CasinoClash 13 -- Analyzing the Analysts

We now have three applicants auditioning to play a major role in deciding whether Cedar Rapids will be get its license to gamble.

Three companies vying to conduct a statewide casino market study made pitches to the five-member Racing and Gaming Commission Thursday at the Riverside Casino and Golf Resort. Actually, they pitched to four members in person and the giant head of Chairman Jeff Lamberti, who appeared on a big screen from Orlando via Skype.

The point of the study is to figure out whether a state with 18-state-regulated casinos can squeeze in any more gambling facilities, or if expansion would simply suck bucks away from existing casinos.

“This is roll up your sleeves type of engagement,' said Rich Baldwin, managing director for analytics with Union Gaming Group, based in Las Vegas and Macau. Yep, Macau, where James Bond dropped by casinos in “Skyfall” and “Man with the Golden Gun.” I take my casino market analysis shaken, not stirred. Or maybe in a casing?

“There's a lot that goes into the sausage-making,” said Baldwin, talking about the many micro and macro factors that will go into a full-blown market analysis.

Union's two competitors previously made sausage for the Iowa commission. Marquette Advisors, with offices in Minneapolis, Seattle and Washington, D.C., studied the state's gaming market in 2008-2009. New Jersey-based Spectrum Gaming Group is partnering with Massachusetts-based Cummings Associates, which studied the Iowa market in 2003 and again in 2005.

It's possible the commission will hire two of the three firms. The pick is expected in October.

For Cedar Rapids casino-backers, picking the sausage-maker could be a pivotal decision. The market analysis will be the biggest single factor in determining whether a Cedar Rapids facility gets a state license. So how that analysis gets done could determine the local project's fate.

PREVIOUS STUDIES

Does it matter who is hired? We can only speculate. And we might as well get started

Marquette's 2008-2009 analysis was bad news for casino seekers in Webster, Wapello, Tama and Franklin counties, and good news for Lyon County. Marquette surveyed the lay of the gaming landscape four years ago and determined that Iowa's market, “while not ‘saturated,' is approaching maximum penetration with respect to the regional population base.” Marquette found that Iowa's market had achieved “equilibrium,” where the supply of gambling was roughly equal to the available market.

“This means that further addition of gaming facilities in future years would likely have an increasingly dilutive impact upon existing casinos, rather than generating ‘new' demand by tapping underserved markets,” Marquette wrote in its 2008-2009 analysis. New casinos might be financially feasible, it concluded, but would likely draw only modest new demand while grabbing market share from existing casinos.

The exception, then, was Lyon County in far Northwest Iowa, which could tap the Sioux Falls market. So Lyon County got a license. The other counties were denied, for various reasons. But that analysis loomed large.

‘GRAVITY MODELING'

Will Cummings, who leads Cummings Associates, studied the market in 2003, as the commission weighed the possibility of dropping a moratorium on expansion, and in 2005, after several counties had applied for licenses.

“Waterloo and Cedar Rapids are the only major markets that appear to offer substantial promise without major adverse impacts on some of Iowa's existing gaming facilities,” Cummings wrote in 2003, before Linn County shot down a gambling referendum. Waterloo got a new license, as did Riverside to the south, changing the market equation.

Cummings bases his analysis on what he calls “gravity modeling.' It's complicated stuff, but basically it tries to measure the potential pull, or gravity, a casino has or would have on its market.

For example, the closer a casino is, the more often people visit and spend money. Larger casinos with lots of amenities have a stronger gravitational pull than smaller facilities. Urban residents tend to gamble more than rural folks, so a casino's proximity to a large city is a factor, as well as its accessibility from interstates, local income data, etc.

I think a Cedar Rapids casino, which would be urban and very close to its core customers, but not large and full of the sort of amenities that would push its drawing potential far into other markets, might fare OK under this sort of analysis. Of course, I'm only making a partially educated wild guess.

Union Gaming is a wild card, and may get picked if the commission wants to put some fresh eyes on the state. Cummings is working with Spectrum, which worked with Cedar Rapids casino investors as they put their plans together. That relationship could make a difference to the commission. Perhaps we'll get a mix of experienced and fresh.

Regardless, things are going to start happening now. The City Council will vote on a development agreement with the casino investors later this month. Cedar Rapids backers turn in their application on Sept. 3. The commission will hear their formal pitch and pick a market study firm in October.

Then the sausage gets made. Wash it down with a martini, like they do in Macau.