Cedar Rapids casino market studies: Grim to glimmer of hope

Two independent market studies released Thursday paint different pictures of what a casino in Cedar Rapids would mean for the state.

Reports by both Marquette Advisors of Minneapolis and White Sand Gaming of Atlantic City, N.J., predict Riverside Casino & Golf Resort would lose at least 20.5 percent of its $85 million-plus annual revenue if any of the three Cedar Rapids casino proposals are built.

However, the firms varied widely on the state impact, revenue generated and overall cannibalization rates.

Marquette predicted the left-for-dead 2014 Cedar Crossing proposal, which has been rebranded as Cedar Crossing on the River would generate $47 million in new gambling revenue for the state while cannibalizing 45 percent of its revenue from existing Iowa casinos, which is much lower than the 73 percent prediction in 2014. The other two proposals — Cedar Crossing Central and Wild Rose Cedar Rapids — would generate $25 and $23 million, respectively, and cannibalize 56 percent each from surrounding casinos.

'We expect that a new casino in Cedar Rapids will prompt an increase in local casino gaming participation rates, such that a new casino here will be successful in attracting new gaming dollars from the local population,' the Marquette report states, while adding 'such a development will result in redistribution of market share among existing casinos in Iowa.'

White Sand had a far more grim outlook, suggesting all three proposals significantly overstated annual revenue projections by 13 to 42 percent, none would generate more than $6.8 million in new gambling revenue for the state and each would cannibalize at least 89 percent from surrounding casinos.

High cannibalization figures identified in independent market studies combined with a stagnant market was the main reason the Iowa Racing and Gaming Commission rejected a license for Cedar Crossing by a 4-1 vote in 2014.

'At this time, we see nothing that changes this conclusion and resulting decision,' the White Sands Gaming report stated.

What history tells us

Jeff Lamberti, a commission member from Ankeny, previously said the commission, historically, has supported casino applications with cannibalization rates in the low teens or lower for any existing casino, while cannibalization that tops 20 percent traditionally hasn't been supported.

The next most impacted casino would be Isle of Capri in Waterloo, although its predicted loss tops out at 8.5 percent in the White Sand study and 5.6 percent in the Marquette study.

The Iowa Racing and Gaming Commission plans to hear presentations from the firms during its meeting at 8:30 a.m. Thursday, Oct. 12, at Wild Rose Emmetsburg. The commission approved bids of $93,000 by White Sand and $85,100 by Marquette earlier this year to conduct the studies. The commission plans to decide on a casino license in November.

On the table are the $40 million Wild Rose Cedar Rapids next to the Skogman building on First Avenue SE, and two choices from the Cedar Rapids Development Group-Peninsula Pacific partnership: the $105 million Cedar Crossing Central attached to the DoubleTree Hotel on First Avenue NE and the $165 million Cedar Crossing on the River on vacant land at First Avenue and First Street SW.

Wild Rose said in a statement the market studies are just one part of the decision, and they look forward to hearing how commissioners view the reports next Thursday.

'Recent history shows that the studies have not been accurate predictors of what happens in reality when a new gaming facility is opened,' the Wild Rose statement said in reference to exaggerated cannibalization predictions for Wild Rose Jefferson, which opened in 2015.

Marquette also studied the market in 2014 for Cedar Crossing and Wild Rose Jefferson. Marquette acknowledged present data shows it overestimated cannibalization caused by Wild Rose Jefferson, although hit the mark on overall revenue projections.

In 2014, Marquette concluded a Cedar Rapids casino would generate approximately $81 million in adjusted gross revenue by 2017, including $59 million or 73 percent from cannibalization, including 25 million or 27 percent of Riverside's revenue.

Their cannibalization estimates released on Thursday were significantly lowered.

'Positive' report

Jonathan Swain, an official involved with the Cedar Crossing proposals, called the Marquette report a 'positive' because of stronger predictions of new revenue for the state compared to 2014 studies and noted it predicted Cedar Crossing would generate more revenue than Wild Rose.

The Cedar Crossing group has been making the case the market and customers are changing, and the commission must look at it differently if it hopes to grow, noting new investment has driven the gains in an otherwise flat industry.

'Our reaction is pretty positive,' said Swain. 'You would have to go back to 2006 to find any project that brought as much new revenue for the state as the $47 million (for Cedar Crossing on the River).'

He said he was confused by the White Sand report and considers it an 'outlier.'

A significant difference in the studies is the adjusted gross revenue projections. Marquette's revenue projections tracked pretty close to the applicants' projections, and in some cases Marquette predicted higher revenue.

White Sand found all the applicants significantly overestimated how much revenue their casino would make. Wild Rose had overestimated its $48.8 to $57.4 million revenue estimate by 13 to 14 percent. Cedar Crossing Central revenue of $62.9 million was overestimated by 42 percent, and Cedar Crossing on the River revenue of $83.8 million was overestimated by 29 percent, according to the White Sand report.

l Comments: (319) 339-3177; brian.morelli@thegazette.com

Report highlights

Here are some highlights from each of the casino market studies:

White Sand study

— Cedar Crossing on the River would generate $6.2 million in new gambling revenue for the state, while cannibalizing $53 million or 89 percent from other casinos. Riverside would see 32 percent cannibalization.

— Cedar Crossing Central would generate $2.8 million in new gambling revenue for the state, while cannibalizing $36 million or 92 percent. Riverside would see 22 percent cannibalization.

— Wild Rose Cedar Rapids would generate between $3.5 and $5.1 million in new gambling revenue for the state, while cannibalizing between $42.5 and $49.1 million, or between 90 and 92 percent. Riverside would see between 25 and 27 percent cannibalization.

Marquette study

— Cedar Crossing on the River would generate $47 million in new gambling revenue for the state, while cannibalizing $38 million or 45 percent from other casinos. Riverside would lose 25 percent of its revenue to cannibalization.

— Cedar Crossing Central would generate $25 million in new gambling revenue for the state, while cannibalizing $32 million or 56 percent. Riverside would see 23 percent cannibalization.

— Wild Rose Cedar Rapids would generate $23 million in new gambling revenue for the state, while cannibalizing $29 million or 56 percent. Riverside would see 20.5 percent cannibalization.