Station Casinos not benefiting from new open boarding policy

Rick Alm

Monday, Dec. 6, 1999 | 11:38 a.m.

KANSAS CITY, Mo. -- After two weeks, open boarding appears to be a windfall for Kansas City's smaller riverboat casinos. The big ones are paying the price.

The Missouri Gaming Commission reported that 14 days of open-door casinos in Kansas City and St. Joseph had resulted in record admissions and a combined 10 percent jump in revenue from the same two-week period last year.

Revenue had been on a 9 percent growth rate anyway, said Jim Oberkirsch, the commission's chief financial analyst.

But all that revenue growth is not spread evenly among the region's gambling boats.

"It's too early to tell," Oberkirsch said, "but in Kansas City the one-boat operations might be gaining at the expense of the two-boat casinos. We didn't see that in St. Louis" in August when eastern Missouri casinos switched to open boarding.

The state's small casinos have pushed for the change for years. Larger operations were wary, however, and at one point Station Casinos Inc. of Las Vegas, with riverboats in Kansas City and St. Charles, Mo., publicly opposed open boarding.

Since the change began in Kansas City on Nov. 15, the single-boat Argosy Riverside Casino is pacing the local market with a 27 percent increase in revenue and a 47 percent jump in admissions.

The Flamingo Hilton Casino has a 23 percent growth in revenue and a 64 percent jump in admissions.

The problem for the large casinos is that their relatively modest increases in admissions -- 27 percent for Harrah's North Kansas City Casino & Hotel and 23 percent for Station Casino Kansas City -- are outrunning almost flat revenue growth of 3 percent and 1 percent.

"The net effect is we are paying a lot more taxes for the same revenue," said John V. Finamore, Station's Midwest president. "Open boarding has been a success for the guest. It's been a success for the state and for all the recipients of our taxes.

"But for the two-boat operators, it is not a success. It is not a windfall. It is a cause for concern."

During the past two weeks, Station's gross revenue from gamblers' losing bets has grown by about $81,000 from the same period in 1998. But Station must pay about $167,000 more in taxes and fees to the state and local governments on that increase.

Those payments include a straight 20 percent tax on the revenue, plus a $2 head tax for each of the 75,000 additional admissions logged during the period.

Before the change, gamblers had to wait up to 75 minutes to enter a one-boat casino. Twin-boat operations had cut the wait to 15 minutes with staggered boarding times, routinely attracting business away from smaller operators.

Oberkirsch said most new admissions statewide were being recorded during the time spans when boarding had been prohibited - the final 75 minutes of each two-hour boarding session, which technically is still in place.

Cruise times are still in effect under open boarding because gamblers are still limited to buying no more than $500 in chips or gambling tokens during a two-hour session. Monitoring is done through personalized electronic swipe cards that track players' entries, cash buy-ins and betting habits pegged to the old timetables.

In an extreme example, that means a patron can now enter a casino during the final minute of a two-hour session and remain on board for just a few minutes, causing the casino to pay the state's $2-per-cruise head tax twice. If the patron stays for more than two hours, a third $2 head tax is charged, and so on.

"Fourteen days of data is not enough data for our staff to make any type of meaningful analysis," said Mel Fisher, the commission's executive director. "But we are pleased with the positive results so far."

Finamore begs to differ. "The one-boat operators are loving it," he said. "It's all they had hoped for. The Gaming Commission says open boarding is a success. From our point of view, that is just not true."

For Jack Bonar, director of marketing for Argosy Riverside Casino, it's a matter of fairness.

"With the old boarding time structures, we were at a disadvantage," he said. "This puts us on a more even competitive playing field."

Projected over 30 days, admissions at Kansas City's four riverboat casinos would top 2 million for the first time ever.

Revenue would reach $42.9 million -- tying the second-largest month in local riverboat gambling history.

In addition to greater admissions that can count players more than once, open boarding has attracted more players. According to the two-week report, total admissions represented 50,000 more people than the same period last year. Some of those could be the same people visiting a casino on different days.

After 30 days of open boarding in St. Louis this summer, eastern Missouri casinos saw similar jumps in admissions, collectively up 45 percent, while gross revenue ballooned 10 percent.