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The "State of the States" in Gambling Survey

22 July 2005

The annual "State of the States" survey from the American Gaming Association arrived in the mail recently, bringing the usual compendium of statistics and survey results on who gambles, where they play, how many jobs are created and how much tax revenue is produced by the gaming industry.

Most of the results will look familiar to anyone who has seen such surveys before. The 54.1 million American adults who made casino trips in 2004, averaging 5.9 trips apiece, look a lot like the average American adult, just slightly more affluent (median household income $55,532 vs. $47,270) and slightly better educated (at least some college for 55 percent vs. 53 percent).

That's no surprise. The survey TFS NFO does annually for Harrah's, included in the AGA report, has been coming up with similar data for years.

What is striking this time around is the spotlight on poker based on surveys done by the Luntz Research Companies, quantifying the boom that has followed televised poker such as the World Poker Tour, World Series of Poker and Celebrity Poker.

When the survey was taken earlier this year, 18 percent of adults reported they had played poker in the previous 12 months, up from 12 percent a year earlier. Of those who had played in the last 12 months, 19 percent said they had just started playing in the last year or two.

By age group, the youngest adults are the most likely to play. Of those ages 21-39, 29 percent said they'd played poker in the last year, up from 22 percent a year earlier, followed by 16 percent of adults 40-49, 14 percent of those 50-65 and 12 percent of those over 65.

That's why poker has gained strength in casino settings. Even though it might generate less revenue per square foot than slot machines do, it continues to draw younger customers into the casino. And while they're there, the younger adults also play other games and spend money in the restaurants and hotels.

Just a few years ago, casino operators thought video slots were going to be their route to attracting younger adults who grew up with video games. At least for now, though, it's poker that's giving casino customers a more youthful face.

* * *

Two years ago, when the Illinois Legislature raised the maximum gaming tax to 70 percent of gaming revenues and hiked the admissions tax to $5 a head, Hollywood Casino in Aurora was the first in the Chicago area to respond with fees for admission and parking.

Now that the tax has been rolled back to a top rate of 50 percent, Hollywood has been first to respond in its current advertising by trumpeting free admission and parking.

The tax rollback isn't perfect from either an operator's or a player's viewpoint. It doesn't bring the increase in the number of gaming positions that has long been bandied about. The number remains stuck at 1,200. And there's a catch. Casinos must pay at least as many gaming tax dollars as they did under the old rate. If the new tax rate leaves a shortfall, the casinos must make it up. Without attracting added business, the casinos are, in effect, stuck with the old tax rate.

That beats the former situation, in which Illinois wrote into law an incentive for businesses to drive customers away. And casinos did drive customers away with admission fees, parking charges, charges for soft drinks and coffee, cutbacks in comps --- mixed and matched in different combinations at different casinos.

The higher tax rate did increase Illinois' wagering tax receipts from $619 million in 2002 to $737 million in 2004. It also lost the state thousands of jobs, tens of millions of dollars in canceled or revamped construction projects and drove business out of Illinois into neighboring states.

In 2002, the last full year with a 50 percent maximum on the gaming tax, Harrah's produced $315 million in gaming revenue, Hollywood took in $273 million and Empress took in $238 million. In 2004, with a $250 million threshold at which the 70 percent rate kicked in, Harrah's dropped to $273 million, Hollywood to $230 million and Empress to $228 million.

Only Grand Victoria in Elgin never added an admission fee. It reported $400 million in gaming revenue in 2004 --- Grand Vic couldn't have dropped anywhere near $250 million if it tried, and with a supply of high-end customers other casinos can only envy, it didn't need to try. A customer who rolls high enough is profitable for the casino even at a 70 percent tax rate.

But in Aurora and Joliet, much business that became marginal or even unprofitable at the 70 percent rate was driven to Indiana or out of the market entirely. Now casino operators need to woo old players back, and develop some new business. Hollywood started the process by dropping admission and parking fees, and we'll see whether Harrah's and Empress soon follow suit.

The resumption of free admission won't immediately start a stampede to the gates. Operators knew full well that some players driven away by the charges would never return. Now conditions have changed, and so must the casinos.

Listen to John Grochowski's "Beat the Odds" tips Saturdays at 6:20 a.m., 2:50 p.m. and 7:41 p.m. and Sundays at 8:20 a.m., 2:50 p.m. and 10:42 p.m. on WBBM-AM, News Radio 780 in Chicago, streaming online at www.wbbm780.com.

Recent Articles
Best of John Grochowski
John Grochowski

John Grochowski is the best-selling author of The Craps Answer Book, The Slot Machine Answer Book and The Video Poker Answer Book. His weekly column is syndicated to newspapers and Web sites, and he contributes to many of the major magazines and newspapers in the gaming field, including Midwest Gaming and Travel, Slot Manager, Casino Journal, Strictly Slots and Casino Player.

Listen to John Grochowski's "Casino Answer Man" tips Tuesday through Friday at 5:18 p.m. on WLS-AM (890) in Chicago. Look for John Grochowski on Facebook and Twitter @GrochowskiJ.

John Grochowski Websites:

www.casinoanswerman.com

Books by John Grochowski:

> More Books By John Grochowski

John Grochowski
John Grochowski is the best-selling author of The Craps Answer Book, The Slot Machine Answer Book and The Video Poker Answer Book. His weekly column is syndicated to newspapers and Web sites, and he contributes to many of the major magazines and newspapers in the gaming field, including Midwest Gaming and Travel, Slot Manager, Casino Journal, Strictly Slots and Casino Player.

Listen to John Grochowski's "Casino Answer Man" tips Tuesday through Friday at 5:18 p.m. on WLS-AM (890) in Chicago. Look for John Grochowski on Facebook and Twitter @GrochowskiJ.

John Grochowski Websites:

www.casinoanswerman.com

Books by John Grochowski:

The Craps Answer Book

> More Books By John Grochowski