(Published by Sun-Sentinel, October 22, 2013)
Gambling interests say they will create thousands of jobs in Florida if we legalize Vegas-style casinos. When Bugsy Siegel essentially created Las Vegas by building casinos in a barren desert in Nevada, his enterprise did create jobs – because virtually nothing existed before the casinos.
The problem is when casinos are introduced into an existing base of commerce, they simply re-shuffle the deck of consumer spending. This is called “cannibalization” — when existing consumer spending shifts from one pocket into another.
Quite simply, the economic problem with adding casinos in Florida is that Florida is not a barren desert in Nevada or a remote swamp in Mississippi.
When casinos move in, they don’t simply compete for consumer spending. They use the predatory business practice of giving away things that are a source of profit for longstanding Florida businesses — things like “comp” meals and hotel stays.
But don’t take my word for it, just look at Atlantic City, where 40 percent of restaurants and a third of the retail stores went out of business after casinos opened. Crime skyrocketed and the population actually shrank. That’s what happens when casinos are dropped into an already-developed economy.
The euphemistic term “reallocation of consumer spending” was a key phrase in testimony last week in Tallahassee before the Senate Gaming Committee. Spectrum Gaming Group, the gambling industry’s go-to economic experts, were paid $400,000 by the state to study how Vegas-style casinos would affect Florida’s economy. They dryly noted that much of the impact would not come from new spending, but from “reallocation of consumer spending,” otherwise known as cannibalization.
The closure of so many restaurants and retail establishments after casinos moved in was a searing experience for Atlantic City.
And thirty-five years after casinos opened in Atlantic City, things have gotten worse, not better.
Now that the casinos have devoured the other businesses around them, they have started to devour each other. Oversaturation of casinos in Atlantic City and neighboring states has caused a 7-year gambling revenue skid in Atlantic City. Casino profits are down by half in one year alone.
And for the first time ever, Atlantic City casinos are adding strip clubs to try to draw more gamblers. And taxpayers are now having to bail-out failing casinos — over a quarter-billion dollars for one casino alone — because once government relies on gambling as a major source of revenue, casinos become too big to fail.
Atlantic City’s experience is not unique. Casinos pose a threat to local businesses wherever they emerge. John Kindt, professor emeritus of business at the University of Illinois who has testified before Congress, noted that in a Minnesota study, restaurants within 30 miles of a casino lost 25 to 50 percent of their business.
“For every job created by legalized gambling, the local economy loses one to two jobs,” Kindt said. “Intense gambling activities … will tend to cannibalize a pre-existing tourist economy.”
Rod Motamedi, a senior economic associate for Regional Economic Models Inc. who testified before the Senate and House Select Gaming Committee last week in Tallahassee, cited the potential loss to “retail, food service and similar businesses that compete for finite consumer spending.”
Motamedi also said, “You are making a choice to not spend money on something else. And that choice implies a loss of revenues or a loss of business for the other thing.”
The problem is that by the estimates provided by the legislature’s study, less than 5 percent of the money spent in Florida casinos would be from tourists — and many of those tourists are already coming here.
So casinos have their eye on Florida, not for what they can bring to Florida, but what they can take from us.
If there’s one thing that Florida history should teach us, it’s that gambling is nothing more than an economic shell game, where the only real winner is the house.
Carol B. Dover is President/CEO, Florida Restaurant & Lodging Association.