Steve Gray says he’s not “throwing in the towel,” but the Cedar Crossing Casino he and other investors want to build in Cedar Rapids just took two brutal roundhouses to the jaw.
Two independent, state-funded assessments of Iowa’s gambling market, by Minneapolis-based Marquette Advisors and Las Vegas-based Union Gaming Group, concluded that a massive chunk of Cedar Crossing’s roughly $82 million in annual revenue would be sucked from existing casinos. The biggest share of that cannibalization would come from Riverside Casino and Golf Resort. Marquette pegged its annual losses at $25 million, or 27 percent of Riverside's total revenue, while Union estimated a $37 million drop, or 42 percent of revenue.
Both studies came to the same sobering conclusion: Iowa’s gambling market is largely saturated, and it would be a bad idea for the state to issue any new licenses.
Iowa's market is nearing "maximum penetration," Marquette contends. "New developments are likely to derive revenues by and large through the cannibalization of existing operators,' Marquette's study concluded.
"We recommend the state of Iowa refrain from issuing additional casino licenses at this time and re-evaluate at a later date," the Union study said.
For nearly a year, this looked like a fight Cedar Rapids couldn’t lose. The county gambling referendum passed by a landslide. Impressive plans were unveiled. Investors’ own market studies, remarkably, showed little cannibalization to fear. Locals were convinced that the deal is done and the fix is in.
But the Racing and Gaming Commission still needed to see its all-important market studies. Now it has, and the results couldn’t have been worse for Cedar Crossing. Suddenly, its cruise to victory becomes a punch-drunk stagger.
I, too, thought Cedar Rapids had a great chance. Now, any clear-eyed assessment must concede the Cedar Crossing application faces much, much longer odds.
Now what? Backers still have cards to play.
They can play the all-American, competition-is-good card. New competition would force existing casinos to step up their game. That’s how our marketplace is supposed to work. Why should the commission protect Riverside’s ability to suck gambling dollars from Linn County after voters here so clearly expressed a preference for spending them at home? The future home of James T. Kirk trumps Iowa’s second-largest city?
But Iowa’s casino industry isn’t really a market. It’s a cartel that controls who gets slices of the gambling pie, while serving a big, fat slab to state government. In return, state government and its commission watch over those casinos like shepherds watching over sheepshearers. The state has encouraged investors to build large, pricey destination casinos. And the state will do all it can to protect them from undue competition.
But if the commission wants its cartel to live long and prosper, innovate and attract new customers, is it better off treating it as a mature industry in need of a jolt of new blood or as a hothouse orchid that will die if regulators open the door even a crack? Based on history, bet on the orchids.
Backers here also can point to the casino’s role in the city’s flood recovery effort. Comeback City, remember? But I didn’t get a sense from commissioners I spoke with last month that recovery tugged their heart strings. It all boiled down to those market studies. They would be the determining factors.
Gray insists investors are moving forward. All is not lost. And it's too late to turn back.
But could the commission step in to stop the fight? If its members see the studies as a knockout, they may not see a need for the long count to last until April. Next week’s meeting in Altoona, when the studies are formally presented, will be big.