Jeff Piselli  /  AP
Once an impoverished part of the country, the fortunes of Mississippi’s Tunica County have been transformed by gambling legislation. The region boasts nine casinos, including the Horseshoe Casino and Hotel pictured here.
By Roland Jones Business news editor
updated 5/14/2005 1:10:53 PM ET 2005-05-14T17:10:53

With its famous strip of outsized mega-resorts and over 37 million visitors a year, Las Vegas is still the undisputed kingpin of the U.S. commercial casino market. But gaming venues from Michigan to Mississippi are giving Sin City a run for its money.

The State of Nevada passed gaming legislation in 1931, giving Las Vegas a considerable head start in the gaming business, and it has been honing its expertise as a gambling town ever since.

New Jersey introduced legislation to introduce casinos in Atlantic City in 1976, and a number of U.S. states have followed suit over the last decade or so, spawning commercial casino operations in 11 U.S. states — and many of them are showing significant revenue growth.

A case in point is Mississippi’s Tunica County, located on the northwestern edge of the Mississippi River Delta.

Ten years ago, few had heard of this poor agricultural region some 40 miles south of Memphis, Tenn., once famously called “America’s Ethiopia” by civil-rights activist Jesse Jackson. Today, Tunica is America’s third-largest gaming resort destination after Las Vegas and Atlantic City, pulling in more than 12 million visitors a year into its nine casino resorts notes Webster Franklin, president and CEO of the Tunica Convention and Visitors Bureau.

“In 1990, when we passed the Gaming Control Act, if you had said gambling in Tunica would become a $1.2 billion industry, you’d have been laughed out of town; we had one stop light and unemployment in the upper teens,” Franklin said. “Since then, we’ve seen over $3 billion worth of investment and we have nine casinos and plenty of new roads with stop lights.”

Franklin attributes Tunica’s “Mississippi Miracle” to its ability to grow unimpeded by legislation. Unlike other states that have recently passed gaming laws, Mississippi’s gaming legislation does not specifically restrict the number of casinos that may be built in the state, Franklin notes, and so competition between Tunica’s nine casino resorts has pumped billions of dollars into the local economy, generating thousands of jobs and pouring millions into state coffers.

Franklin notes that, like Las Vegas, Tunica is building golf courses, a museum, restaurants and shopping malls. “We are unique here having this cluster of casinos in the middle of America,” he said. “Our plan is to persuade people not to travel half way across the country to visit Las Vegas or Atlantic City, and once we get them to come here we want to encourage them to stay longer.”

States, Internet gain
It’s not just Mississippi that’s benefiting from casino revenue.

In Illinois, new gaming legislation in 1990 has led to handful of casinos in the Chicago region, and similar laws in states like Louisiana and Iowa have produced a flotilla of riverboat casinos. Most of the gaming centers came into being in the 1990s in response to states’ need for more revenue said Frank J. Fahrenkopf, Jr., president and CEO of the American Gaming Association (AGA), an industry trade group.

“Casino gaming brings tremendous capital growth and it produces economic development, jobs and it’s environmentally clean,” said Fahrenkopf. “And most importantly you can tax gaming at higher rate, so the states that have adopted gaming laws have found it to be remarkably beneficial.”

Indian casinos, operated by native-American tribes in 28 U.S. states, are seeing massive growth, and Internet-based gambling is big business. Christiansen Capital Advisors, a New York firm specializing in analysis of the professional gambling industry, estimates online wagering has grown from $1 billion in 1999 to about $11 billion in 2005.

These gaming venues are in the sweet spot. The U.S. gambling market continues to demonstrate healthy growth, rebounds from the economic hardships of the early part of the decade. Recent data from the AGA show the number of Americans visiting casinos increasing in 2004 and gross gaming revenues rising in every state.

The data also suggest the balance of power is tilting away from Las Vegas.

While the West Coast of the United States — and Las Vegas in particular — still accounts for more casino visits than any other region, the data show its share of casino visitors fell for the first time in three years in 2004, declining from 38 percent in 2003 to 35 percent. Visitors to gaming regions in the Northeast, north central and southern parts of the nation saw a slight increase in their share of casino visits during the same period.

Similarly, although Nevada’s gross gaming revenue continues to grow, with the state’s takings topping $10 billion for the first time in 2004, states like Missouri and South Dakota also showed revenue increases, rising 10.8 percent and 10.9 percent respectively from 2003 levels. Year-over-year, revenue growth in Nevada was 9.7 percent.

Also making significant gains are Indian casinos, notes Whittier Law School Prof. I. Nelson Rose, a gaming law expert. These tribally-operated casinos were formed after a 1987 U.S. Supreme Court decision to allow federally-recognized Native American tribal entities to operate gaming facilities free of state regulation.

“The third-biggest market for gaming after Las Vegas and Atlantic City could actually be Connecticut — that’s where the Mohegan Sun and Foxwoods casinos are,” Rose said. “These casinos are probably the largest in the world, but we don’t have good numbers for them.”

The Racino boom
Another fast-growing segment of the gaming business is the “Racino,” a combination horseracing facility and casino.

Racinos are growing rapidly because companies do not have to seek out new gambling permits for them — as racetracks they are already licensed betting establishments, notes the AGA’s Fahrenkopf. And Racinos are lucrative for local governments. In Delaware, for example, the taxes paid by the state’s three Racinos amounts to just under 10 percent of the state’s budget. Similarly, taxes paid by four Racinos in West Virginia make up 12 percent of that state’s budget, he said.

“This is the route states have taken over the last few yeas to help deal with their budget problems,” said Fahrenkopf.

But although gaming in locations outside Las Vegas are growing, the capability of the city’s gaming industry to reinvent itself in the face of increased competition should not be underestimated notes Fahrenkopf.

Ten years ago, a Vegas casino like MGM Mirage would have derived about 65 percent of its bottom line from gaming, and the rest from food and lodging Fahrenkopf said. Today, only about 45 percent of the revenue comes from gaming; the rest comes from restaurants, lodging and entertainment, he added.

“People are going to Vegas not just to gamble, but to shop in the stores you’d find on Fifth Avenue or Rodeo Drive, and they are eating at gourmet restaurants and playing golf at the best golf courses,” Fahrenkopf said. “So we are seeing a dramatic change in the industry, especially in Nevada, and I think venues like Atlantic City are trying to make that move too.”

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