Looking for the end of a nightmare, and a ray of hope By Ken Adams, CDC Gaming Reports March 22, 2020 at 11:00 pm Recently, we all woke up to find ourselves in a nightmare, the world changed beyond recognition. Things are shutting down all around us, on what seems like an hourly basis, and gaming is very much a part of the nightmare. As every person in the country now knows, official reactions to the coronavirus are happening too quickly to keep up with – or, really, to process. Take Atlantic City as an example. On Friday, March 13 – ten days ago – the headline in the lead story in the Adams Daily Report was “Atlantic City casino revenue up 18% for best February since 2011.” On the following Monday, the lead story was: “Atlantic City casinos will shut down at 8 p.m. amid COVID-19 concerns.” On Friday, the New Jersey Gaming Control Commission proudly proclaimed that revenues from slot machines, table games, sports betting and online gambling were growing like weeds. By Monday, no one knew when the casinos might reopen, much less report increases in gaming revenue over the previous year. A week after the casinos in New Jersey closed, casinos are now closed in every state, including Nevada. Many of those are closed for the first time ever; the only other time casinos in Las Vegas have closed was in 1963, following the murder of John F. Kennedy. According to the American Gaming Association, 94 percent of casinos in the country are currently closed, with more closing every day. For the casino industry, it is a catastrophe of gigantic and frightening proportions. In an attempt to make sense of the situation, we can look at two previous times when all casinos in a jurisdiction closed. In July 2006, then-New Jersey Governor Jon Corzine closed the casinos in a battle with the state legislature over the state budget. The closure lasted through the July 4 holiday weekend; it was estimated at the time that four days of being closed cost the industry $16-20 million in lost revenue. It was expensive for Atlantic City, but the city recovered, and it wound up gaining a longer-term benefit when the state legislature later passed a law to prevent a similar shutdown. The other event that might be considered comparable was Hurricane Katrina. Katrina hit the Gulf Coast head-on in August of 2005. Casinos in Biloxi, Mississippi were impacted the most, although casinos in Louisiana certainly suffered. Biloxi’s casinos were either destroyed completely or so damaged that it took a long time to rebuild them. The casinos on the Mississippi Gulf Coast lost billions in revenue before they were more or less completely recovered over a decade later. In the aftermath of Katrina, the Mississippi legislature approved legislation that allowed the casinos to be built on land. That meant that, as casinos rebuilt, they built better, more user-friendly casinos. And Biloxi likely would have recovered faster had it not been for the Great Recession. Both Atlantic City’s lost Fourth of July and Hurricane Katrina offer a ray of hope for today: in both cases, the customers returned. And, in the case of Mississippi, the casinos were given an opportunity to build on land and improve. In the wake of COVID-19, customers will return also, not just to casinos but to all the businesses that have been forced to close have reopened. However, like the post-Katrina world, not every business that closes will reopen. The number of businesses that fail as a result of national “lockdown” policies is going to be directly related to the length of the shutdowns, the size of the businesses, the debt they carry, and the overall post-virus economy. When people have gone back to work, they will have money to spend, and they will spend it on both essentials and on things they could not buy during the shutdown. There will be pent-up demand for all types of entertainment, travel and leisure activities, and there will be bargains galore. In April, when New Jersey and Pennsylvania report gaming revenue, it will show the degree to which online gaming has propped up the bricks and mortar casinos. Other states will be watching those numbers carefully and considering legalizing more online options. Online gaming does not employ vast numbers of people, but it does pay taxes. The American Gaming Association has estimated that approximately 600,000 casinos workers are unemployed. In Nevada alone, the number of unemployed casino workers is over 200,000. Every state will work to get those people back to work. Beyond employment, most states will still be looking at Pennsylvania and New Jersey for ideas about how to keep tax revenues flowing in the cases of a disaster. A year ago, very few people in the world could have imagined a situation like this, with the spread of the coronavirus and its impact on the world economy. Today, however, nearly every person in the world can imagine a worldwide calamity and the concomitant need to think of ways to protect themselves. For the average citizen, the government is the first line of defense. In this crisis, the federal government is stepping in to help both individual and business. The degree of that help is uncertain, but most are hoping for enough to keep them afloat. In the aftermath of COVID-19, we can expect lawmakers everywhere to look for ways to protect their citizens and tax revenues. But none of us know what the post-crisis world will look like. In the meantime, all we can do is manage our resources, plan for the end of crisis, and help each other get through this in the interim. The end of the nightmare will come.