CEDAR RAPIDS, Iowa (KCRG-TV9) -- Market impact studies show the latest proposals for a Cedar Rapids-based casino would again cause “a significant cannibalization impact” meaning a new gaming facility would be taking business from surrounding casinos.
Business “cannibalization” was the biggest reason the Iowa Racing and Gaming Commission rejected a previous Cedar Rapids gaming license proposal, four to one, in 2014 after reviewing similar market studies on a large Cedar Crossing design by the Cedar Rapids Development Group, or CRDG.
This time, commissioners are looking at three bids. Two are coming from CRDG. One of them-- virtually the same proposal as three years prior, a $196 million Cedar Crossing development on the west side of the Cedar River. The other, a smaller Cedar Crossing Central plan that calls for putting a $106 million casino in the core of downtown by replacing a parkade next to the U.S. Cellular Center.
The third option comes from Wild Rose Entertainment, which plans for a smaller “boutique” casino up on First Avenue Southeast, next to the Skogman building. Its plan calls for an estimated construction cost of about $42 million.
The Marquette Advisors study, released to the public Thursday afternoon, showed all three casinos would cannibalize between 45%-56% of their annual revenue from other Iowa facilities. Riverside Casino & Resort losing the most revenue, between $18 million to $22 million.
“Of the $85.0 million in annual revenue projected for the larger Cedar Crossing facility, we estimate that about 55% ($47 million) would be “new” revenue resulting from an increase in gaming activity, with the remaining 45%, or $38 million coming through the cannibalization of business from other casinos,” said the report. “The cannibalization impact for the smaller casino proposals is estimated to range from approximately $29 to $32 million, or about 56% of facility revenues.”
The WhiteSand Gaming study showed even higher percentages of projected cannibalization, 89%-92% of revenue being pulled from nearby casinos. Riverside's facility again feeling the biggest impact, a loss of between $19 million to $27 million.
"Hardest hit would be Riverside, with over 20% of their current revenue at risk to a new operation in Cedar Rapids," said the WhiteSand study. "Waterloo would be affected as well, losing between 5 to 9% of revenue. We spread the effect of the revenue loss in the Dubuque market between the two properties located there with a combined revenue loss of between 3 and 6%."
Jeff Lamberti, IRGC member and former chair during the last proposal, told I9 back in February, historically, if a proposed casino is expected to cut into another casino’s profits by a percentage in the mid-teens the commission would deny the request.
"If the impact on the adjusted gross receipts of the facility was under 10% they generally got a license," said Lamberti. "If it was above the mid teens and certainly 20, 25, 30 they were denied."
Lamberti continued, saying if studies showed a big enough margin of difference, commissioner discretion came into play.
"I may have one study that says the impact is 13% and the other one tells me it's 8%," said Lamberti. "OK, that's where my judgment comes in and says do I think it's closer to this or closer to this."
The WhiteSand report concluded Cedar Rapids may have missed its shot for a downtown facility altogether when voters turned down a 2003 Iowa Racing and Gaming Commission recommendation to authorize gambling in Linn County.