Investors Spent $10B Opening or Expanding East Coast Casinos

In the multibillion-dollar casino arms race of the east coast, Las Vegas-style casino resorts have spread from Boston to New York and into Washington, D.C. It is the most densely populated region of the United States and investors have spent $10 billion to own a piece of gambling there in just the past 12 years.

According to Clyde Barrow, a casino expert at the University of Texas Rio Grande Valley, the race has led to bigger urban casinos. In the heat of competition, few if any investors stopped to question the region's ability to support another mega-casino-resort. Some experts now say the area is already saturated.

Barrow offers an explanation for the blinders that prevented states like Pennsylvania and Maryland from realizing the region had reached its limit: tax dollars. He says states were pressed for new revenue in the late 2000s. Casinos were proposed as a way to collect voluntary taxes from residents.

Some casino operators, such as CEO David Cordish of The Cordish Cos., are aware of the situation. Cordish, who has led casino developments in the region, says they have to “drill down” to find the saturation, but it is there.

The most significant downside to the mega-casino-resort trend is the high operating costs. Barrow explains that these properties are far more vulnerable than a handful of slots parlors spread throughout the same neighborhood. They typically come with significant debt and much higher labor costs. Debt and labor costs were key factors in the closure of Atlantic City casinos including the $2.4 billion Revel.

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