Another Central City casino closes

Oct 9, 2006 5:51 AM

It still amazes me that well-thought out and properly operated casinos fail, but they do.

With the closing of yet another Central City casino, the Scarlett Casino, this actuality is re-enforced. Central City’s casinos collectively earn about 1/10 of Black Hawk’s gross gaming revenue. This figure at first glance seems shocking, but the reality is that Central City has roughly 5% of the gaming positions (defined as slots plus number of tables times 6) and 4% of casino square footage of Black Hawk.

In terms of Black Hawk and Central City as a combined market, Central City has 4.5% of gaming positions and 4.8% of the total square footage. This means that the amalgamated casinos of Central City are in fact performing at approximately twice fair market share (in terms of GGR).

There are a multitude of reasons for the failure of the Scarlett Casino. Most of the elements leading to its downfall have little to do with the casino itself, but rather the changing competitive market.

According to the Denver Post quoting GM Kevin Wolff, "Revenue never hit projections."

The more comprehensive analysis might be that Central City’s critical mass (i.e. all it has to offer as an entity — candy and gift shops, museums, and opera house included) is relatively less than the "built up" Black Hawk with its inclusion of larger (non-historically authentic) physical plants with plentiful parking, night clubs, restaurants, and entertainment options.

As a matter of opinion, the Scarlett Casino was with its operation an accurate reflection of what limited stakes, mountain mining town gaming was meant to be.

The property was housed in an authentic building, sported an appropriate old west dance hall style décor, and offered intimate gaming and dining environments bolstered by genuinely friendly and helpful staff.

Just like the small independent store on Main Street getting whacked by Wal Mart, the Scarlett Casino simply could not compete with the "big box" operators a few miles down the street.

It is evident that the Central City Expressway has not provided the expected competitive edge for Central City. In fact, many individuals take this thruway, bypass Central City, and proceed directly to the very nearby (i.e., less than two miles) jurisdiction of Black Hawk. Black Hawk properties are reaping the externality of a road that Central City casinos are indebted to via bond payments.

Unless the Central City casinos establish a viable working relationship amongst themselves, like the casinos on Fremont Street did to competitively battle the Strip properties, charming properties like Dostal Alley and Famous Bonanza may be the next collateral damage in the casino wars of Central City and Black Hawk.

Central City, the time has come to develop a master plan to stay competitive (and in business).