The Tin Lizzie Gaming Resort in Deadwood, South Dakota, is touting sports betting as a revenue driver. The Tin Lizzie has 220 slot machines and 10 table games, besides the sports betting. But during the football season, the sports betting is the tail that wags the dog. As Isaiah Clift, assistant sportsbook manager, told local TV station KOTA, “We probably see around 300 people who come in and 100 sit and watch the games. We take in 1,000 wagers on Sundays alone.”
For a casino with just 200 slot machines, 100 people watching football games and betting is a big number. It is doing as well as can be expected for its location; sports gave it an extra little push. Sports betting was approved by voters and the legislature in 2020 and casinos began taking bets in 2021; in slightly less than 3 years, $23. 6 million has been booked with $2. 2 million in GGR and $217,933 paid in taxes, not big by industry standards. By comparison, Arizona has taken $18.1 billion in wagers, netted $1. 5 billion in GGR, and collected $92. 6 million in taxes.
Deadwood is not Arizona and it is not like any other gaming destination. It is not close to any population center; the entire state of South Dakota has less than a million people. Deadwood’s heyday was as a mining town in the 19th century. Nothing came along to replace mining, except a small summer tourism business and prostitution, poker games, and illegal slot machines. In 1986, the town almost died when law enforcement shut down the last of the illegal activities. The mayor at the time, Tom Blair, went to an economic-development conference that year and talked to one of the keynote speakers who said, “Why don’t you put gambling up and down the street.” Blair said, “It was like somebody turned the light on.”
Blair went home and began organizing efforts to legalize gambling in Deadwood. Voters approved a ballot measure by 65% in 1988 and in November 1989, Deadwood became the third gaming destination in the country after Nevada and New Jersey. The law was meant to preserve and promote Deadwood and its historic mining past using gaming funds. Initially, gaming in Deadwood was low stakes, with five-dollar maximum bets and a limited number of slot machines. The casinos lobbied successfully to raise the limits now at $1,000. And as the Tin Lizzie shows, casino have found a way around the limit on slot machines.
Now with rooms and dining, the Tin Lizzie calls itself a gaming resort. It would not qualify as a resort in any other place, but this is Deadwood, which has 2,700 slot machines and 87 table games, including 40 poker games. The entire town would not qualify as a resort in any major gaming destination. But it does illustrate a truism in gaming: It takes people, lots of people, to make a casino work. During the surge in legalized gaming after 1989, when casinos were approved in Iowa, Illinois, Indiana, Mississippi, Missouri, and Louisiana, estimates of the potential revenue from the new casinos always missed the mark.
In those early projections, it was assumed that customers would come from everywhere. After all, that was true in Las Vegas and partially true in Atlantic City. Over time, it has become clear that customers rarely travel more than 100 miles to visit a casino. In many casinos, the market area is much smaller than 100 miles, sometimes no more than a 5-mile radius. A good example of a failure to understand that fact is Bally’s in Chicago; monthly, the media points out that the casino is doing much less business than was projected.
Bally’s gets the second-most customers in Illinois, but that is less than half of Rivers, the best-performing casino in the state. And Bally’s generates only one-fourth of the revenue of Rivers. Of course, that is with a temporary casino. When the $1. 8 billion resort opens, it will do better. But whether that is better than Rivers or if it generates enough revenue to justify the cost will be the measure of its success. That indeed will also be the question in New York City.
Three casinos are being projected for New York City. The price range is from $2 billion to nearly $10 billion. New York City has 8.3 million people, Chicago has 2. 6 million. A casino in New York will do better than one in Chicago, but again whether the revenue will justify the cost is a major question.
Back to Deadwood, casinos in the city generate about $15 million a month in gross gaming revenue. They might generate a little more with some added attractions, but not much. There simply are not enough people within 100 miles or farther away who are interested in going to Deadwood; the city does get thousands of bikers once a year. The Tin Lizzie could spend, if it could borrow enough, $50 million or $100 million on a grand expansion, but it could never attract enough customers to pay the debt. Just ask Keven Costner. Costner was one of the early casino owners in Deadwood. He had big plans; at one time he was planning a $100 million resort. Instead, he closed his casino in 2017, sold his land, and quietly retreated.
The population rule holds true for Deadwood as it does for Chicago. It was brutally true in New Orleans for Harrah’s and in Atlantic City for Revel. That suggests that developers should measure the marketing carefully before doing a budget; maybe the Tin Lizzie is better model than the MGM Grand. In the meantime, the TinLizzie is rocking with sports and bringing them in hand over fist.
