www.baltimoresun.com/business/bs-bz-maryland-table-games-20130701,0,6391519.story

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Shift to table games in Maryland also shifts gambling revenues

Casinos, state say Maryland won't see its cut decrease amid trend of fewer slots

By Chris Korman, The Baltimore Sun

7:52 PM EDT, July 1, 2013

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When plans called for a Harrah's to rise not far from M&T Bank Stadium, the Baltimore casino was slated to have 3,750 video lottery terminals delivering 67 percent of revenue to the state.

Instead, a Horseshoe casino — a brand known for its ties to big-money poker games — will fill the vacant lot on Russell Street. It will house 2,500 slots, with the leftover space used in part to accommodate 900 seats around 130 table games. The state receives only 20 percent of table games revenue.

Horseshoe isn't the only Maryland casino to dial back on its slot machines in favor of more lucrative table games, approved by state referendum last November. Hollywood Casino in Perryville has cut its slots from 1,500 to 1,148, Maryland Live Casino idled several hundred slot machines to make room for table games and the Rocky Gap Casino Resort opened last month with 558 machines, down from the 850 first proposed. Still, casino operators and state officials say the shift toward poker, blackjack and roulette won't reduce Maryland's cut of casinos' windfall.

"We were able to use numbers from other facilities to show that reducing the number of slot machines often leads to keeping the same market share, or even growing it," said Chad Barnhill, Horseshoe Baltimore's general manager. "Our projections for the smaller number of slots with 130 table games shows a similar boon to the state as what we'd been looking at all along."

Stephen Martino, director of the Maryland Lottery and Gaming Control Agency, said he wasn't troubled by the trend toward fewer slots and more table games. "The state is not going to see less money," he said.

With three of four Maryland casinos running table games, the trend has been positive. The state's casinos paid $32 million in taxes in February, the last month without table games, and $37.2 million in May.

During that time, the casinos' share of the pot went from $15.8 million to $32 million, demonstrating how lucrative the addition of table games is.

The majority of the increase — $14.1 million — went to Maryland Live in Hanover, which features blackjack and other table games but has yet to begin offering poker. It is constructing a two-story addition that will house 52 poker tables. Chips will hit felt there in time for the Labor Day weekend.

While officials say the state won't see a revenue shortfall, that's not what happened with Maryland Live. Slots revenue dropped once table games were introduced and so did its payment to the state.

By far the state's largest casino, Maryland Live turned $29.9 million over to the state in March, the last month it ran only slots and electronic card games. After opening 122 table games to the public April 11, it returned $27.3 million for the month. That figure reached $28.6 million in May, narrowing the gap.

Maryland Live's total revenue went from $44.6 million in March to $55.1 million in May; its share went from $14.7 million to $26.5 million.

General manager Rob Norton said the drop in slots revenue could be attributed partially to players who used electronic card games shifting to actual tables, but it also reflects "soft" months. Gamblers decrease their time in casinos when the weather warms up, he explained.

"We feel very confident that our slots revenue will be higher than what it was without table games when you look year over year," he said. Maryland Live opened only part of its floor last June; year-over-year comparisons will be difficult to make for several months.

David G. Schwartz, the director for the University of Nevada-Las Vegas' Center for Gaming Research, analyzes monthly earnings from casinos across the country and said Maryland's pattern has not been unusual.

"Slot machine use has dropped a bit with the introduction of table games, but not drastically," he said. "That 20 percent tax rate for tables is about average, whereas the 67 percent for slots is very, very high."

Schwartz said running table games costs operators more money for several obvious reasons — paying for dealers, floor supervisors and extra security — but also because it is more expensive to market to card players. Slots players often join rewards programs that allow the casino to track every play they make. Reaching out to card and table game players is more complicated and requires complimentary play that can account for 20 percent to 30 percent of the casino's spending, Schwartz said.

Having a mix of slots and table games should lead to increased revenue across the board, Schwartz said, thanks in part to "tandem gaming," where dedicated table games players bring friends and family to the casino who otherwise wouldn't play slots.

"You want a more diverse facility in every way possible," he said. "It's all about getting customers there."

Horseshoe's Barnhill coveted more space for hosting and promoting facets of the Horseshoe that will appeal to customers who aren't going to come just for slots or poker. The casino will have three full-service restaurants, a food court where customers will be able to buy food from established Baltimore restaurants, a noodle bar and a multipurpose room.

"As we add entertainment options outside of gaming, it's important that we have that space and it's not just wall-to-wall slots," he said. "We want to have an experience that appeals to a broader audience."

Ultimately, the decision comes down to being able to make the most money, Barnhill said. He relied primarily on analysis of data collected at parent company Caesars Entertainment's other properties. Using numbers culled from nearly 50 facilities — including the new urban casinos in Cleveland, Cincinnati and Philadelphia — the company monitors customer demand and reacts accordingly, he said.

Maryland Live already has shown that fewer might be better. During renovations to reconfigure the casino for table games in February, the facility had only 3,991 operating video lottery terminals. It still made nearly $3 million more than it had running 4,750 machines in both December and January. Maryland Live's most lucrative month for slots revenue came in March, when it made $44.6 million with 4,129 machines on the floor.

Unlike with slots, table game revenues are reserved for the state's education fund only. But leaders in the horse racing industry — which receives slots money through a purse account and a racetrack renewal fund — favored the addition of table games because they believed slots play would increase, as well.

chris.korman@baltsun.com

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