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Gaming on target for $21.6 billion growth

Jan 14, 2003 5:32 AM

Florida, Maryland, Massachusetts, Texas, California and New York hold the best prospects for new gaming ventures, according to an industry analysis that projects $21.6 billion in revenue growth.

The geographically diverse list, compiled by Steve Rittvo of the Innovation Group, points to casino growth from coast to coast. Over the next five years, Rittvo forecasts sharp gains in gaming revenue:

”¡ Northeast, from $2.9 billion today to $7.9 billion in 2007.

”¡ Mid-Atlantic, $3.5 billion to $9.1 billion.

”¡ Southeast, $5.5 billion to $10.7 billion.

”¡ West (except Nevada): $2.9 billion to $8.7 billion.

All told, that’s a whopping 146 percent jump in gaming revenues.

The increases will be driven, Rittvo said, by expansion of existing properties and construction of new casinos and racinos.

Overall, he predicts that 200,000 new slot machines will be put in play during the period ”” and that replacement rates on those units will accelerate as competition grows.

"The real winners in all of this will be the machine

manufacturers,’’ Rittvo told a gathering at the American Gaming Summit at the Rio hotel-casino last week.

In Florida and Maryland, he sees heavy racino action fueling gaming growth.

Massachusetts is eyeing full-scale Las Vegas-style casinos as a way to keep its residents’ bets from straying to other New England states.

California and New York, meanwhile, will be driven by more Indian gambling halls.

"And Texas will be huge, if it happens. It’s a virgin market,’’ Rittvo observes.

But it’s not all peaches and cream.

Statistics suggest that several markets will be approaching saturation as expansion rolls out. According to Rittvo’s numbers, some areas will actually fall below 300 persons per gaming position — an extraordinarily low ratio that usually translates into slimmer profit margins.

"There’s a diminishing rate of return on expansion because competition requires far higher capitalization costs,’’ Rittvo says. "You can’t just put up a vanilla casino and expect to succeed.’’

Looking to cash in, some revenue-strapped states are actively talking about hitting gamers with 50 percent tax rates and levying entry fees ranging from $50 million to $100 million. Such demands may dampen the industry’s enthusiasm.

"Maryland won’t be a good market,’’ flatly declares Sebastian Sinclair, president of Christiansen Capital Advisors.

Massachusetts also could be a nightmare. That’s the home of Michael Harshbarger, the trial lawyer who took on the tobacco industry and is now setting his sights on casinos.

The litigator has publicly accused the gaming industry of reaping "obscene profits."