Aug. 4 (Bloomberg) -- After its gambling fortunes sank in an isolated Illinois river town, Caesars Entertainment Corp. is seeking a solution in a feat of maritime and statutory engineering: Turning a convention center into a riverboat.
It might float legally, if not literally.
The owner of the Harrah’s Casino in Metropolis is making the move from a 21-year-old boat on the Ohio River to an adjacent convention center on terra firma in hopes of reversing a slide in revenue. Before betting can begin, it must satisfy an Illinois law that says slots, wheels and table games must be played over water. The precise liquid solution, which must be approved by the Illinois Gaming Board, hasn’t been divulged.
“It might be putting water bladders under the convention center,” Mayor Billy McDaniel said. “Like a giant hot water bottle.”
Lisa Gower, president of the Metropolis Chamber of Commerce, said the lower level may be flooded.
“There’s more than one way to float a boat,” she said.
The wager to rejuvenate Harrah’s Metropolis Casino comes against the national backdrop of decline in casino gambling, driving Atlantic City’s credit rating to junk. Caesar’s, citing flagging business and increased competition, closed its Harrah’s casino in Tunica, Mississippi, in June. Communities such as Metropolis are wondering how their bet on steady income went sour and what can reverse it.
Metropolis officials support the move to shore because the ambitiously named town of 6,500 near Illinois’s southern tip needs money. Gambling makes up almost half its annual revenue and the take has fallen by 57 percent since the 2007 fiscal year.
Revenue from the riverboat, which opened in 1993, peaked at $9.7 million seven years ago, said Patricia Suttles, the chief financial officer. It’s been sliding ever since, to $4.2 million in the year ended June 30.
“It covers all of our operating expenses for personnel,” McDaniel said.
The red-and-orange carpeted casino, with 1,100 slot machines, is a throwback to 19th century riverboat gambling days, with a gangplank onto the vessel. Devotion to historic roots, though, makes it less accessible and convenient to patrons than a one-floor operation that the Harrah’s-owned convention center will offer, said marketing director Ryan Bierbaum.
A revenue forecast is difficult. “We hope to see a slight reversal in the trend,” Bierbaum said.
Once confined to a small number of resorts such as Las Vegas and Atlantic City, New Jersey, games of chance have become a mundane part of the U.S. landscape as small casinos like the one in Metropolis proliferated.
After Iowa opened its first riverboat in 1991, moral resistance to gambling gradually gave way to the argument that it can be an economic development tool. The political concession to opponents in Illinois was that casinos be located on rivers to hold them at a remove.
Since the early 1990s, the number of casinos nationwide has soared to about 930, according to the American Gaming Association.
After years of analysts asking whether the country has reached a saturation point, the answer is moving toward yes. In a July 21 report, Fitch Ratings cited proliferation of gambling choices, stagnant wages and indications that young people are less attracted to slot machines than are baby boomers.
In Illinois alone, nine of 10 casinos saw their revenue drop as much as 17 percent in June, year over year. The boat in Metropolis was down 10 percent.
That’s a sobering assessment for a town whose emotional identity is tied to an entertainment super hero, Superman. The comic-book creation who worked in the fictional metropolis of Metropolis is honored with a 15-foot-tall bronze statue fronting the old court house square and tourists pose for pictures beneath the brightly painted figure at all hours. The town held its 36th annual Superman celebration in June.
That, though, is a once-a-year event. Casino money built police and fire stations, along with parks and playground equipment.
“It’s kind of a scary future -- our operational budget is based on gaming,” said Carrie Rutherford, who runs the Metropolis Public Library, a grand, 114-year-old edifice built by the 19th-century industrialist and philanthropist Andrew Carnegie.
Las Vegas-based Caesars, the subject of a $30.7 billion leveraged buyout at the top of the market in 2008, has struggled since then to cope with its mountain of debt and declining revenue. The company announced the closing of two casinos in the past six months, in Tunica, Mississippi and Atlantic City, New Jersey. The stock is down 29 percent this year to $15.31 at the close Aug. 1.
In Illinois, a 2008 ban on smoking hurt casino business, said Steven Norton, who runs a gambling consultancy in the Mississippi River town of Alton, where the state opened its first riverboat in 1991. Then, the Illinois General Assembly authorized video gambling, which began in 2012. Now there are almost 18,000 units across the state.
“There’s just so much more competition, and we’re not creating new gamblers,” said Tom Swoik, executive director of the Illinois Casino Gaming Association.
Not everyone agrees. Illinois state Representative Lou Lang, a Democrat from the Chicago suburb of Skokie and longtime advocate for gambling expansion, says there is room for growth. Confining casinos to water makes no sense now, he said.
“Blackjack is blackjack and craps is craps no matter where you play it,” Lang said.
Even if the revenue slide can be halted, it is clear that the days of casinos driving local economies are probably over, said Thomas Garrett, an associate professor of economics at the University of Mississippi.
“Casino gambling being the savior of a town or a region isn’t the sure thing it was 15 or 20 years ago,” said Garrett, who specializes in state and local public finance.
For Harrah’s and Metropolis, they’ve placed their bet on dry land, with a splash -- somewhere.
“You have to put water under it somehow,” Bierbaum said.
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