Study Indicates Room for Gaming at Illinois Tracks

A new feasibility study of gaming expansion in Illinois includes some potential good news for racetracks moving forward with casino plans.

The study, mandated by the sweeping expansion law approved in the spring session of the Illinois General Assembly and released Aug. 13 by the Illinois Gaming Board, was commissioned primarily to determine which of the five sites proposed for a Chicago casino would have the best economic potential.

It found none of the five would work under the tax structure included in the new law, likely requiring further legislative action this fall.

Along the way, however, Union Gaming Analytics, based in Las Vegas, commented on the overall impact of the gaming expansion legislation, which includes approval for six new casinos around the state, gaming and sports betting at racetracks, and expansion of the huge video gaming network already operating through most of Illinois. Existing casinos also are authorized to add gaming positions and the City of Chicago can install airport slot machines.

Despite all that new gaming, and contrary to the predictions of some opponents, the study found the market does not face oversaturation, even in the Chicago area. Overall, UGA said, there is room for significant expansion without cannibalization of existing gaming facilities.

"A well-served gaming market can be thought of as a metropolitan area where most residents live within close proximity of a casino," the report said. "In these markets, the percentage of income typically allocated to gaming is approximately 1%.

"By way of comparison, we estimate the Chicago metro area allocates just 0.6% of income to casino gaming, inclusive of casinos in the Chicago area (Illinois and Indiana). This suggests there is significant upside potential in terms of total gaming revenue that can be supported by the Chicago metro area as supply is added throughout the market."

However, the report stressed the importance of location.

"(I)t is not only the amount of gaming supply that matters, by the quality and location as well," UGA concluded. The firm noted the southern parts of the metropolitan area, in which a proposed new harness track would compete, would see considerable competition for business.

Prospects would be brighter in the areas surrounding Arlington International Racecourse and Hawthorne Racecourse, the study suggested, saying, "Conversely, there is limited gaming supply to the west of Chicago and only modest supply to the north/northwest (although the addition of gaming to Arlington Racecourse will represent the third casino to the northwest)."

Hawthorne is a short hop north of Midway Airport, more west than south of the Chicago Loop. Arlington is a northwest suburb.

Hawthorne is moving ahead aggressively with plans to conduct both casino gaming and sports betting. Arlington has not yet announced its plans although the deadline for applying for a gaming license looms at the end of August.

While finding that onerous special taxes and undesirable siting could doom prospects for the five suggested Chicago locations, the study concluded a properly sited city casino "has the potential to become the highest-grossing casino in Illinois, significantly higher than the current market-leading Rivers Casino in Des Plaines, which generated $441.8 million (in adjusted gross revenue) in calendar 2018."

Churchill Downs Inc. owns Arlington and holds a majority stake in Rivers. The two are located about 14 miles apart.