Indiana casinos brace for impact of Horseshoe Casino

Mar 3, 2013

The roulette wheels will spin and the lights on the slot machines will flash when Cincinnati's Horseshoe Casino opens its doors to the public for the first time tonight.

Down the river in southeast Indiana, all within an easy drive of downtown Cincinnati, there are three riverboat casinos that have been cash cows since the late 1990s for their owners; and the local governments that have benefited from the tax revenue they generate.

Ed Feigenbaum is the editor of the Indiana Gaming Newsletter, a publication watched closely by those in the Indiana statehouse and in the Hoosier State's gaming industry. He said the southeast Indiana casinos are bracing for the impact Horseshoe Casino will have on their businesses.

"I think for the first three months of its opening, from March through May, the impact is going to be devastating on the three Indiana casinos in what we call the Cincinnati market,'' Feigenbaum said.

Those casinos are looking warily at what Cincinnati's brand-new Horseshoe Casino might do to their business. And they don't like what they see. 

Many gamblers, particularly those who live in the immediate Cincinnati area, are going to want to "kick the tires" of the new casino, as Feigenbaum said. Whether or not they return to the Indiana riverboats, he said, depends on their experience at Horseshoe and the marketing efforts of the Indiana casinos.

It's been bad enough for Indiana's 13 casinos and racinos in recent years.

A tough economy has hit them hard. So too has the competition from new casinos in neighboring states like Illinois, Michigan and now Ohio.

This is serious business for the casino operators. It is serious as well for Indiana's state government.

Casino tax revenue is the third largest source of income for state government, behind income taxes and sales taxes.

A state report put out last year estimated revenue from riverboat gambling alone is expected to drop by about 15 percent by 2015. 

Feigenbaum said a combination of a soft economy and competition from neighboring states is wreaking havoc on the Indiana gaming industry.

“Indiana is under fire,'' Feigenbaum said. "What this has meant is a significant decrease in revenues for the Indiana casinos. They went down from 2011 to 2012 by almost fifty million dollars. And that is a pretty big hit for the gaming properties.”

Indiana's casinos drew fewer customers last year than in any year since casino gambling began in the Hoosier State. Hollywood Casino in Lawrenceburg saw a drop in admissions of nearly 14 per cent last year.

Feigenbaum said the riverboat casinos in southeast Indiana are going to have to adapt to the new competition, changing the way they market their product.

Rising Sun Casino is focusing on older patrons, who may not like the bright lights and bustle of the big city when they do their gambling. Belterra, with its golf, hotel and spa, has become a get-away destination.

Hollywood Casino has already down-sized, laying off about 10 percent of its work force last fall. Hollywood is hoping that its loyalty program, which offers special deals to regulars, will boost its business.

But Hollywood Casino has already taken one hit from Cincinnati's new casino, even before Horseshoe opened its doors. Todd George, the vice president and general manager of Hollywood Casino, said he has already lost a number of employees who decided to go work at the downtown Cincinnati casino.

Still, George says he believes his casino is ready for the competition from Horseshoe.

“From a competitive nature, I have always kind of felt that competition makes us better not bitter; and that the people who will benefit from this is the guest, the customer if you will," George said. "And our focus at Hollywood, and from what I am seeing, the focus of the other boats on the river, it’s really been to up the game in terms of service.”

George said he knows that he will lose customers to Horseshoe, at least initially, but hopes they will ultimately prefer the small-town atmosphere at Lawrenceburg. And, he pointed out, on the Indiana boats, people are allowed to smoke - something banned by law in Ohio.

Mike Warren, the vice president of marketing at Horseshoe Casino, said there is great excitement over the opening of the new casino.

“I think in the city of Cincinnati and this greater area, this property has been such a long time coming to see the project to completion'' Warren said. "So I do expect there is going to be a very large number of people who just want to come in and see the physical asset itself.”

They will keep coming back, Warren said, because Horseshoe is part of a vibrant downtown scene.

“The offerings we have here are going to be in partnership with a number of the city amenities – the attractions, the arts, local hotels, local restaurants,'' Warren said. "So I think that in and of itself is a very different entertainment experience than what can be provided in some of the more traditional casino offerings.”

Tonight, the competition begins in earnest. The urban casino versus the small-town riverboats.

And, for the time being at least, both sides seem to agree - Horseshoe Casino in Cincinnati is playing the hot hand.