Slots revenues fall short of projections

By Megan Poinski
Megan@MarylandReporter.com

In their first few months of operation, revenues at slots casinos in Perryville and Ocean Downs have fallen short of projections, but Maryland State Lottery Director Stephen Martino said that there are reasons, including the fact that the projections might not be accurate anymore.

Perryville’s Hollywood Casino, which opened Sept. 27, has 1,500 video slot machines. According to projections made in 2007, when the slots law was being debated, each machine there was expected to bring in an average of $211 per day. So far, according to revenue analysis through the end of January prepared by the Department of Legislative Services, each machine is bringing in about $185 a day. The Ocean Downs Casino near Ocean City was projected  to bring in an average of $284 a day for each of its 800 machines. In its first month of operation since opening in January, each machine brought in about $145 a day.

Opening day at Ocean Downs casino.

“We’re slightly behind, but I would caution anyone from being too judgmental at this time,” Martino told the Education, Business and Administration Subcommittee of the Senate Budget and Tax Committee on Monday. He explained that the holiday season tends to be a slow time for gambling. People tend to spend their disposable income on holiday gifts – or trying to pay off holiday bills. The spring and summer are traditionally better times for people to gamble.

Martino also said that the projections may have been too high. They were made in 2007, before the economic recession hit.

The Maryland State Lottery is responsible for regulating the state’s slots casinos. The two existing casinos – plus the one in progress and the two that have not been awarded to bidders – handle all their own promotions. The casino operators own the buildings where the casinos are, while the state owns or leases the slot machines inside.
Martino said that through the end of January, both operating casinos made revenues of $38 million. The law states that 48.5% of all revenues from slots goes to the education trust fund, which so far has gotten just under $19 million.

The second largest piece of slots revenues goes to casino operators, who get a third of the proceeds. Martino said that so far, the Perryville casino has grossed $35.3 million. Of that, $11.6 million has gone to the operator. In its first month, Ocean Downs has grossed $3 million, $1 million of which has gone to the operator.

Gov. Martin O’Malley’s fiscal 2012 budget proposal increases funding for the Maryland State Lottery by $113 million – to a total of nearly $170 million in both general and special funds – mostly because of the video slots program.

Meanwhile, Legislative Services analysts expect maintenance of the video lottery terminals to cost more than expected. The law reserves 2% of video slots earnings for their maintenance, but  analysts wrote that in order to actually cover the true maintenance costs, the state should keep almost 10% of video slots revenues.

The number of video slots locations and machines in Maryland are slowly expanding. Martino said that since zoning appeals against the Arundel Mills casino were withdrawn late last week, he expects there could be a temporary casino near the mall by the first quarter of 2012. A permanent casino would open at the site a year later.

Martino also was hopeful that a request for proposals for a developer of the Baltimore City casino – an issue that has been tied up in litigation – could be published in the next few months.

The law has also authorized a casino at Rocky Gap, a state-financed western Maryland resort. However, after two different requests for proposals, there have been no suitable offers. Martino said he can take no position on what should happen with that casino site. Western Maryland legislators have proposed that the state again reduce its share of the proceeds to make the site more attractive.

“The crux of the issue is that area has low population and low incomes,” Martino said. Additionally, competition from new casinos in Pennsylvania, within an hour’s drive of Rocky Gap, may also be draining the demand for a casino in that area.