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Maryland’s tabled gambling profits

CHARLES TOWN, W.Va. — At the Hollywood Casino at Charles Town Races, the atrium is filled with sounds formerly heard only in Atlantic City and Las Vegas — the click-clack of the steel ball on the roulette wheel, the roll of dice on the felt craps table, the sweet clink of casino chips as blackjack players place their bets.

“We usually go to Atlantic City,” said Paul Moersen, 26, who drove the 45 minutes from Gaithersburg with his father, Dave, to spend a Wednesday afternoon at the casino. The two had pooled their money for one spot at a crowded craps table with $25 minimum bets.

“Now with this right up the road, it’s dangerous for us,” he said.

Table games opened here this month, as did games in Pennsylvania and Delaware in May, cutting in half the long drive for Marylanders to a full-fledged, Atlantic City-style casino. They’re still operating with their training wheels on — at Charles Town, the 20-something cocktail waitresses dressed like Hollywood starlets shyly take drink orders while freshly trained dealers haltingly stack chips for bettors. But these islands of gaming surrounded by acres of parking lot and a few hotels are already a formidable force on the casino landscape.

The addition of table games means competitors have one more lure than — and are one more giant step ahead of — Maryland in the “mid-Atlantic gaming arms race.” While other states forge ahead, Maryland’s gaming picture is one of stalled starts, lack of interest from casino operators and a legal battle tying up the state’s biggest potential slots site.

But even though table games are another arrow in the quiver for surrounding states, Maryland’s biggest competition in its quest to enter the gaming arena has so far been itself.

Gaming consultants say one of Maryland’s biggest problems is that it got into the slots game too late. West Virginia debuted slots in 1994 and Delaware followed in 1995. Then, while the General Assembly debated slots legislation for years, Pennsylvania launched its gaming in 2004.

Now with table games in those states, Maryland isn’t playing catch-up on just slots as it gets ready to open its first casino, Hollywood Casino at Perryville, on Sept. 30.

“You can only control the expansion within your own state,” said Ken Adams, strategic analyst at CDC Consulting Inc. in Las Vegas.

But, he said, Maryland’s entrance into the gaming world has been slow.

“And now the states are looking at each other as competitors and in some sense responding to what their competitors are doing,” Adams said.

Different customers

Himbert Sinopoli, general manager of the Perryville casino, said table games and slots attract different customers — men generally like table games, women are more drawn to slots. But a full-service casino (like Delaware Park, 35 minutes from Perryville) can still pull away slots customers from Maryland.

“It isn’t slots versus tables — the bigger question is slots versus slots and tables,” said Randall A. Fine, managing director of The Fine Point Group in Las Vegas. “Oftentimes there are couples who split up. A husband and wife going to a casino want tables and slots, so they’ll choose to go to a destination where they both can play.”

That so far is proving true in Charles Town, where all gambling activity increased when table games opened during the Fourth of July weekend.

According to General Manager Albert Britton, slots play was up by 20 percent that weekend. Wagering on horse racing was also up by an average of 20 percent and doubled on Friday night.

“It surpassed all of our projections,” Britton said, who would not reveal exact numbers because casino operator Penn National Gaming Inc. is a public company.

Other casinos have reported a similar boon for their table games business. At the Presque Isle Downs Casino in Erie, Pa., wagering was up 18 percent to $52 million during the casino’s first full week of operating with table games. The state’s share, including money designated for special funds, increased by $200,000 to more than $2 million, according to the gaming control board.

The action across the borders has operators in Maryland already thinking bigger.

“I don’t think it will prevent us from being successful here, but longer term, I do think there’s an advantage if we get table games because … [otherwise those customers still] might pass us up to go to Delaware Park,” said Sinopoli.

Towson resident Jimmy Kosmas, 55, is one of those customers. Kosmas said he normally goes to Atlantic City two or three times a year for table games, but now he was patiently waiting for a spot at one of Charles Town’s blackjack tables. For Kosmas, the hour drive to Charles Town works just fine.

“Now I’m going to try all the other [casinos],” he said.

Kosmas ended up waiting close to an hour for a seat, and, even during a weekday, that hasn’t been unusual for the first few weeks of business there. Charles Town plans for a total of 85 tables, but only about one-quarter are operating now, mostly due to the wait required to license more dealers.

Crowds from Day One

That has meant crowds from Day One for players. Located just past the main entrance, the table games area of the casino looks more like Vegas or Atlantic City on a Saturday night than Charles Town on a Wednesday afternoon.

“It’s too bad Maryland couldn’t get table games to start off with,” said Kosmas said. “They should have known Pennsylvania, Delaware and West Virginia would go to table games once Maryland got slots.”

Race track casinos in those states get anywhere from 40 to 80 percent of their customers from the Maryland-Virginia region, general managers said. Consultants say when Maryland does open its slots casinos, it will start stealing those customers back.

“The most important factor in casinos for customers is proximity,” said Fine. “People in Maryland are going to play where it’s easier for them to get to.”

And with slots being the most popular form of casino gambling in the U.S., (60 percent of casino visitors say it is their favorite game, according to the American Gaming Association), Maryland’s slow journey into gaming still makes other casino operators wary.

“One of the reasons we wanted table games was so we could compete with the surrounding jurisdictions,” said Charles Town’s Britton. “And Maryland can take their time, by the way.”

Slots aren’t just a crowd pleaser for customers — they’re generally more profitable for casino operators. A row of 10 slot machines can fit in the space required for one table game. And while table games require licensed dealers, dealer supervisors and more surveillance, operating costs for slots are low.

Fine said that’s why table games are taxed differently than slots, with the state making less money off them. Although it varies by state, casino operators generally pay 60 percent of their slots revenue in taxes and 16 percent for table games earnings to help counteract the cost of operation. Still, at least 65 percent of commercial casinos’ gaming revenue is from slot machines, according to the AGA.

Md. shouldn’t be faulted

Fine and other consultants said Maryland shouldn’t be faulted for not adding table games just because other states have them.

“Things are going slowly … but you do really want to get [your] hands on the slots business and benefit before you move on to table games,” said John Yeomanson, a CDC Consulting table games analyst.

But Maryland, as a latecomer to the gaming world, could have made itself more attractive. According to its tax structure, casino operators can retain only up to 33 percent of slots revenues; operators in Delaware, Pennsylvania and West Virginia retain more than 40 percent.

“I think Maryland had the right idea,” said Fine. “But there was a belief — and not just in Maryland — that gaming was this limitless taxable resource, and that’s not true. So it’s not that operators are afraid to have a casino in Maryland, it’s having a casino anywhere that has these tax rates.”

That became evident last year when just five bids were submitted to operate Maryland’s five designated casino sites — and one site in Western Maryland did not receive a bid at all (although one company did express interest). The state had hoped to realize up to $90 million in revenue from license fees for the maximum allowed 15,000 slot machines during fiscal 2010, which ended June 30. But with just two of the five designated sites moving forward, it took in only $13.8 million in fees for 2,300 slot machines.

Financially on track

Donald C. Fry, head of the state’s Video Lottery Facility Location Commission, noted that Maryland was still financially on track because it had not planned on receiving revenue from slots operations until fiscal 2011. But the stalling is a concern.

“I think the entrance of table games in adjacent states has certainly highlighted the issue that Maryland needs to move as soon as possible to get up and running,” Fry said.

Perryville’s opening this year might cover the state’s $61 million in revenue projected for fiscal 2011. But the delays that will affect the following year’s slots revenue projections of more than $400 million could be significant.

Ocean Downs, which had hoped to open a temporary slots site in May, has delayed its casino until December. A voter referendum on slots zoning in Anne Arundel County could put the casino operator selection process back at square one next year.

The Western Maryland slots license was put up this week for bidding a second time, and the Baltimore City license will be rebid this fall after the last bidder repeatedly missed proposal deadlines.

A wait until Nov. 2012

Fry noted that for Maryland to add table games to its gaming repertoire, it would need approval in a referendum. And because referendums are limited to general election years, that would have to wait until November 2012.

Like slots, that could be an uphill battle. A bill asking for a voter referendum allowing poker rooms at the now-shuttered Rosecroft Raceway in Prince George’s County was proposed in this year’s legislative session and passed in the Senate. But, like many slots bills in years past, it died in the House of Delegates.

Gov. Martin O’Malley has also held back on supporting new gaming in Maryland, saying slots need to be up and running first.

But many believe that day will come in Maryland. And whereas it took a decade of maneuvering and debate for the General Assembly to move on slots after surrounding states passed legislation, political observers say table games may come sooner.

“We’ve kicked down that door on slots — it’s been done,” said Matthew Crenson, political science professor emeritus at Johns Hopkins University. “And once you’re there, it’s relatively easy to make the transition from slots to table games.”

Daily Record business staff writer Nick Sohr contributed to this article.