Manufacturers thrilled by Illinois gaming expansion; analysts tepid to the growth Howard Stutz, CDC Gaming Reports · June 4, 2019 at 12:07 am Illinois gave gaming equipment manufacturers a boost the sector hasn’t seen in years. In a marathon weekend legislative session, state lawmakers approved the nation’s largest gaming industry expansion to an existing market in more than a decade – six new casinos, including one in Chicago, legalized sports betting, and expanded video lottery locations. Ultimately, Illinois could add up to 30,000 more slot machines in the next four years. At last count, the state has more 31,000 video lottery terminals operating in more than 6,900 bars, taverns, and liquor stores, while the state’s nine casinos have roughly 12,000 slot machines. Not everyone, however, is sold on the expansion. “It presents a wide range of potential outcomes which are mixed for operators and a significantly positive catalyst for the equipment suppliers,” Jefferies gaming analyst David Katz told investors late Sunday night after the measure passed in the Illinois Senate. Deutsche Bank gaming analyst Carlo Santarelli said the legislation “could ultimately expand gaming meaningfully in the state,” but there will be repercussions to casino operators in both Illinois and neighboring Indiana, where the state’s northwest casinos draw much of their business from the Chicagoland market. “While a lot remains to be seen, there are a few things we think we can say with confidence,” Santarelli said Sunday in a research note. “For starters, new competition will create further – and unneeded, given the current status – headwinds for the existing operators.” Major slot machine companies were the initial winners in the eyes of investors, though. Stock prices for the major manufacturers all jumped on the news. International Game Technology closed at $26.68 on the New York Stock Exchange, up 9 cents or 0.34 percent; Scientific Games rose $1.36 or 7.12 percent to close at $20.46 on the Nasdaq, shares of Everi Holdings grew 27 cents or 2.42 percent to close at $11.41 on the Nasdaq, and AGS finished the day at $19.39, up 25 cents or 1.31 percent, on the New York Stock Exchange. “The slot suppliers are a key beneficiary of the new legislation given the sheer magnitude of newly authorized gaming positions,” said Union Gaming Group analyst John DeCree. Illinois Governor J.B. Pritzker said he would sign the gambling bill sometime this month. Ultimately, the Illinois gaming expansion could raise $700 million in new taxes. The bill adds six new casinos: downtown Chicago, Waukegan, the south Chicago suburbs, Williamson County in southern Illinois, Rockford in northern Illinois, and Danville in the state’s east-central region. The state’s current commercial casino market has experienced gaming revenue declines in nine out of the last 11 years. Casino revenues are down more than 3 percent this year through April. Much of the declines have been attributed to VLTs, which have taken market share away from the casinos. The downtown Chicago casino, which was long supported by former Mayor Rahm Emanuel, was initially met with a lukewarm response from new Chicago Mayor Lori Lightfoot. The Chicago casino will be allowed up to three times the number of slot machines and table games operated by any other commercial casino in the area. Macquarie Securities gaming analyst Chad Beynon said a Chicago casino will hurt existing Illinois and Indiana casino operators that rely on the market, including Penn National Gaming, Caesars Entertainment, Eldorado Resorts and Boyd Gaming Corp. The companies draw between 8 percent and 12 percent of their total revenues from the market. “During the last 15 years, there’s been significant political debate around expansion, mainly in Chicago and it appears it will be coming,” Beynon said. Under the bill, existing Illinois casino operators will be allowed to move riverboat casinos onto land and to add an additional 800 gaming positions spread between slots and table games. “(It’s) something we expect few to act on quickly, given the potential pitfalls from new competition, as well as slot win per day metrics that don’t support slot expansion,” Santarelli said. The bill also allows the state’s horse racing tracks and large truck stops, as well as Chicago’s two major airports, O’Hare International and Midway International, to add slot machines. Existing VLT operators, which operate three to five games, will be allowed to add one additional machine per location. The bill also made Illinois the 13th state with legal sports wagering and the fifth to legalize the activity in 2019. The bill authorizes sports betting online and at the casinos, racetracks and sports venues, including Chicago’s Wrigley Field and Soldier Field. The legislation prohibits betting on games involving Illinois schools. “In short, the competitive landscape becomes considerably more crowded within Illinois and in all directions,” Katz told investors. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.