Illinois's Biggest Casino Boss Says a Chicago Resort Is a Tough Sell

(Bloomberg) -- Tim Wilmott, chief executive officer of Penn National Gaming Inc., said a high tax rate and other conditions laid down by Illinois legislators could make a casino project in downtown Chicago a bad bet.

Illinois passed legislation this month allowing for an ambitious expansion of legalized gambling, providing for six more casinos statewide and sports betting, along with slot machines at Chicago’s O’Hare International and Midway airports.

The law offers what seems like a plum opportunity: the first casino in the middle of one of the largest cities in the U.S.

But whichever operator builds the sole Chicago project, including the airport rights, will have to pay $120 million for licensing and fees, and hand over up to two-thirds of the revenue to the city and state, according to Wilmott. Slot machines in airports are less profitable, making those a tougher proposition, he said.

And even though Chicago doesn’t have a casino yet, such a property would face plenty of competition from suburban resorts.

“An already saturated market is going to get a lot more supply,” Wilmott said in an interview. “It’s going to make the Chicago casino a very difficult investment to make.”

While states continue to expand their gambling businesses as a way of generating tax revenue, they are beginning to see the limits of those efforts. Pennsylvania, for example, allowed for as many as 10 new minicasinos in 2017. But only five have been bid on by operators.

A spokesman for Las Vegas Sands Corp. said his company, which specializes in large, convention-oriented resorts, isn’t interested in Chicago. Caesars Entertainment Corp., another Illinois operator, hasn’t taken a public position. Matt Maddox, the CEO of Wynn Resorts Ltd., which this month opened a $2.6 billion resort near Boston, said that property could serve as a model for other big-city casinos.

Table Games

Wilmott said states typically impose lower tax rates on table games, such as blackjack, than on slot machines. Pennsylvania, for example, has taxes on slots of 54%, but only 16% for table games. While Illinois also does so, it adds additional fees earmarked for the city.

“I just wonder if it’s going to be slot machines only,” he said. “Because given the labor it takes to run table games and margins associated with table games, I don’t think you can make a profit.”

Shares of Penn National fell as much as 1.8% in New York. They had gained 2.2% this year through Thursday, trailing the 17% gain for the S&P 500 Index.

Penn National is based in Wyomissing, Pennsylvania, but it knows a thing or two about the Illinois market. It’s the largest casino operator in the state, with three properties and a business providing slot machines in bars.

Discussion by local politicians that the Chicago casino be located in an economically depressed part of the city also gives Wilmott pause. Traffic and the availability of parking can make downtown locations difficult.

“I’ve always had the mindset that if I had a choice of a great suburban location or a great urban, city location, I would always take the suburban location first,” Wilmott said.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum

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