Articles
"Odds are, Winter's Been a Bad Bet: Casinos in
January saw their revenues hit hard, and ice
storms take much of the blame", (c) Rick Alm,
The Kansas City Star, 2/15/07
January started unseasonably pleasant but
midmonth ice storms that shoved much of nation in
the deep freeze also chilled Kansas City casino
revenues.
The Missouri Gaming Commission reported Kansas City riverboat admissions were
down almost 17 percent compared with January 2006 while gross revenues fell 8.1
percent, to $55.9 million. Statewide revenues were off 7 percent, and admissions
were down 15.5 percent.
It didn't help that January's calendar had one fewer Sunday than a year ago,
shaving lucrative weekend crowds.
"Weather really was the big story for January," said Chris Krohn, marketing
vice president for Harrah's North Kansas City Casino and Hotel. "We definitely
saw a sharp drop in our business the weekends with big storms."
"Interestingly," Krohn added, "we saw growth with our best customers. It was
really at the lower end of the market where we saw some of the play drop off.
Casual gamers were more affected by the weather and chose to stay home."
Other markets coped with similarly frigid circumstances. Iowa casino revenues
were reported down 4.3 percent from a year ago, while riverboat revenues slipped
1.3 percent in Illinois and 0.7 percent in Indiana. Atlantic City's gambling
parlors were barely up at 0.6 percent.
Locally, Ameristar Kansas City Casino and Hotel again led the market with
$20.4 million won from gamblers for a 36.5 percent market share -- down almost a
full point from a year ago.
Harrah's slipped more than a point to 26.7 percent, its smallest slice of the
local market pie in almost two years.
The beneficiary appeared to be the Argosy Riverside Casino and Hotel, which
picked up two-plus points for the month and a property-record 24.2 percent
monthly market share. That closed the gap with Harrah's to 2.5 points. A year
ago Harrah's edge over Argosy was 6.8 percentage points.
Krohn said Harrah's relished the challenge.
"We appreciate having strong competition," he said. "Having a competitive
marketplace is good for customers. It provides motivation to ensure we are
focusing on what our customers want."
Lousy weather and the dearth of weekend-wager warriors may not have been the
only factors at play in January's market skid.
Players might be noticing at least one area casino has tightened its belt on
comps and other promotional spending in Kansas City's historically red-hot
competitive environment.
Tom Steinbauer, chief financial officer for Las Vegas-based Ameristar Casinos
Inc., recently told industry stock analysts the company has been "relentless" in
a campaign to curb costs and cut promotional spending -- particularly at its two
flagship operations in Missouri.
In a Feb. 1 conference call, Steinbauer said the company slashed
fourth-quarter promotional spending at its seven U.S. casinos by a combined $8.4
million, or 16 percent. That strategic decision clearly bumped cash flow numbers
up, which was good news for Ameristar stockholders. But the flip side meant
fewer free meals, giveways and special events for players.
The news cheered analysts at Nollenberger Capital Partners. "Ameristar has
been known to market heavily in order to retain a leading share in its markets,"
Nollenberger analysts said later in a report to clients. "We applaud
management's shift from 'buying market share' to focusing on profitability.
"We believe Ameristar can continue to ratchet down promotional allowances and
marketing expenses this year without severely hurting its top line."
The analysts see Ameristar's management team rolling the dice in a gamble
they can save more money through fewer giveaways than they will lose through
lost business.
Kansas City Ameristar vice president Troy Stremming doesn't see it that way.
"We're trying to find that sweet spot between the two," he said.
"Some things are cyclical, and this is one of them. When you have a facility
as large as this, and significant costs to keep the lights on, market share is
important. But it is not the only factor that is important."
Executives at rival casinos will be watching for soft spots to exploit in the
market leader's performance.
The issue for players to watch is whether Ameristar's new conservatism marks
the start of a trend.
Krohn was enigmatic on Harrah's response.
"We're certainly mindful of what our competitors are doing in the
marketplace," he said. "We work to have a competitive promotions calendar."
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