The July gaming numbers are in for Ohio.  The casinos which were open in July of 2012 were down in July 2013.  The Horseshoe in Cleveland was down 17 percent – about the same as the casinos in Indiana have been down since the first casinos opened in Ohio.

 The Horseshoe Cleveland Casino grossed nearly $19.9 million last month…down 17 percent when measured against July of last year… ThistleDown, which opened in April, grossed almost $11.4 million…Hollywood Toledo grossed $15.4 million, a 19 percent decrease …Hollywood Columbus grossed $17.5 million…Horse Cincinnati grossed $19.3 million….Scioto Downs in Columbus, grossed more than $11.1 million in July, down 6 percent from July 2012. Thomas Ott, Cleveland Plain Dealer, 8-7-13

That is the good news.  There is a marketing war in progress in Ohio and that is the bad news.  The casinos are cutting each other’s throats over every gambling dollar available.  And they are cutting their own throats in the process.  Coin-in and win should never be confused with profit.  It is difficult to believe,  but it is possible for a casino to lose money by over spending on marketing.  The war for the Ohio gamblers is only beginning and it is not just casinos in Ohio that are in the fight – casinos in Indiana, Pennsylvania and West Virginia are in this war, too.

I don’t have the numbers with me, but, if you want to spend a little time looking at the relationship of promotional credits to the slot win in Cincinnati and Columbus, or Cincinnati and Cleveland, I think you’ll find those numbers to be absolutely mind-boggling, relative to the amount of promotional credits they’re giving. It really is — I’ll use Peter’s word — insane. Bill Clifford, CFO, Penn National Gaming, 7-23-13

Penn National has said it will take time, possibly as much as three years, to develop and grow the market in Ohio.  Penn is predicting that its properties in Ohio will grow as they develop their customer base and improve their data based marketing.  Penn’s estimates are based on the population in the vicinity of each of its properties and a theoretic gross gaming win for each adult person within that area; the company said it can take as long as 10 years to fully develop a market.  Penn thinks the marketing war is bad, but hopes it will be short-lived.  When it is over, Penn and the other casinos can concentrating cultivating new customers in their market area and leave other casinos’ customers alone.

That is not a strategy that will work in West Virginia; West Virginia is a small state and  has always depended on customers from other states.  For example, MTR’s first property, Mountaineer Casino, Racetrack & Resort was down 11 percent in the second quarter – the company blames the casinos in Ohio.  In recent years, the West Virginia casinos have been hit hard, first by the casinos in Pennsylvania and now Ohio.  The company has done what must be done – cut expenses and reinvest in ways that it hopes will make Mountaineer more competitive.

“The expansion of gaming in Ohio and other regional markets continues to cannibalize existing mature markets, including Western Pennsylvania and West Virginia …” said Billhimer. “We have been able to offset some of this impact through continued focus on operating efficiencies, as well as targeted capital spending. As of June 30, we have spent approximately $10 million of our planned $20 million capital improvements for 2013.” Casey Junkins, Herald-Star, 8-7-13

From April through June, parent company MTR’s revenue was up 11.1 percent compared to the same period in 2012. However, revenue at Mountaineer slumped 10.6 percent during this same time. Revenue at Mountaineer from April through June was $52.4 million, down from $58.4 million during the same three months in 2012. Slot machine revenue dropped by $4.6 million during this time, while table gambling revenue slumped by $1.4 million. Casey Junkins, Herald-Star, 8-7-13

Of course, MTR is part of the problem – MTR has a racino in both Pennsylvania and Ohio; and that is a good thing, corporate headquarters would be a gloomy place if the only casino the company owned was Mountaineer.

Scioto Downs, which celebrated its first anniversary for having slots and tables on June 1, is now the main revenue driver for MTR. The facility outside Columbus saw $37.6 million in revenue from April through June, up from just $12.6 million during the same time last year. Casey Junkins, Herald-Star, 8-7-13

A marketing war can be entertaining to watch, but brutal to fight.  Does anyone remember the Atlantic City wars of early 90s when the casinos fought over every bus customer?  In one year, collectively the casinos in Atlantic City lost money.  But eventually, cooler heads prevailed because they realized two things: The war was too expensive; and the bus customer wasn’t worth the price.  For their sakes, let’s hope the casinos in the region learn that lesson sooner rather than later.

If Penn is right, it will take at least three years for the Ohio market to stabilize.  That means three years before we can assess the impact on casinos in Indiana, Pennsylvania and West Virginia by the Ohio casinos.  It may be tempting to predict doom and gloom based on the July numbers, but it might be worthwhile to withhold judgment and see how things sort themselves out – in three or four years.  Unfortunately, I am not that patient and will probably rush to judgment a good many times in the next three years as Ohio, Pennsylvania, Indiana and West Virginia fight it out.