $96.5 million in adjusted gross revenue, and by 2012, the revenue had grown to $129 million in adjusted gross revenue.
"Why did that occur?" Swain asked. "What happens when a new competitor enters the market is that we react as business people. We do things. We invest. We reacted to the new marketplace."
Swain, one of three top executives of former Peninsula Gaming LLC who now have invested in the Cedar Crossing Casino and will manage its operation, took the lead role as Steve Gray, leader of the Cedar Rapids casino investor group, and Doug Gross, Des Moines attorney and the investor group’s project strategist, presented the case for a Cedar Rapids casino to The Gazette’s editorial board.
Swain talked as a veteran of the Iowa casino industry and as a peer of Dan Kehl, who is the chief executive officer at the Riverside Casino and Golf Resort and who has ownership positions in the state’s newest casino in Lyon County and in the new casino to be built along Interstate 80 at Davenport.
Kehl has been the most vocal opponent of a Cedar Rapids casino, and two market analysis studies conducted for the Iowa Racing and Gaming Commission both agreed with Kehl earlier this month that a Cedar Rapids casino would harm a Riverside casino by taking between 27 and 42 percent of its business.
Swain dismissed the claims. He called both studies seriously flawed, and he said previous studies done for the state commission have always overestimated the damage or "cannibalization" a proposed new casino would do to existing casinos in Iowa.
"Instead, there was growth in the market," Swain said of past casino growth. "(Existing casinos) did things to improve themselves. The amount of cannibalization is limited and it occurs only to those competitors who don’t react to new market conditions. And that’s just not the way business people react."
Swain and Gray said their financial analysis of the Riverside casino, which opened in 2006, and Kehl’s Grand Falls casino in Lyon County, which opened in 2011, shows that Kehl’s Riverside casino will be nicely profitable even if loses 31 percent of its business to a Cedar Rapids casino as Kehl has said it would.
Gray, founder of Gray Venture Partners LLC in Cedar Rapids, said he would be happy with Kehl’s financial position in the Riverside casino with a Cedar Rapids casino in place.
Kehl has said that a Riverside casino will have to fail for a Cedar Rapids casino to succeed.
Swain called on Kehl to "ratchet down the rhetoric (about failing), which is not true," he said.
Swain said the Quad Cities market has three casinos and the Dubuque market, two, so he said it does not make sense that the Cedar Rapids-Iowa City market cannot sustain another casino without putting the Riverside casino out of business.
Swain said Kehl’s new Davenport project and his profitable casinos in Riverside and Lyon County prove that Kehl and his shareholders "are going to be just fine."
"It is true that Dan and his shareholders will be less successful (in Riverside) than they have been in the past because their success has been based on a monopoly for the casino’s first eight years," Swain said. "But the decline in success should not come at the cost of the benefit a casino can bring to Cedar Rapids and to the state of Iowa.
"I respect what he’s doing to try to maintain his profitability. But I think Dan’s objections (to the Cedar Rapids casino) are going to make him look a little bit greedy to Iowans."Swain, Natalie Schramm and Brent Stevens, top executives at the former Peninsula Gaming LLC, sold Diamond Jo Dubuque and Diamond Jo Worth County casinos in Iowa and three out-of-state casinos in 2012. The three are now principals in JNB Gaming LLC, which is the development and management firm hired by the Gray-led Cedar Rapids casino investor group. The three also are investors in the Cedar Rapids casino.