The Effect of Casino Proximity on Lottery Sales:

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Zip Code-Level Evidence from Maryland. 10. th. European Conference on Gambling Studies and Policy Issues. Helsinki, Finland. 11 September 2014. Douglas M. Walker . and. Will E. Cummings. Background. ID: 670110 Download Presentation

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The Effect of Casino Proximity on Lottery Sales:




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Presentations text content in The Effect of Casino Proximity on Lottery Sales:

Slide1

The Effect of Casino Proximity on Lottery Sales: Zip Code-Level Evidence from Maryland

10th European Conference on Gambling Studies and Policy IssuesHelsinki, Finland11 September 2014Douglas M. Walker and Will E. Cummings

Slide2

BackgroundMaryland lottery established in 1973

Annual Sales reached $1 billion in the 1990s, then moreBut traditional products began to decline in early 2012Maryland’s first casino (Hollywood) opened in 2010Except for Virginia, Maryland is surrounded by casino statesDelawareWest VirginiaPennsylvaniaNew Jersey & Ohio also in the region2

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Casino Proximity and Lottery Sales

Slide3

Map of Northeast USA

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Slide4

Figure 1. Annual lottery sales in Maryland and states

nearby(excludes VLT sales)

Data

source:

LaFleur’s

2009 World Lottery Almanac,

LaFleur’s

Magazine, and state lottery annual reports.

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Slide5

Figure 2. Maryland and nearby casinos

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Slide6

Background, continuedStudy purpose: Analyze lottery sales data to determine if/how lottery has been affected by casinos in and around Maryland

We also analyze proximity of casinos on lottery salesLottery data provided by Lottery’s vendor, Scientific GamesVendor-level monthly sales data on 17 lottery games offeredJuly 2009 through February 2014Data begin over 1 year before first Maryland casino opened11 September 2014Casino Proximity and Lottery Sales

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Slide7

Casinos in MarylandFour casinos operating during sample period2014 FY revenues of $833.3

mnVLT revenue: $578.4 mnTable game revenue: $254.9 mnHorseshoe Baltimore opened August 26MGM National Harbor to open in 201611 September 2014Casino Proximity and Lottery Sales

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Slide8

Hollywood CasinoPerryville, MD

Opened September 27, 20101,500 machine games (since reduced)22 table games (added March 2013)FY 2014 revenues of $85.7 mn

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Slide9

Casino at Ocean DownsBerlin, MDOpened January 1, 2011

800 machine gamesNo table games (yet)FY 2014 revenues of $52 mn

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Slide10

Maryland Live! CasinoHanover, MDOpened June 5, 2012

4,332 machine games177 table games FY 2014 revenues of $754.4 mn

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Slide11

Rocky Gap Casino ResortFlintstone, MDOpened May 21, 2013

550 machine games10 table gamesFY 2014 revenues of $41.2 mn

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Slide12

Lottery trendsData indicate positive sales trend until early 2012, then sales begin to declineDownward trend continues through end of sample period

“Monitor” and “Monitor” games appear to have most negative trends11 September 2014Casino Proximity and Lottery Sales12

Slide13

Figure 3. Total monthly sales, all Maryland lottery games

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Slide14

Table 1. Lottery game groups

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Slide15

Figure 4. Total monthly sales, by game type

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Slide16

Table 2. Review of literature

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Slide17

Tools for analysisSoftware allows us to sort lottery retailers/ sales by

county or zip codeZipCTAs – populated zip codes, data from Easy Analytic SoftwareScientific Games provided county, zip codeWe also use “travel time” Calculated using Microsoft MapPoint softwareSample spot-checked by hand with MapQuest and Googlemaps11 September 2014

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Slide18

Scale of analysisLottery sales data are monthly, by retailerShould we analyze casino effect by county, zip code, or individual retailer?

Maryland counties are large, and Maryland Live is near border of three countiesZip code-level analysis is possible and provides a more ‘micro’ view of effectsRetailer-level would be extremely complicated and tedious, with few advantages4 million data points…11 September 2014Casino Proximity and Lottery Sales

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Slide19

“Simple” analysisWe compare lottery sales for periods before and after casinos openingCounty-level sales data

Analyze trends in lottery sales, by gameResults are mixedTable summarizes (next slide)11 September 2014Casino Proximity and Lottery Sales19

Slide20

Table 3. Summary of apparent near-term impacts on local lottery sales

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Slide21

Econometric analysesModel explains “change in sales” (Δ

Sales) over the same month the year beforeControls for other factors that might affect lottery salesThis is the first study to explain lottery sales using an intra-state casino proximity variableOther studies found negative impact from adjacent state casinos11 September 2014Casino Proximity and Lottery Sales21

Slide22

The modelExplanatory variables:“change in gravity

” (Δ Gravity) over the same month the year before“Gravity” = 1/travel timeZip code fixed effectsTime period fixed effectsThe model: Δ

Sales$

i,t

=

Constant +

Δ

Gravity

i,t

+

ε

i,t

(Constant = Zip fixed effects + Time fixed effects)

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Slide23

Table 4. Basic regression results

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Slide24

Interpretation of resultsGravity coefficients are negative and significant

Interpretation of coefficients for panel data (many zips, 56 time periods) isn’t intuitiveWe show the results in terms of the impact of a casino opening within certain travel times to an “average” zip codeResults are relative to baseline in which the closest casino being 75 minutes away11 September 2014Casino Proximity and Lottery Sales24

Slide25

Figure 5. Impact of new casino opening on Δ Monthly Sales for the “average” zip code(

relative to the closest casino being 75 minutes away)(A) $ impacts

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Slide26

Figure 5. Impact of new casino opening on Δ Monthly Sales for the “average” zip code(relative to the closest casino being 75 minutes away)

(B) % impacts

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Slide27

Casino-specific effectsWe next model the incremental impact on the lottery from each casino individually

Variables are casino dummies multiplied by Δ GravityThis isolates the Δ Gravity in each month to the casino responsible for the Δ GravityModel is again run for each type of lottery game:

Δ

Sales$

i,t

=

Constant

+ Δ

Gravity

+ (Hollywood dummy * Δ

Gravity

)

+

(Ocean Downs dummy * Δ

Gravity

) +

(Maryland

Live dummy

* Δ

Gravity

)

+

(Rocky Gap dummy * Δ

Gravity

)

+

e

i,t

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Slide28

Table 5. Casinos’ marginal effects regression results

 

Instant

 

Monitor

Pick

Multi-State

Other

Constant

461.3882

(0.0041

)

126.4801

(0.6672)

243.9563

(0.0587)

4694.665

(0.0000)

113.0446

(0.0012)

Δ Gravity

106141.6

(0.0912)

-169793.8

(0.1402)

-98848.99

(0.0503)

-323071.3

(0.0002)

-1340.454

(0.9215)

Hollywood * Δ Gravity

41139.52

(0.5437)

-3051.307

(0.9804)

49385.73

(0.3644)

236052.6

(0.0002)

-7791.387

(0.5953)

Ocean Downs * Δ Gravity

-229378.6)

(0.0001)

-227340.3

(0.0307)

3171.605

(0.9452)

102920.0

(0.1979)

-18736.27

(0.1320)

Maryland Live * Δ Gravity

-480594.6

(0.0000)

-366019.8

(0.0021)

-3719.379

(0.9432)

74634.02

(0.4087)

78948.39

(0.0000)

Rocky Gap * Δ Gravity

-39262.92

(0.4677)

303612.4

(0.0022)

107688.5

(0.0132)

450357.2

(0.0000)

37140.16

(0.0015)

n

 

16,403

16,403

16,403

16,403

16,403

R

2

0.261405

0.151262

0.261922

0.437304

0.337682

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Slide29

Monetary estimates from resultsWe calculated the impact of all Maryland casinos on annual lottery sales

Based on last full year of sales data (3/13 – 2/14)Δ Gravity from first to last period, mult. by Δ Gravity coeff from Table 4 (aggregate regression)Next we calculated impact of each casino on annual lottery salesΔ Gravity plus marginal impact coeff of each casino (from Table 5), multiplied by Δ Gravity

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Slide30

Table 6. Estimated impact of all Maryland casinos on annual lottery sales($ millions)

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Slide31

Table 7. Estimated impacts of individual Maryland casinos on annual lottery sales($ millions)

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Slide32

Forecast of new casinos’ impactsLastly, we forecasted the likely impacts of the Horseshoe Baltimore (opened 8/26/14) and MGM National Harbor (to open summer 2016)

Assume that each casino has marginal impacts similar to Maryland Live casinoBoth new casinos are in populous areas, like Maryland Live11 September 2014Casino Proximity and Lottery Sales32

Slide33

Table 8. Forecasted impact of two new casinos on annual lottery sales($ millions)

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Slide34

ConclusionExisting casinos have caused a decline in annual lottery sales of $44-50 million

Two new casinos expected to cause decline in lottery sales of another $45 million Total casino impact on lottery around $95 million, around 5.5%This is the first study to analyze…Effect of casino proximity on lottery salesImpact of casinos on individual lottery game typesThe model could be applied to other jurisdictionsFollow-up research on net tax impact of new casinos11 September 2014

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Slide35

Contact informationDoug Walker

ProfessorDepartment of EconomicsCollege of Charleston66 George St.Charleston, SC 29424USAdougwalker2@gmail.comWill Cummings

President

Cummings Associates

135 Jason St.

Arlington, MA 02476

USA

cummingsw@aol.com

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Casino Proximity and Lottery Sales


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