Entrepreneur Takes a Chance on What Gambling’s Big Fish Have Overlooked : Gaming: Jon Elliott seeks out remote markets in need of an economic turnaround. But not all have laid out the welcome mat.
From a desk at his home in Agoura Hills, casino executive Jon Elliott has set out to bring gambling to small-town America.
It’s not a quest for the faint of heart.
In search of virgin casino markets, the CEO of Royal Casino Group Inc. ventured to some of the poorest districts in America--from the black-dirt farmland of southern Missouri to a remote, drizzly corner of the Pacific Northwest.
He’s been jostled by crowds of hostile Baptists and thwarted by small-town politicians. He’s struck a deal with a struggling Indian tribe, only to leave baffled, angry and $10,000 poorer.
His tribulations contrast sharply with the swift and seemingly effortless ride to wealth enjoyed by those who got in on the gambling boom early.
In the last five years, such companies have struck it rich as new casinos have sprung up in 24 states, said I. Nelson Rose, a gaming expert at Whittier Law School. Today, new-jurisdiction casinos--those in Mississippi, Colorado, South Dakota and other states--get more visitors per year than casinos in Atlantic City and Las Vegas.
But the boom is already ebbing a little. Four years ago, a Midwestern company was able to turn $400,000 in assets into $153 million in annual revenue. Today, Elliott, who runs the company from his home, thinks himself lucky to have so far purchased just one small, money-losing casino in South Dakota, with a couple of million in annual revenue.
Small entrepreneurs--who first cleared a path into new jurisdictions--are now squeezed by competition from large, well-financed rivals. Big, easy profits are harder to come by. Entry costs are higher. Some markets are saturated.
“The price of poker has gone up,” said G. Dan Marshall, spokesman for Argosy Gaming Co. of Alton, Ill.
Elliott maintains that gambling “is still a gold rush.” But until more states open their doors to casinos, “the easy markets have all been taken,” Rose said.
What’s left for a company like Royal are the remote market niches that the big firms overlook.
Enter gaming’s low-rent Wild West, where a single casino in a small, poor community can utterly transform the local economy.
In such places, gambling has a way of stirring up emotions and bringing cultural clashes into sharp relief. Each has “its own unique personality,” Elliott said.
Last April, for example, Elliott gave a $10,000 good-faith deposit to a Washington state Indian tribe with 60% unemployment, believing he would soon sign a contract with tribal leaders to develop a casino. Instead, Elliott says, the Quileute tribe entered into an agreement with another entity behind his back--and kept his deposit.
However, the Quileutes say they legitimately sought a new investor because Royal wasn’t moving fast enough.
It’s an example of the kind of lesson Elliott can’t afford to learn too often. He’s already attempted a handful of other casino enterprises, only to be set back by local political backlash, competition from bigger firms or last-minute changes in state laws.
But Elliott also says he has become more savvy since his early days. Once, he said, he gamely attended a Baptist rally in Scott City, Mo., where demonstrators were protesting a measure to allow casinos.
A California businessman in dress and manner, Elliott displays a polish that bespeaks an early, short-lived stint as host of a cable TV sports program. But he was unprepared for his encounter with Bible Belt passions. And the Baptists were even less prepared to accept him. “I barely got out alive,” he said.
Elliott recently signed an exclusive franchise deal, yet to be approved by the state Gaming Commission, with the Missouri town of Wyatt, population 376.
Wyatt, which lies amid corn, soybean and cotton fields, doesn’t make it to some maps. The official state estimate of unemployment in the region is 10.4%, twice that of the rest of Missouri. Descendants of migrant workers populate the countryside, and the poverty is generational, said Tammy Berg, a spokeswoman for the Missouri Labor Department.
“There is a lot of welfare here and an awful lot of people who don’t work,” said Edward Bowles, owner of a Wyatt sandblasting firm. “It’s not that they are out of work. They don’t work.”
Royal Casinos has proposed building a $13-million to $15-million riverboat in Wyatt that could unleash a mini-economic revolution there. The boat would pull in a projected $40 million in yearly revenue for Royal, Elliott said. It would also provide jobs for 300 people, he said. Moreover, taxes from gambling would increase the town’s general budget tenfold, from $80,000 a year to $800,000, according to Mayor Riley Fitzgerald.
Fitzgerald talks of fixing the city’s aging water well, building a park, buying an ambulance. The town has even annexed a skinny, five-mile strip of riverfront land, since it must be a river town to host a riverboat.
But the proposal has also sparked controversy in a community with a history of intricate racial politics.
Particularly incensed are some residents of the neighboring town of Wilson City, literally on the other side of the tracks from Wyatt and home to 210 African Americans. Wyatt, by contrast, is mostly white.
Wilson City Mayor Charles Jackson is angry that Wyatt has not assured his town a cut of expected casino revenues. He said Mayor Fitzgerald once offered Wilson City a 50-50 split if Jackson would organize a vote on a casino in his town, which he did.
At the time, Wyatt was also voting on casino gaming, and it looked like the measure might lose, Jackson said. If Wilson City was made to look like a competitor, Wyatt’s voters might be persuaded to change their minds, Jackson contends.
Fitzgerald calls that account untrue and says Wilson City’s vote did not influence Wyatt’s. But Jackson hints at legal action. “We are not going to let them treat us like that,” he said.
For his part, Elliott says he’s disappointed by the dispute but not surprised.
“That’s Southeast Missouri,” he said. “It’s a different world.”
He said he has tried to persuade both sides that the project would benefit both towns, but the rivalry persists: “They told me I don’t understand; I’m not from around there,” he said.
None of which has shaken Elliott’s faith in the stock argument of the industry: that casinos will repay the communities that host them with economic development. Missouri, for example, can credit riverboat casinos with the creation of 10,000 jobs.
But the Missouri Gaming Commission has begun to entertain new fears of market saturation. It is also worried that casinos take money from working people, and it now favors large, tourist-oriented projects with expensive related attractions that employ more people and are less likely to float away, said the commission’s executive director, Tom Irwin.
And in Wyatt, not all are convinced that a casino boat would be the answer to the community’s problems. If the market proves poor, riverboats “just have to fire up their little motors and they are gone,” Bowles said. “I don’t consider that economic development.”
All this could make it more difficult for Elliott’s project in Wyatt to get licensed. But he remains confident. After all, there are other Wyatts.
Elliott is looking into buying a small casino in rural Nevada. Though not a gambler himself, he is pressing ahead with the heady nerve that so befits the industry.
“An entrepreneur always believes he’s going to win,” he said.