Vol. 4, No. 3, March 2007
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Delaware Diversions
The racinos of Delaware expand to meet new competition with a few unique offerings
Most of the talk of alternatives to the Atlantic City casinos has centered on the new slot competition from Pennsylvania and New York. However, there is one other regional market that has been growing and adapting to new competition—the tiny state of Delaware.
Across the Delaware River from New Jersey is a gaming market which, if not offering direct competition to Atlantic City, has grown to the point that its three racinos—one, in particular, the racetrack and casino at Dover Downs—can be considered attractive as a getaway excursion for South Jersey residents.
At first glance, the slot-only casinos at three Delaware racetracks—the thoroughbred track at Delaware Park and standardbred tracks at Harrington and Dover, which also has a prominent NASCAR track—would seem to offer little that South Jersey locals could not find in Atlantic City. However, changes to Delaware’s gaming law and unique offerings at each Delaware racino translate into a unique set of diversions.
For instance, Delaware Park, the closest to South Jersey of the state’s racinos, has added the White Clay Creek Country Club, an 18-hole championship golf course surrounding the racetrack and stable areas. Dover Downs is doubling the size of its world-class hotel and convention facilities, first added in 2002 to create one of the nation’s only resort hotels connected to a racino. (Half the rooms and suites face the horse and NASCAR tracks for a unique setting.) The Harrington Raceway, down-state near the Maryland border, is adding slots and expanding its facility as well.
The expansion in Delaware is testament to the fact that the state has now recovered from the smoking ban imposed at the end of 2002. Year-over-year revenue numbers, which had been increasing by double digits every month leading up to the ban, dropped by 20 percent for each of the several months following the ban. By 2004, revenue numbers had recovered to the pre-ban levels, and have increased since, with a non-smoking environment now promoted as one of Delaware’s benefits.
Video Lottery Enhancement
Much of the new construction in Delaware was launched when the state legislature gave the casinos the green-light to add more slot machines.
The response of Delaware lawmakers to the coming competition in Pennsylvania was last year’s Video Lottery Enhancement Law, which raised the maximum allowable number of slots at each of the Delaware racinos from 2,500 to 4,000.
The law also provided for 24-hour gaming every day but Sunday (they previously closed four hours a day), and authorized the racinos to grant free promotional slot play to customers through the player’s clubs.
One more enhancement to the state’s gaming law last year was the addition of electronic table games. In October, Delaware’s three racinos began installation of a total of 54 electronic table game units, with 270 player stations. The electronic tables, on Shuffle Master Inc.’s Table Master platform, are multi-player units with video dealers, simulating live blackjack games and Shuffle Master’s specialty poker games. Initial games include the Royal Match 21 blackjack game, the Dragon Bonus baccarat game, and video versions of two popular Shuffle Master table games, Let It Ride Bonus and 3-Card Poker.
The new rules led to immediate expansions at Delaware’s racinos. Delaware Park added 500 slots, bringing its total to 3,000. Harrington Raceway’s Midway Slots facility and Dover Downs each added hundreds of new games and initiated expansion projects that will greatly increase their capacity.
At Harrington, a $42 million expansion will double the size of the facility, increasing the number of slots from its current 1,614 to 2,100, with “room to grow,” according to Patty Key, chief operating officer of the facility. She says the current expansion will upgrade Harrington’s amenities as well, adding an upscale steakhouse with a terrace, a new lounge with a themed concept, an upgraded buffet and a “grab-and-go” deli.
Key says that while the expansion is in part to meet possible competition from Maryland—the source of a good portion of Harrington’s customers and a state perennially considering slots—it will keep the facility up-to-speed with other casinos in Pennsylvania and Delaware as well. “Pennsylvania is part of our customer base too,” she says. “We consider anything within a 100-mile radius part of our market. We also want to grow our market with the expanded facility. We’re going to have warm interiors, and an upscale design with more wood and water features.”
Casino Hotel
While Harrington’s potential market may be large, the casino’s main customer base comes from the southernmost counties of Delaware and northern Maryland, and Key says the racino prides itself on serving this local market. Dover Downs, on the other hand, is more of a destination resort than any casino in the state. Even before it considered hotel rooms, the addition of slots in 1995 was an enhancement to a facility that had been one of the state’s big draws since opening in 1969 as a dual-purpose racetrack offering both harness horse races and NASCAR’s Winston Cup (Richard Petty won the track’s first stock-car race that July). The same year slots were added, Dover Downs’ “Monster Mile” became the first concrete-paved NASCAR super-speedway.
The addition of a 232-room luxury hotel in 2002 distinguished Dover Downs among the nation’s racinos—it is a destination-style hotel, with fine dining and headline entertainment, as well as 25,000 square feet of meeting space. Dover Downs, in fact, recently secured its fourth consecutive annual Four Diamond Award.
Expansion of the hotel at Dover Downs was already planned when the state’s law was changed. The master plan always had been to double the size of the hotel to a total of 500 rooms (with half of the rooms overlooking the track). That expansion, now under way, will include 41 spa suites. They will be huge—1,000 square feet—each including a pool table, fireplace, wet bar and Jacuzzi.
Last year’s legislation prompted the property to add a casino expansion. A 75,000-square-foot addition will blend seamlessly with the current 97,000-square-foot casino, with 600 new slots to start (bringing the total to 3,300) and plenty of room to expand further.
“The expansion includes a ‘wow’ entrance to our facility,” says Ed Sutor, chief operating officer of Dover Downs Gaming & Entertainment, Inc. “Right now, our hotel entrance is stunning, but the casino entrance is under-whelming. This will take your breath away.”
The new casino addition also will include a custom-designed casino lounge with live entertainment almost every night, and the overall expansion will feature three new restaurants and 4,000 square feet of new retail space. Thousands of square feet of new convention space also are in the plan.
According to Sutor, the hotel construction was helped greatly by January’s warm weather—the grand opening is now anticipated by mid-September, a month earlier than planned, and in time for a major September NASCAR event. He says the casino plans should be approved by the end of March, after which a 14-month construction schedule will put its opening in the second quarter of 2008.
Hedging the Bets
The addition of electronic table games was Delaware’s first effort to include unique offerings as a hedge against coming competition. The table games, currently being examined by Pennsylvania regulatory officials but not yet approved, have generated much excitement and revenue that is increasing steadily, according to Sutor.
“Our CFO reports the electronic table games are performing close to the floor average for slots, but creating tons of excitement,” Sutor says. “Volume is building every month, and they are attracting more male customers, younger customers—and new customers. The numbers say that more than half the people playing the electronic table games have not been a part of our player’s club previously.” He adds that minimum bets of $5 on most electronic tables (with a maximum of $200) make the games accessible to a broader range of gambling budgets than the live table games in Atlantic City.
However, Delaware has a card up its sleeve it has yet to play: It is the only state east of the Mississippi able to offer sports betting, having voted to exempt itself from the federal ban on sports wagering in the 1990s. Delaware Governor Ruth Ann Minner has so far rejected any attempts to expand the offerings of Delaware racinos, including sports betting. However, Sutor notes she has softened her stance a bit.
“We expect a bill will be introduced this session to authorize sports betting,” he says, “and while the governor has maintained her position that she will not sign any bill to legalize sports betting, she has dropped her former explicit threat to veto it.”
Without a veto, the bill can pass without a signature—just as the original slot law did.
Other possible hedges to new competition include proposed slot casinos away from the racetracks. There are currently three proposals for non-track slot casinos, which so far have not seen much legislative action. Two of the projects are proposed riverfront casinos in the city of Wilmington, and one is in the southern county of Sussex.
Frank Fantini, publisher of Fantini’s Gaming Report and a partner in the Diamond Point casino project in Wilmington and in the Sussex project, says the proposal for the Diamond Point Casino Resort is the most fully developed plan. It calls for a $300 million, 4,000-slot casino on Wilmington’s 7th Street Peninsula, a strip of land hemmed in by the Christina and Brandywine rivers on the east side of the city.
“The Diamond Point project is actively recruiting a casino operator to come in and plant the flag to see what they can do in Delaware to enhance the lobbying effort they already have in place,” Fantini says.
Those efforts have been stymied so far, by a powerful lobby operating on behalf of the racing industry and by the governor, who has steadfastly opposed any new casinos.
Fantini says there may be hope, though, in the fact that a new governor takes over in 2009, and in other proposed projects. He says a private investor group is proposing a new racetrack and off-track betting facility in the Georgetown area.
“Obviously, the hope would be to add slots down the road, if they can get the support of the harness racing industry,” he says.
That support is no guarantee either, he notes, as there currently are two different constituencies cooperating to lobby against new facilities—the racinos, who want no more competition; and the racing interests, who want as many racing days in the state as possible. The prospect of a new track could split that coalition, Fantini says.
With the Pennsylvania slot market off to a sputtering-but-steady start and the prospect of gaming in Maryland, racino operators and gaming proponents in Delaware will no doubt be forced to come up with more offerings to counter the competition. As the market develops, the First State is bound to offer more promise as a getaway for South Jersey residents.
