When analysts examine pricing in the gaming industry the focus is usually on room rates or table game denominations. Often overlooked is slot hold percentage which can be manipulated by casinos. Better quality properties and casinos in less competitive markets typically exhibit higher hold percentages, because they can.
- Until early August, Ameristar operated the top quality facility in the Northern Indiana and with the exception of Elgin (geographically not a competitor), generated the highest revenues of all the Chicago area properties. East Chicago’s competitive position gave management the luxury of maintaining a slot hold percentage of 9.4%. By comparison, the Chicago market averaged only 8.2% year to date. Even the higher quality facilities downstate, Argosy Lawrenceburg and Pinnacle Belterra, averaged in the low 8s. See the relative hold percentages in the first chart.
- Harrah’s Entertainment introduced its expanded and renovated facility in early August. Horseshoe Hammond is now clearly the nicest facility in the market and its proximity to East Chicago will provide a serious threat to ASCA. As visitation and volume migrate to Horseshoe, ASCA may be forced to lower its pricing (hold percentage) to protect its market share. The second chart shows the impact on ASCA’s revenue, EBITDA, and EPS assuming a market average hold percentage was in place over the last four quarters. A $0.21 negative impact is clearly meaningful at 15% of TTM EPS.
ASCA EC and Horseshoe benefitting from high slot hold %
"Normalized" slot hold could have material impact