June 26, 2011
Recently I took a look at the economics of the Prairie Meadows poker room in Des Moines, Iowa. Based on data reported to the Iowa Racing and Gaming Commission, my estimate was that rake, jackpot drop, and tips for dealers and servers likely took roughly $4 million a year out of the central Iowa poker economy. But what about all Iowa casinos?
Let's take a look at data for all gambling at all Iowa casinos for Fiscal Year 2010 (July 2009-June 2010). [FN1]. First, the one figure that leaps out of the data is that Iowans (and its visitors) love to gamble, to the tune of gambling losses of nearly $1.37 billion last year. Another striking figure is the sheer dominance of slot machine revenues, which accounts for 93% of all Iowa gaming revenue, and 91% of gaming revenue at casinos with poker. [FN2]. As someone who spends most of my casino time in the poker room, with occasional sessions of blackjack or craps, the fact that most other folks actually prefer to gamble in the rows and rows of slots really hadn't registered with me.
Still, the table game revenues in Iowa, although dwarfed by the slots, are nonetheless nothing to sneeze at, coming in at nearly $117 million last year. Poker revenues (which are counted with the table game revenues) accounted for a mere $11.5 million last year, a sizable chunk of change that is nothing more than a minor rounding error on the casino balance sheet. And poker players wonder why they are treated as the red-headed stepkids of the gaming world.
Breaking down the table games brings some interesting insights. Hardly surprising is that blackjack is far and away the biggest earner among the table games, while poker actually holds it own, earning roughy half what is earned by the craps tables and assorted carnival games, and more than what is earned by either roulette or pai gow poker.
Table games have a few built-in advantages over poker. Most important, table games can be played on an individual basis, while poker games rarely start or continue running with fewer than five players. Also, poker can only offer the house a steady rake, while many table games offer sucker bets with a 5-10% (or better) house edge. Still, poker does bring in revenues that might otherwise escape the casino's greedy paws, and a million extra dollars of revenue can help pay the electric bill. [FN3] In many ways, poker resembles gasoline at a convenience store—a product with a low profit margin that hopefully entices players to come inside and purchase higher profit margin products like soda and groceries.
Looking at the four biggest Iowa poker rooms by revenues—the Horseshoe in Council Bluffs, Prairie Meadows in Des Moines, Riverside near Iowa City, and Diamond Jo in Worth County—these four rooms account for over 75% of Iowa's poker revenues. The Horseshoe pulls from the Omaha market, Prairie Meadows dominates Des Moines and central Iowa, Diamond Jo (Worth) draws heavily from Minnesota (where no-limit poker is prohibited), and Riverside is near Iowa City (home of the University of Iowa). Yet of these four rooms, only the Horseshoe and Prairie Meadows really show a significant revenue stream from poker on an overall basis, and on a per table basis, poker continues to be a bit player in the overall table games portfolio even for these four casinos with a large poker revenue base.
[FN1] Data for fiscal year 2011 will be available in roughly four to five weeks, and I plan to do a year-by-year look at the progression of the Iowa poker economy once that data is released.
[FN2] Gaming revenue excludes horse and dog racing revenues, which are not included in these reports.
[FN3] I find it highly unlikely that poker is a "loss leader" as some people claim. Casinos aren't in the business of losing money in any facet of their operations.