Casino profits to be halved in 3 years
Niagara, Windsor in most danger
Lee Greenberg, The Ottawa Citizen, Thursday, September 07, 2006
TORONTO - Profits at Ontario’s three border-area casinos, which have long been cash cows for the government coffers, will be slashed almost in half over a three-year period, a Crown executive said.
Beset by decreased traffic and increased competition, profits will decline $163 million by 2008.
"We’re anticipating that a series of events, which some people have described as a perfect storm, will have an impact," Duncan Brown, chief executive of the Ontario Lottery and Gaming Corporation, said after appearing before a government committee.
"The source of revenue decline is focused on our large commercial casinos in the border regions," he said.
Increased U.S. competition, a rising Canadian dollar, a provincewide smoking ban and a decline in cross-border visits are all blamed for the casinos’ sagging fortunes, which are summarized in an OLGC document titled Four-Year Plan.
The projected decline in profitability is most extreme in Windsor and Niagara Falls.
The two Niagara casinos, which reaped $136.2 million net profit in 2005, are expected to fall to $32.8 million in profit in 2008. Profit at Casino Windsor will drop to $25.2 million from $101.1 million over the same period.
The hit, when added to capital expenditures, primarily at the Windsor casino, will amount to a nearly $500-million loss to the approximately $2-billion annual cash infusion the government receives from state-sanctioned gambling.
Mr. Brown told MPPs yesterday he expects profits to rebound significantly in 2009, nearly doubling at casinos in both cities.
Casino Windsor is currently in the midst of a $400-million expansion, which includes a 400-room hotel and a 100,000- square-foot convention centre that will include a 5,000-seat entertainment facility.
"We’ll be able to return Casino Windsor back to a position in the market that it previously occupied," Mr. Brown said, touting the new facility’s ability to bring in "a different, broader audience."
However, competition from neighbouring Detroit, which opened the door to gambling in 1999, is unrelenting. MGM Grand’s Detroit casino is also undergoing a complete revamp.
In Niagara Falls, where the government owns two casinos, Mr. Brown said changes to "management, marketing and operations" will lead to improvement in the business.
He also cautioned that "in both cases, of course, we’re also looking at the impact of border issues, change in the American currency and the impact of the smoke-free Ontario legislation."
Politicians on either side of the aisle cast doubt on the reasoning behind the company’s projected rebound.
"We’re projecting that revenues at our commercial casinos are going to go down over the next four years and then in the last year they magically go up by $500 million," said New Democratic MPP Gilles Bisson. "I just question where those numbers come from."
"The passport issue is going to be a problem," said Conservative MPP Laurie Scott, referring to U.S. legislation that goes into effect at Canadian land crossings in 2008.
© The Ottawa Citizen 2006
© 2006 CanWest Interactive, a division of CanWest MediaWorks Publications Inc.