Running some numbers on the Chicago Casino

Monthly revenues keep hitting the under, but don't panic yet.

A lot of my writing in this Substack has been focused on Chicago’s fiscal liabilities. As you’ve likely picked up by now, I view dealing with our pension debt as Chicago’s single greatest public finance challenge (and quite possibly Chicago’s greatest challenge, period). I thought it’d be worth taking a look at one of our newer revenue sources which has been in the news recently - the new Chicago casino - and how it’s doing.

A brief history

A city casino is an idea that people floated for a long while, but momentum really got going in 2019 when Springfield passed a law allowing for land-based¹ casinos in the state. Rivers Casino in Des Plaines - which had technically previously been located in a shallow pool of water - became the first land-based casino in the state to open later that year. They’re now far and away the largest and most profitable casino in Illinois, with roughly $539 million in casino gaming revenue in 2023 (about one-third of total casino gaming revenue in Illinois).

In 2021, Mayor Lightfoot announced a Request for Proposals for a casino development in the city. They received five proposals from four applicants, and in May 2022 Lightfoot announced (somewhat controversially) that Bally’s proposal for a $1.7 billion casino and resort development at the Tribune Publishing site in River West was the winner.

Bally’s plans anticipated a 2026 opening for the permanent development at the Tribune site, as well as operating a temporary casino location elsewhere downtown until that time. That temporary site turned out to be the former Medinah Temple in River North, and after a few months of delays the temporary site opened in September 2023².

More recently, earlier this summer in June Mayor Johnson expressed some doubts on whether the permanent site would proceed, especially as Bally’s was facing financing challenges for the development project and a takeover bid from hedge fund Standard General which some investors claimed could jeopardize the project.

Finally, in July Bally’s announced they had secured financing for the project, removing the funding gap, and accepted Standard General’s buyout offer while announcing their Chicago plans remained unaffected, hopefully putting these issues to rest.

Why does any of this matter for the city?

Simply put - tax revenue.

The entirety of public interest in getting a casino in the city is the opportunity to use gaming revenue to fund our pension debt and other public liabilities. This is intended to be a reasonably big chunk of revenue - the city’s projections called for roughly $180 million in city revenue by 2028, plus another $70 million or so going to other Chicago entities (CPS, parks, et cetera):

That’s not enough to fix all of our problems or anything - remember, our total net pension liability is around $37 billion - but it’s a good chunk of change!

On the other hand, actual revenues haven’t looked quite so good:

I thought it’d be interesting to look at why.

Diving into some Illinois Gaming Board reports

Luckily, casino gambling is a highly regulated industry in Illinois, and the Illinois Gaming Board (IGB) releases some pretty detailed numbers every month that let us know how every casino in the state is doing. This leads to some occasional surface-level news coverage on whether the latest month’s report was good or bad, but frustratingly I haven’t really seen much on overall trends or any deeper analysis on how to think about the casino’s performance. So let’s do that.

First, let’s benchmark things. Here’s what Bally’s and the city had projected for casino revenue:

As I mentioned earlier, Bally’s originally expected to open a temporary site in June, so $102 million in 2023 equates to around $14-15 million per month for 7 months. $243 million for 2024 equates to about $20 million per month. By 2028, once the permanent site has been open and operating for several years, we’re expecting $60-70 million per month.

Okay, now to the IGB filings. As of July, there are 15 casinos operating in the state of Illinois, with 7 in the Chicagoland area. For starters, here’s a look at actual monthly revenue for those seven since 2023:

Thus far, Bally’s is nowhere near that $20 million a month figure - we’re looking at more like $10-11 million per month right now. Not great! It is at least nice, however, to see that we are showing some growth versus 2023. For a better visualization of that, here’s a chart on monthly revenue for all seven casinos, relative to revenue in October 2023 (the first full month the temporary Chicago site was open) - Bally’s Chicago is the thick blue line:

You can see Bally’s is definitely the strongest revenue grower, which makes sense given that it was just ramping up in 2023. I also think it’s interesting that the others haven’t really declined at all - they were down in January but look roughly flat since then. This implies to me that we’re not seeing a ton of demand shift from the other casinos to Bally’s Chicago yet.

The other thing that really jumps out in those monthly revenue figures is how gangbusters Rivers Casino in Des Plaines is doing. Again, Rivers is by far the biggest casino in the state, pretty consistently doing over $40 million in AGR per month, and prior to Bally’s opening it was also by far the closest Illinois casino to downtown Chicago³. This gives me some hope that the revenue forecast for the permanent site aren’t crazy, despite early performance for the temporary location; for 2026, Bally’s only needs to do 20% more revenue than Rivers, at what should be a location and campus primed to draw a lot more visitors.

But let’s focus on the present. Speaking of visitors, here’s a look at admissions by month for the seven:

Bally’s has grown from 80-90k per month last fall up to around 126,000 or so in June - or roughly half of what Rivers is doing. That’s pretty good! Yet unfortunately our revenue is only one-fourth that of Rivers, which seems odd. Is Rivers just particularly good at maximizing revenue per visitor?

Nope, Bally’s Chicago is just particular low. Here’s a more detailed view of stats for June 2024 across all seven area casinos:

If you look at revenue per gaming position⁴, Bally’s looks pretty middle of the pack. Revenue per visitor, on the other hand, seems oddly poor - Bally’s has only $82 per visitor, over 30% worse than the next lowest casino (and only half the $162 per visitor that Rivers is showing). If Bally’s improved to be middle of the pack and could do something like $140-150 per visitor, we’d be looking at $18-19 million in monthly revenue. That’s basically in line with projections.

I was pretty curious on that revenue per customer figure - is it just because Bally’s is brand new?Are their table minimums too low, so bet sizes are way smaller? - so I tried digging in a bit more on other casinos. Notably, Bally’s Quad Cities location also shows a pretty low revenue per customer - around $83 per visitor in July, compared to $88 and $108 from their competitors across the river in Iowa⁵ and in Missouri their Kansas City location shows $82 per patron versus $140ish for their competitors⁶.

For another view on this, I reached out to Jeff Stantial, a managing director in equity research at Stifel who covering the gaming sector. He explained that Bally’s has a distinct marketing strategy compared to competitors like Penn⁷ or Caesar’s⁸, targeting a lower spending audience (while the others have focused on only mid-to-high spending players). This naturally flows through to their revenue per visitor. Jeff also noted that Bally's downtown location might draw more casual bettors who visit out of curiosity, unlike suburban casinos where visitors are more intent on gambling. Unfortunately, that’s all to say that boosting that revenue per visitor isn’t some One Weird Trick we can bank on to boost gambling revenue going forward - we’ll just need to see particularly healthy visitor figures for Bally’s Chicago to do well.

An optimistic case for Bally’s Chicago

That being said, I think there’s still a reasonably bullish case to be made for casino revenue in Chicago longer term. Despite the poor 2023, those figures above show that the temporary site is still growing in both revenue and attendance, so it’s not like we’ve hit a steady state for the next few years. That seems promising. I think the bigger question, though, is how much things change when we transition to the permanent site. I’m betting that it’ll be a big transformation.

For starters, I think the whole concept of a “temporary casino” is probably not super attractive to many people. If you haven’t been, there’s probably a decent chance your mental image is, like, folding tables and fake curtain walls or something. For what it’s worth, that’s totally wrong - excluding Las Vegas, it’s comfortably in the top half of all casinos I’ve ever visited - but I have to imagine that perception exists in people’s minds and might reduce visitor traffic. That probably doubly applies to any tourism attendance - a nondescript building in River North⁹ just doesn’t have the same sexy attractiveness to out-of-towners looking for something to do than a big shiny complex on the river would. Based on those charts above, it also seems like they haven’t started to take much traffic away from their suburban competitors, which again I’m guessing is a combination of some kind of ramp-up curve plus a temporary site just not being as attractive as the real thing.

On top of that, it is worth nothing that the permanent site is approved for a full 4,000 gaming positions, or about 4x what the temporary site currently has. Revenue per gaming position does seem strong, and if the permanent site can 4x revenue than we’re looking at monthly AGR in the $40-42 million range - not quite the $50-55 million estimate they have forecast for 2026, but a good start.

What’s our downside?

I also think it’s worth question what the actual downside is here if the site underachieves. This isn’t like financing a public stadium, where the city would actually be putting up money to finance the development; Bally’s actually paid the city $40 million up front in their proposal. The city is just giving permission, not underwriting a project. I suppose there’s an argument around the city’s role in promoting or allowing gambling, and the social costs that imposes, but I’m not super sympathetic to that line - and think that ship sailed a while back.

Another concern expressed by groups such as the Civic Federation is that gaming revenues are simply too volatile year-to-year for us to rely on them to fund pensions. I take their point, but I’d push back on two fronts. First, when you have $37 billion in pension debt, I think exploring every potential revenue source is prudent. Even if it’s not something we think we can bank on every year going forward, I would rather the city accept a free pot of money by allowing the casino to operate than choose to pass. Second, even in the scenario outlined above, the city’s projections only call for $160-180 million in annual tax revenue to the city by 2028. Again, that’s a meaningful sum of money, but it’s not like we’re looking for the casino to become the bedrock underpinning our entire pension system (I agree that would be a bad idea!). In contrast, I think it’s a really good idea to start expanding to a more diverse portfolio of revenue sources backing our pension systems, instead of relying fully on property taxes (which are both politically difficult to hike, and stretched pretty far as is).

At the end of the day, so long as Bally’s remains committed to developing the permanent site - and it seems to me like they are - then having a big new development on the river and a new pot of revenue to the city seems like a win.

The Bottom Line

• It’s fair to say the temporary casino is off to a pretty slow start, with revenue estimates coming in quite below expectations, though there are some signs of growth, and foot traffic seems reasonably strong thus far.

• That said, it’s just way too early to rule out the viability of the permanent casino altogether. I’m glad to see that Bally’s financing issues have been resolved and they’ll be moving forward with the project, since I remain convinced the permanent development is simply a whole different ballgame.

1. As opposed to riverboat casinos.

2. It was previously expected to open in June 2023.

3. Though if you count other states, Horseshoe Casino in Hammond, Indiana - which, with $323 million in 2023 revenue, outperformed every Illinois casino other than Rivers last year - is a close second.

4. In case you share my curiosity on what exactly constitutes a “gaming position” - a craps table is considered 10 gaming positions, any other table game is considered 5 gaming positions, and a slot machine counts as 0.9 gaming positions. I calculated the position figures I’m showing here based on the IGB’s reports, though I imagine each casino’s position limit is a similar round number (Rivers, for example, is licensed to have 2000 positions).

5. See here from the Iowa Racing and Gaming Commission - I’m looking at Isle of Capri in Bettendorf, IA and Rhythm City Casino in Davenport, IA.

6. See here from the Missouri Gaming Commission.

7. Penn Entertainment owns the Hollywood, Ameristar, and Argosy casino brands, among others.

8. Caesar’s Entertainment owns the Harrah’s, Horseshoe, and Isle of Capri casino brands, among many others.

9. Okay, the Medinah Temple is cool architecture, but it’s still remarkably understated compared to most casino facades.