September revenue from Horseshoe Casino is 34% below city estimate
The new Russell Street casino is not bringing in the funds the Rawlings-Blake administration thought it would during its first month of operation
Above: Few customers were in sight on a recent Saturday afternoon at Horseshoe’s main entrance on Warner Street.
During its first full month of operation, Horseshoe Baltimore Casino generated 34% fewer revenue dollars than the Rawlings-Blake administration had anticipated.
After an initial splurge of gaming when it opened in late August, the Russell Street casino’s revenue stream dropped to $22.4 million in September, according to figures released this afternoon by the Maryland Lottery and Gaming Control Agency.
That’s less than half of the $45.5 million in revenues generated by its competitor, Maryland Live, located 10 miles away in Anne Arundel County. Horseshoe seems to have peeled off about 10% of Maryland Live’s revenues last month – an impact far less than expected.
What this means for Baltimore City is that – if the current revenue trend continues – “local community impact” funds generated by Horseshoe will be about $730,000 a month. That’s a third less than the $1.1 million a month ($10 million over 9 months) projected by the city Finance Department for fiscal 2015.
The city has already committed $7 million of those impact funds to reimburse Horseshoe’s operator, Caesars Entertainment, for relocating an underground steam pipeline and rehabilitating city streets around the casino.
A continued shortfall of impact funds means that future casino money promised to South Baltimore communities may be in short supply.
No Certain Winner
More broadly, the September results suggest that the fiscal gold mine depicted by Mayor Stephanie Rawlings-Blake while the casino was being promoted, planned and built is no sure bet.
The mayor’s long-term plan was to use casino real estate taxes and other revenues to fund a reduction of Baltimore’s property tax rate, the highest in the state, and to aid citywide education.
Horseshoe’s disappointing revenue figures could also negatively impact on Caesars itself, which has touted the new casino as an “edgy” entertainment hot spot that would draw in young gamblers, sports fans and tourists visiting other Baltimore sights.
Having lost $3 billion last year alone, Caesars is weighed down by $24 billion in debt and has been beset by bondholder lawsuits and widespread predictions that it will file for partial or full bankruptcy soon.
READ OUR THREE-PART SERIES ON CAESAR’S FINANCIAL PROBLEMS here, here and here.
While a bankruptcy filing by the parent company is not expected to impact immediately on the Baltimore casino thanks to its array of sheltering subsidiaries, continued financial turmoil at the Las Vegas-based giant could injure the local casino’s brand name and lead to employee layoffs as the company is forced to tighten its cost structure.
A New York analyst, who requested anonymity, today said a potential silver lining in Horseshoe’s results is the company’s reputation for increasing revenues over time. He noted that the company’s Total Rewards program increases points as the number of visits by a gambler increases, which in turn generates more revenues for the casino.
The Maryland gaming commission today reported Horseshoe’s gross gaming revenue in September as:
• $178 per slot machine a day
• $2,356 for banking table games a day
• $764 for non-banking table games a day.
(Horseshoe Casino Baltimore operates 2,500 slot machines and 120 banking and 25 non-banking table games. It opened to the public on August 26, 2014.)
In contrast, Maryland Live Casino generated:
• $219 per slot machine a day
• $3,833 for banking table games
• $1,284 for non-banking table games.
Over the month of September, Horseshoe casino generated $746,353 a day in revenues, of which a portion goes to the city and state and the rest to the operator.
Over the five days that Horseshoe was open in late August, the casino generated more than $1.1 million in revenues, according to the gaming commission.