Truist Securities gaming analyst Barry Jonas returned from visits to a plethora of properties in Chicagoland, what he describes as his “Casinopalooza,” and reported optimistic news. He found the impact from macroeconomic conditions “limited” and “customer spending patterns consistent and resilient.”
Jonas did note a few imponderables on the horizon. These included the continuing spread of slot routes, the prospect of legalized internet casinos in Illinois, new gaming product, and the elephant in the room: the $1.7 billion Bally’s Chicago “at the heart of it all,” starting in late 2026.
“Property management teams noted the Great Recession was driven by excesses beyond players’ means (e.g., customers using equity from their overvalued homes). Trends today are more normal and steady, generally within players’ means,” wrote Jonas, adding that stimulus funds after the Great Pandemic of 2020 boosted player spending in an aberrant way that is now making for tougher year-over-year comparisons.
Although gambling revenues were up 6.5 percent in the first quarter of 2023, they’re down six percent in the current quarter. That softness was attributed to middle- and low-tier players.
In the meantime, operators are bracing for a slew of new casinos. Two have already opened: Hard Rock International in Rockford and Full House Resorts’ The Temporary at American Place in Waukegan. A Wind Creek-branded tribal casino is in the works and “aging riverboat properties” owned by Penn Entertainment in Joliet and Aurora are being replaced with new land-based casinos “in materially improved locations.”
Jonas got a sneak peek at Bally’s Corp.’s interim casino in Chicago’s Medinah Temple and called it “the nicest temporary we’ve ever seen.” He thought it could do even better than the $50 million in annual cash flow Bally’s has projected.
As for the permanent megaresort, Bally’s “is exploring solutions to fund the project, which will likely include commitment of its own capital, some third-party aid, proceeds from a unique minority-equity plan, and possible real estate monetization elsewhere in the portfolio. Given a turbulent few years … management understands the importance of execution on what should turn out to be the flagship property in the company portfolio.”
The one competitive threat to Bally’s, slot routes in metro Chicago, remains on the horizon. Already the Land of Lincoln is home to 46,000-plus independent slots in more than 8,300 locations. “Traditional land-based casino operators have seen some lower-worth players opt for these machines at their local pub/truck stop, rather than a trip to a casino, given [that video gaming terminals] mimic traditional slots,” Jonas chronicled.
Chicago could throw another 25,000 slots into this mix, particularly with the new mayor, Brandon Johnson, being in favor of them. This would be a boon to Aristocrat Gaming, Jonas believes, given the company’s predominance in the Illinois slot-route market. What’s more, Aristocrat will be fielding what Jonas describes as a “strong pipeline of new cabinets/games” after July, supplanting “an aging installed base.”
Finally, igaming was the subject of “chatter,” as Jonas reported that it could raise its head during the next legislative session, “especially with the prospect for increasing budgetary deficits. Some operators’ past pessimism is turning to more cautious optimism, though the powerful industry’s opposition would need to be overcome.”
The analyst believes that the igaming market will swell to 24 states by 2030 and estimates that Illinois would become the sixth-largest state in the market.
