Illinois Casino Outlook Steady as New Supply Comes to Market

Posted on: June 21, 2023, 04:34h. 

Last updated on: June 22, 2023, 09:56h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Outside of Nevada, Illinois is one of the largest land-based casino markets in the US — heft that’s increasing with new venues coming online. A sell-side analyst sees vibrancy in the state’s gaming industry.

Illinois sports betting
The Illinois casino market is evolving. An analyst believes that’s positive for operators.(Image: OZinOH/Flickr.com)

That’s relevant at a time when Danville, Rockford, and Waukegan are homes to new casino hotels, and as the debut of a temporary casino, a prelude to a permanent venue, nears in Chicago. Truist Securities gaming analyst Barry Jonas recently returned from visits to a broad swath of Illinois gaming properties, noting management teams are constructive on patrons’ spending patterns against the backdrop of a challenging macroeconomic outlook.

Property management teams noted the Great Recession was driven by excesses beyond players’ means (e.g., customers using equity from their overvalued homes). Trends today are more normal and steady, generally within players’ means,” noted the analyst.

On a year-over-year basis, Illinois gross gaming revenue (GGR) jumped 6.5% in the first three months of this year, but is trending lower in the current quarter, as lower-tier bettors scale back discretionary spending.

Illinois Casino Market Bracing

When accounting for venues that are either temporary or under construction, there are 16 casinos in Illinois.

Some of the temporary and newer venues come courtesy of tribal operators Hard Rock International (Rockford) and Wind Creek (East Hazel Crest), as well as Full House Resorts (NASDAQ: FLL). That company, The Temporary, is already off to a stellar start, and will eventually give way to the American Place, which is expected to be one of the operator’s biggest revenue drivers.

By number of venues, Penn Entertainment (NASDAQ: PENN) is the largest operator in Illinois, with four casinos. The largest regional casino company is moving riverboat casinos in Aurora and Joliet ashore to what Jonas described as “materially improved locations.”

Among publicly-traded gaming companies, Caesars Entertainment (NASDAQ: CZR) is the next largest in Illinois with two properties, which Bally’s (NYSE: BALY) will tie with the debut of Chicago’s first gaming venue in 2026.

Speaking of Bally’s Chicago …

It’s possible that Rhode Island-based Bally’s could have its temporary Chicago casino in the River North open sooner than anticipated. Truist’s Jonas called it “the nicest temporary we’ve ever seen.”

The analyst added that the venue could exceed the operator’s forecasts of $50 million in yearly cash flow, which could prove pertinent as Bally’s looks for ways to finance the $1.7 billion permanent property.

The company “is exploring solutions to fund the project, which will likely include commitment of its own capital, some third-party aid, proceeds from a unique minority-equity plan, and possible real estate monetization elsewhere in the portfolio,” added Jonas. “Given a turbulent few years … management understands the importance of execution on what should turn out to be the flagship property in the company portfolio.”

Previously, Bally’s has engaged in sale-leaseback transactions, indicating it’s not shy about monetizing its real estate.