In most industries, new market entrants are signs of a healthy business climate and an expanding economy.
In Colorado Springs, politicians and business owners actively recruit companies and roll out the welcome mat to newcomers.
Asked whether he could imagine a scenario in which Colorado Springs would not welcome a new business that planned to employ scores of people and invest $50 million in a new facility, Mike Kazmierski, president of the Economic Development Corp., had a quick, one word answer.
Yet rather than welcoming the new kid on the block, business owners and politicians in Cripple Creek are apprehensive, believing that a casino being built by American Gaming Group of Las Vegas will cannibalize other casinos, and even cause overall gaming revenue to drop.
“When you’re in a flat market, and the supply increases by 15 percent and the demand remains steady, it means that everybody’s sales will decline by that amount, everything else being equal,” said Marc Murphy, co-founder of Bronco Billy’s, one of Cripple Creek’s original casinos.
He said the industry hasn’t experienced any significant growth in Cripple Creek during the past five years.
“When we opened, we had customers coming from New Mexico, from Kansas, from Texas,” he said. “But now there are so many options — Indian casinos in New Mexico, $49 flights to Vegas — so we’re strictly local, serving Colorado Springs, Pueblo and Canon City.”
Kyle Fenner, executive director of the Cripple Creek Casino Association, agrees.
“Casino revenues here have been flat for years,” he said. “They fluctuate and spike a little, but a new casino will just re-distribute revenues, not necessarily increase them.”
Cripple Creek Mayor Ed Libby said the new casino could have a negative impact on the city’s economy.
“By itself it won’t enlarge the market,” he said. “I’ve made it clear that this is bad timing, just look at the statistics. Our ‘coin in’ is down 13 percent since the beginning of the year.”
Libby said that Cripple Creek needs to diversify its economy.
“Ninety-seven percent of the city’s revenues come, directly or indirectly, from gambling,” he said. “That revenue is partially generated by fees on 4,500 devices (i.e., slot machines). When the new casino opens, they’ll have 800 devices. We may see three to four operators shut down or merge. In my experience, that’s always followed the opening of big new facilities. That attrition might cost us 1,200 devices, so the new casino could lead to a 10 percent revenue loss.”
But wouldn’t the new casino tend to drive visitor numbers up because of its own marketing efforts?
“That’s what the Double Eagle said when they opened a few years ago — and within 24 months they were in bankruptcy,” Libby said. “They spent too much money, and overestimated the market — and these new guys are doing the same thing. They’re spending $50 million on it. I think they may be making the same mistake.”
Dan Silverman, the vice president and chief operating officer of American Gaming, doesn’t think his casino will hurt the Cripple Creek economy.
“I’m aware of these (negative) perceptions, but all of our research from unbiased third-party experts tells us a different story,” he said. “We expect that we’ll grow the market, and that the pie would become bigger.”
And he also isn’t worried about market stagnation.
“You have to look at cause and effect,” he said. “This is a market that hasn’t had a lot of new offerings, and such markets tend to flatten out. We wouldn’t enter into an inherently flat market — our intent is not to put these resources in a flat market to divide up an existing pie.”
Silverman said that AGG expects to open for business on New Years Eve, and he had a final word for those who think that his casino will be bad for business.
“I’d ask them to consider the alternative,” he said. “Suppose there were no new entrants, no new establishments? What would that mean, in the long run? Would that be good for business? And, you know, we’re not just a group of ruthless competitors — some of our investors are long-term or semi-permanent residents of Cripple Creek. We’re here to support and grow the community.”
Kazmierski agrees that Cripple Creek’s concerns seem to be misplaced.
“It’s the Wal-Mart syndrome,” he said. “They think that if the big guy comes to town, the little guys will be driven out, and they’ll lose jobs and business. But the big casino will market itself and the area, and eventually lift everyone.”