83°F
weather icon Clear

Las Vegas gaming companies look at opportunities in Illinois

Nevada-based casinos and slot machine manufacturers have been preparing for new markets in places like Massachusetts and Japan. Now, there’s an opportunity for growth nestled in the heart of the Midwest: Illinois.

Earlier this month, the Illinois legislature passed a bill that dramatically expands its gaming industry, in part allowing for more gambling machines and up to six new casinos — including one in Chicago.

The 816-page bill also would legalize sports betting, allow slot machines in O’Hare International and Chicago Midway International airports, and permit casino operations inside the state’s horse racing tracks.

Experts say once the bill is signed by Illinois Gov. J.B. Pritzker, it’s sure to open new opportunities for gaming companies, including some based in Las Vegas. But with a tax structure that demands far more than Nevada’s, some companies may pass on the chance to move to the Windy City.

The ‘likely winners’

While casino operators may pass up the expansion opportunity, experts agree that the bill is a boon for one area in the gaming industry: slot machine manufacturers.

With more machines allowed in existing properties and new casinos on the horizon, a report by SunTrust Robinson Humphrey analyst Barry Jonas estimates anywhere from $79 million to $224 million of earnings from the new unit sales.

“These type of expansion opportunities don’t come along too often anymore,” said Marcus Prater, the executive director of the Association of Gaming Equipment Manufacturers. “As suppliers, we’re certainly pleased.”

Prater said Las Vegas is known as the “epicenter for slot companies,” meaning at least some local slot companies are sure to benefit from the expansion.

“We’re excited about it,” said Derik Mooberry, executive vice president and group chief executive of gaming for Las Vegas-based slot machine manufacturer Scientific Games. “It provides a lot of opportunities for us.”

Mooberry wasn’t able to give an estimate of how prevalent the company is today in the Illinois gaming industry, but he said Scientific Games is one of the largest suppliers in the state.

With the bill allowing growth in both the traditional casino market and video gambling market in taverns and bars — as well as allowing slot machines in airports — Mooberry said Scientific Games is set to take part in all aspects of the expansion.

“We’ll be ready,” Mooberry said.

Phil O’Shaughnessy, vice president of global communications, trade shows and creative services at slot machine manufacturer IGT, said the company also views the expansion as an opportunity. IGT already has a presence in the Las Vegas and Reno airports, and O’Shaughnessy is confident the company will make moves to place machines inside the Illinois airports as well.

“I think we’re well-positioned to have an opportunity for more IGT machines,” he said. “We also recognize that the Chicago casinos will need to be established with an operator, and that will take time.”

Jonas’ report estimates that IGT and Scientific Games could capture $20 million to $56 million of the incremental earnings.

The bill allows 30,000 additional gaming positions in the state, but Jonas doubts that many machines will be necessary.

“A lot of existing operators aren’t going to take up the allocation of new machines,” he said. There will be “15,000 to 20,000, perhaps, assuming all the new casinos get built.”

Casino companies noncommittal

There are currently 10 casinos in the state, none of which are in Chicago. Seven of those are regional properties owned by Nevada-based companies Caesars Entertainment Corp., Boyd Gaming Corp., Penn National Gaming Inc. and Eldorado Resorts Inc.

Jeff Morris, vice president of public affairs and government relations for Penn National, said the company is still analyzing the bill and can’t comment on how it would impact the company specifically.

“This is the most massive gaming expansion package we’ve ever seen, all happening in a state that is already saturated from a gaming standpoint,” Morris said via email.

Spokesmen from Boyd Gaming, Caesars, Wynn Resorts Ltd. and Red Rock Resorts Inc. declined to comment on whether the companies were exploring opportunities in Illinois. Caroline Coyle, a spokeswoman for Eldorado Casino did not return a request for comment. Ron Reese, a Las Vegas Sands Corp. spokesman, said the company is “not currently exploring or considering any opportunities in Illinois.”

Former Nevada Gov. Brian Sandoval, president of global gaming development at MGM Resorts International, said the company is reviewing the bill to determine the opportunities there, with a focus on sports betting.

“Illinois presents a new and dynamic market, and as a leader in gaming and sports betting, we will certainly consider our options there,” Sandoval said via email.

Skepticism around the market

Chris Grove, a managing director at Eilers & Krejcik Gaming, expects casino operators to covet a license in Chicago because of the city’s high volume of visitors. Chicago’s tourism bureau said there were nearly 58 million visitors in 2018. Las Vegas, by comparison, had slightly more than 42 million that year, according to the Las Vegas Convention and Visitors Authority.

“Chicago provides a unique combination of population, significant economic opportunity and a proven interest in gambling, as evidenced by the regional market around Chicago,” Grove said. “I think with the potential of the Chicago market, most — if not all — commercial operators are going to entertain the possibility.”

But Jennifer Roberts, associate director for UNLV’s International Center for Gaming Regulation, said casinos may be reluctant to enter the Illinois market because of costs, location and tax rates.

According to a report from Illinois’ Commission on Government Forecasting and Accountability, casino revenues are taxed on a graduated basis, meaning more revenue corresponds with a higher tax rate. Last year, the effective tax rate for the 10 casinos was 33.8 percent, including state and local wagering and admission taxes.

The Chicago casino is expected to have a 66 percent effective tax rate, according to a SunTrust report, with the proceeds split evenly between the city and the state.

By comparison, Nevada’s tax on gross gaming revenue is between 3.5 percent and 6.75 percent.

Illinois also enforces a 30 percent tax rate on video gambling. That rate is set to rise 3 percentage points July 1 and another 1 percentage point next year through this bill.

According to Jonas’ report, sports betting applicants must pay 5 percent of the adjusted gross revenue from the year prior, capped at $10 million, and gross gaming revenue would be taxed at 15 percent. Online licenses would cost $20 million.

Jonas said Illinois is a difficult market for operators to make a profit, with operators facing a risk of even higher taxes coming in.

“We’re seeing a lot of skepticism around the financial return from operations currently in the market and those not in the market,” he said. “A lot (of operators) are hesitant to add on additional positions, add tables or slot machines, given the returns there.”

Still, Grove believes companies will have a hard time ignoring Illinois if they have any desire to be a serious nationwide player in the sports betting industry.

“It’s one of the most recognized sports hubs in the United States,” he said. “If you’re not in the Illinois market, your ability to compete in connected markets like Indiana and Iowa is compromised.”

The Las Vegas Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.

Don't miss the big stories. Like us on Facebook.
Business Videos
There's a new place to play board games in Las Vegas
Matt Smiciklas, co-owner of Boarding School Games, talks about the new Las Vegas business that he co-owns with Emily Labejof. Dedicated tabletop gamers can choose from more than 500 games to play for free in-store. The doors open to the public Saturday, July 20, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Renovations at the STRAT
Analysts say the $140 million renovation project at The STRAT, formerly the known as the Stratosphere, could help the hotel-casino compete with the evolving north side of the Las Vegas Strip. (Bailey Schulz/Las Vegas Review-Journal)
SLS Las Vegas will become Sahara Las Vegas
Owner Alex Meruelo announced during a special event at the SLS Las Vegas that the hotel-casino will become Sahara Las Vegas in its next iteration. Meruelo said $150 million dollars will be spent to renovate the current property. (Heidi Fang/Las Vegas Review-Journal)
Aircraft hinge maker moves to "business friendly" Nevada
Doug Silva, president of Aircraft Hinge, Inc. in Las Vegas, makes every type of hinge for every type of airplane. Silva talks about his company and why he moved it to Nevada. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Daytime fireworks mark the opening of Encore Boston Harbor
The opening of the $2.6 billion Encore Boston Harbor in Everett, Mass. included a three-minute fireworks show launched by Fireworks by Grucci Sunday, June 23, 2019. (Rick Velotta/Las Vegas Review-Journal) @RickVelotta
Elaine Wynn talks about the opening of Encore Boston Harbor
Elaine Wynn, co-founder and largest shareholder of Wynn Resorts, talked during opening festivities of the $2.6 billion Encore Boston Harbor in Everett, Mass. Sunday, June 23, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
People line hours ahead of opening for Encore Boston Harbor
Guests arrive as much as 17 hours early for the 10 a.m. opening of the $2.6 billion, 671-room resort in Everett, Mass. Sunday, June 23, 2019. (K.M. Cannon/Las Vegas Review-Journal) @reviewjournal.com
Allegiant Discusses Investments In Golf Course Software And Game Rooms - Video
Allegiant Discusses Investments In Golf Course Software And Game Rooms.
Crews working 24/7 to complete Circa downtown - VIDEO
Owner Derek Stevens goal is to open the doors to the 1.25 million-square-foot project by December 2020. (Michael Quine/Las Vegas Review-Journal)
Golden Knights Marc-Andre Fleury sells Las Vegas home - VIDEO
Golden Knights goaltender Marc-Andre Fleury has sold his custom home Southern Highlands home in Las Vegas for $2.3 million.
Las Vegas Strip resorts slow to welcome Alexa, Google Home Hub
Alexa, where are you? Smart home and hospitality technology was big at CES in early January. Amazon and Google promoted their voice-activated speakers Alexa and Google Home Hub. Hospitality executives have called the speakers the industry’s future. Yet for all the hype, the revolution is unfolding at a cautious pace on the Strip as well as in other major U.S. hospitality markets. Hotels are focusing their consumer-facing technology investments on adding streaming capabilities, like Netflix, and enhancing their mobile apps, a December report by Hospitality Technology showed. Voice-enabled technology is 10th on that priority list.
What is MGM 2020
MGM Resorts International announced its MGM 2020 plan in January, The plan would improve cash flow by $200 million annually by the end of 2020 and an additional $100 million by the end of 2021. 1,070 jobs were cut as part of the cost-cutting initiative. 881 of those were Las Vegas employees, mostly in management or mid-management positions. Jim Murren
What is MGM 2020
MGM Resorts International announced its MGM 2020 plan in January, The plan would improve cash flow by $200 million annually by the end of 2020 and an additional $100 million by the end of 2021. 1,070 jobs were cut as part of the cost-cutting initiative. 881 of those were Las Vegas employees, mostly in management or mid-management positions. Jim Murren
Find next-level experience
One minute, you’re just trimming hedges and shooting the breeze with your neighbor. But then he brings up Vegas and you’re thinking about the incredible meals, world-class hotels, pools inside of pools and unparalleled entertainment. You’re thinking about iconic artist residencies like Aerosmith. Priorities take shape. Vegas first, lawn and everything else, second. Just like that, Vegas Changes Everything. (Visti Las Vegas/Youtube)
Vegas Changes Everything
A weekend getaway is nice for anyone, but a weekend getaway in Vegas ... that’s a next-level experience with shows, clubs, spas and more. With a chance to see iconic artist residencies like Gwen Stefani, you might just find yourself going from pushing your child on a swing, to pushing back a birthday party. See how Vegas Changes Everything. (Visit Las Vegas/YouTube)
How much do Las Vegas casino CEOs make?
Las Vegas gaming CEOs made anywhere between $1 million and $24 million last year, according to company filings with the U.S. Securities and Exchange Commission. ((Las Vegas Review-Journal)
30-year-old Rio needs a little TLC
Nearly 30 years after the Rio opened, the red and blue jewel that helped catapult Las Vegas to a new level with its buffet and nightclub has lost its status along with its shine.
The latest on the Drew Las Vegas - VIDEO
Eli Segall recounts his tour of the Drew Las Vegas, formerly the Fontainebleau, on the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
Pinball Hall of Fame to move near south Strip
Operators of the Pinball Hall of Fame have been approved to build a new, larger arcade near the south edge of the Strip on Las Vegas Boulevard near Russel Road. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
National Hardware Show underway Las Vegas
The National Hardware Show kicked off Tuesday at the Las Vegas Convention Center (Mat Luschek / Review-Journal)
Caesars for sale?
Caesars Entertainment Corp. has been swept up in takeover speculation since the company’s share price tumbled last year amid disappointing earnings and concerns over a recession. Amid the decline, hedge funds scooped up shares. Billionaire activist investor Carl Icahn began buying shares of Caesars as early as January. Icahn acquired nearly 18 percent by mid-March. In February Icahn called on the Caesars board to study a sale as a way to boost shareholder value.
Las Vegas home prices
Las Vegas home prices grew fastest among major markets in February for the ninth straight month. But amid affordability concerns, the growth rate has slowed down. Southern Nevada prices in February were up 9.7% from a year earlier, according to the latest S&P CoreLogic Case-Shiller index. The last time Las Vegas' price growth fell below 10% was in September 2017, S&P Dow Jones Indices reported.
Free Parking Coming To Wynn
Free parking will come to the Wynn and Encore resorts on May 1, 2019. (Mat Luschek / Review-Journal)
Founding Venetian employees talk about 20 years at the Strip resort
The Venetian, which opened May 3, 1999, is celebrating 20 years on the Las Vegas Strip. Seven original employees talk about opening the luxury resort and working there for two decades. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Circa aiming for December 2020 opening
The 1.25-million-square-foot property will have 44-stories and 777-rooms. It will also have a separate nine-story, 1,201-space parking garage.
THE LATEST
Lawsuit accuses Encore Boston Harbor of cheating gamblers

The suit by New York resident Richard Schuster says the Everett casino is paying out less for certain winning hands at blackjack and rounding down payouts from slot machines. It was filed Monday in Middlesex County Superior Court.