Oversaturation Of Casinos In Northeast Could Make Online Gambling Regulation More Important

December 4, 2015
Oversaturation Of Casinos In Northeast Could Make Online Gambling Regulation More Important

A new report from Moody’s hypothesizes that new casinos in Northeastern states will oversaturate the market for brick-and-mortar gaming in the region.

That problem for the casino industry in the Mid-Atlantic could mean the states (and casinos) that embrace online gaming could have an advantage — or at least less of a disadvantage — moving forward.

What the Moody’s casino report said

Earlier this week, Moody’s released a report called “Northeast Casinos Face Rising Tide of Competition.” In a press release announcing the report, Moody’s indicated that it believes that eight new casinos opening in the region in the coming years “will increase competition among operators in the already oversaturated market.”

“It will be more difficult for the new casinos entering overcrowded markets to gain share as existing operators have been cutting costs and paying down debt in anticipation of the new supply,” the report continued.

More from the report:

The new supply will hit Atlantic City particularly hard. Increasing competition from casinos in Pennsylvania, Maryland, Delaware and New York has led to the closure of four casinos in 2014, and the new entrants in these states will likely cause the number of casinos in Atlantic City to continue to shrink.

Moody’s also notes that market conditions will be difficult for existing casinos such as Sugarhouse Casino and Harrah’s Philadelphia in Pennsylvania, Maryland Live casino in Maryland, Twin River casino in Rhode Island, and the Native American casinos in New York, which have already been struggling to adapt to flat revenue growth amid new entrants.

One possible aid to casinos? Online gambling

As casinos compete for marketshare, online gambling could be one possible way to help stave off losses. How?

  • Online gaming can provide revenue without even needing to get customers in the door. Online casino in the regulated New Jersey market has already shown that it is capable of providing meaningful revenue (even if poker has not).
  • Far from cannibalizing land-based gambling (as some online gambling opponents would have you believe), online casino and poker products actually complement brick-and-mortar gambling.
  • Online gaming can be used to retain customers for the B & M establishments and even create new customers.

For casinos looking to get an edge on their competitors — at least vis a vis competitors in other states — online gambling should be an attractive and easy method to help them compete.

The states and their status on online gambling

Of course, only two states in the Northeast actually have regulated online gaming — New Jersey and Delaware.

The Moody’s report indicated New Jersey, and specifically Atlantic City, would be hit hard. And while there have been positive signs for AC lately, more competition in neighboring states and the open question of whether AC has actually hit bottom might mean online gaming may have a minimal impact in stopping contraction. But it likely will help the properties that survive.

Online gaming could come into play most in states that do not currently have regulation. Chief among those would likely be Pennsylvania, which appears to be seriously considering online gambling as a revenue source in the ongoing budget battle in the state. Pennsylvania casinos are almost unanimously for online gaming (outside of the Sheldon Adelson owned Sands Bethlehem), and several casinos have already signed on with online partners in the event that an online gaming bill is passed.

New York has flirted with the idea of introducing online poker, but such efforts haven’t amounted to much progress. There have been no meaningful online gaming legislative efforts in Maryland.

In the wake of the Moody’s report, it’s clear that states that pass online gaming regulation would be giving casinos a useful tool in staying competitive moving forward.

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