The bloom is clearly off of Mississippi’s casino industry. It’s unlikely to ever come back to its former magnitude.
Mississippi policymakers — and those local governments where casinos are located — had better get used to the new normal. The revenue their treasuries receive from the 12 percent tax on gaming is steadily falling. No government effort to prop up the industry can offset its negative fundamentals.
The numbers tell the story.
In 2013, gross gaming revenues at Mississippi’s 30 state-regulated casinos totaled $2.1 billion, 26 percent less than their peak in 2007. The first half of this year shows the slump continuing, even as the nation’s economy appears to be slowly rebounding.
Local and state tax revenues from gaming for the 12 months ending June 30 should be around $250 million, their lowest point since 1998.
In the first quarter of 2014, employment at the casinos, their hotels and other ancillary operations had fallen 28 percent when compared to the same period in 2008. That drop doesn’t take into account the closure last month of Harrah’s in Tunica, wiping out another 1,200 jobs in a market that’s been the hardest hit by competition from nearby states. The number of patrons in the Tunica market in the first quarter of 2014 was a stunning two-thirds less than the same time six years earlier.
Tunica has often been compared to Atlantic City, N. J., both hard-luck areas that were dramatically revived by legalized gaming.
Atlantic City was a down-on-its heels seaside resort when, in 1976, New Jersey voters opted to try to resuscitate it with casinos. For three decades, it worked. Atlantic City became the second largest gaming destination in the U.S., trailing only Las Vegas.
But other states eventually got the same idea. For a while, the legalization of gaming elsewhere, like Mississippi getting on board in 1992, was a minor nuisance to Atlantic City. But then the encroachment got closer to its famed boardwalk. Pennsylvania opened its first casino in 2006, and Atlantic City’s gaming revenues have been in free fall ever since. With legalized gaming coming next to New York, it’s uncertain how many casinos will survive in Atlantic City. One gaming house there has closed so far this year, and a second will next month.
Tunica has got to be worried by the parallels. The Great Recession was tough on Tunica, as it has been on virtually every casino market. The flooding along the Mississippi River in 2011, which shut down nine casinos in Tunica County at one point, didn’t help either. But the biggest factor in Tunica’s downturn is the collapse of its regional draw. Other nearby states with legalized gaming — Arkansas and Missouri primarily — are now keeping more of their gamblers at home and stealing a big chunk of the Memphis market. Compared to 2008, Tunica is attracting 400,000 fewer patrons a month from Arkansas and Tennessee. Those two states alone account for almost half of Tunica’s drop in gamblers.
The casinos on the Mississippi Gulf Coast are doing a bit better, but that’s largely because they have not lost their regional market — yet. Alabama and Florida only have a smattering of Indian gaming operations. If either one of those states, though, goes full hog on casinos, the Mississippi coast will be in trouble, too.
The gaming industry on the whole has major systemic problems. It overbuilt and overleveraged itself at the same time that the novelty of what it offered was wearing off. Twenty-two years ago, when Mississippi legalized gaming, there were only a handful of places in this country that had casinos of any size. Now they’re almost as ubiquitous as Walmart. There’s just not much reason to travel far to blow some cash in a slot machine or at a blackjack table.
An unfortunate repercussion of gaming’s downturn in Mississippi is that the casinos have gotten more dependent on local bettors. In 2008, 27 percent of the casinos’ patrons came from in state. That’s now up to 37 percent.
One of the best arguments for legalizing gaming in 1992 was the promise that it would mostly bring in new money from outside Mississippi rather than cannibalize consumer spending that was going to businesses already here.
The casinos along the Mississippi River, except for Tunica, have never lived up to that expectation. Almost 80 percent of their patrons now are Mississippi residents. In many of those small-market gaming towns, it’s debatable whether the casinos have been a boon or a bane.
If Tunica and the Gulf Coast are sliding in the same direction, it becomes doubtful whether gaming’s economic benefits for Mississippi are worth the toll it takes in higher rates of gambling addiction, bankruptcy and other social costs.
