Slot Machines A Surprising Casualty As New York Sports Betting Approaches

• Upstate New York casinos are dumping slot machines to make room for legal sports betting.
• Sports wagering is scheduled to launch by early June in NY.
• New York will not offer mobile or online sports betting, opting to push traffic to struggling commercial casino venues.

ALBANY, N.Y. – Del Lago Resort & Casino is the third of the four upstate New York gambling venues to request a reduction in slot machines. While traditionally profitable, slots are proving to be casualties in the rush to build new sports betting lounges.

Del Lago spokesman Steven Greenberg explains the move, but not the rationale behind it.

“As del Lago Resort & Casino looks forward to begin offering sports gaming in conjunction with our DraftKings partner, we are seeking to reduce the number of slots to construct our sports gaming facility and make other improvements for our customers.”

In a vacuum, this move would be almost utterly unprecedented, as slot machines have historically been licenses to print money for casinos allowed to offer the popular gambling devices. But surprisingly, del Lago is hardly alone here.

A pair of other upstate New York venues – the Resorts World Catskills and the Tioga Downs Casino Resort – have sought and been granted approval by the New York State Gaming Commission (NYSGC) to nix some of their slot machines. The former has cut its slot machine count from 2157 to 1600, representing a 26% reduction. The latter has been granted a smaller 5% reduction, going from 942 slots to 892 slots.

It is unclear how many slot machines del Lago is requesting to eliminate.

Is Sports Betting Really More Lucrative Than Slot Machine Gaming?

The desire to reduce the number of slots to accommodate the construction of sports betting lounges on these sites’ premises does not mean that sports wagering is inherently more profitable than the slots they’re replacing. In fact, nothing could be further from the truth.

Generally speaking, slot machines are considered to be the primary profit vehicle of casinos in general. Indeed, the legal ability to offer slot machine gaming is what characterizes a casino as “Vegas-style” or, in the tribal marketplace, as a Class III venue.

Take the long-term trends in Nevada, which has had slots gaming running alongside sports betting for decades. On average, sports betting accounts for about four percent of the revenue that slot machines pull in. For context, in 2018, Nevada casinos earned $7.7 billion in revenue on slots and $300 million in revenue on sports wagering.

As a result, states universally derive the most tax revenue from slots. In New York, 37 percent to 45 percent of gross gaming revenue from slot machines is handed over to the state, depending on the casino’s regional status. Sports betting gross revenue, on the other hand, is taxed at just 10 percent.

Typically, state governments are reticent to lose money. So what’s going on here?

Upstate New York Casinos Are Not Meeting Revenue Projections

The biggest takeaway is that since launching in 2017, the four upstate New York casinos are performing more sluggishly than expected. According to a January report by the Times Union, none of the four upstate casino venues is meeting anything remotely near their financial forecasts for their first year(s) of operation.

Worse, Moody’s has significantly downgraded del Lago, and the credit-rating brand is forecasting impending bankruptcy if changes don’t come in a hurry.

Whether or not getting rid of underperforming slot machines to make room for the sure-to-be-popular New York sports betting lounges will bear fruit is anyone’s guess. The razor-thin margins on sportsbooks – even successful ones – makes this a decided risk.

Still, sports wagering is easily the most popular form of gaming from a player perspective, as US sports bettors turn an estimated annual handle of some $300-400 billion. A successful book will typically only earn revenue on that action at a rate of five to six percent, however, so these shortfalls could take time to make up.

News tags: del Lago Casino | New York | New York sports betting | Resorts World Catskills | Tioga Downs