Variability among projections for the performance of new casinos is high

Commercial casinos are regulated at the state level in the U.S. Many jurisdictions limit the number, size, and/or geographic locations of casinos.  The types and number of games allowed and other aspects of the casino operations are also tightly regulated. These states typically grant a limited number of casino licenses pursuant to a competitive licensing process of the “beauty-contest” (rather than “auction”) type. There has been little study of the different criteria used to evaluate such contests. Casino applicants are typically required to submit extremely detailed proposals. Projections for the gaming-revenue performance of the new casino(s) are critical elements of these beauty contests, because regulators and other government officials are typically very concerned with the amount of tax revenue and employment that can be expected with any particular casino proposed. In addition to the projections submitted by the license applicants, many regulatory authorities also obtain gaming-revenue studies from independent experts. As a result, there have been many different examples of such revenue projections for casinos across states and over the past few decades. In this paper, I review 50(+) forecasts for the performance of new casinos from nine recent licensing processes in five geographic areas of several U.S. states. The dispersion among these projections is often high. Casinos have actually been built (so far) in three of these areas. Given the wide range of variation among the initial projections, the actual results have varied, sometimes substantially, from all but a few of those forecasts. I examine a variety of important aspects of these projections, which can provide important information for gaming regulatory agencies, state government officials, and the voting public, which may be considering the introduction of expansion of commercial casinos.