Michigan is just one of six states with legal online casinos.
Since launching in January of 2021, Michigan’s online casinos have generated more than $3.17 billion in operator revenue and more than $817 million in state tax revenue.
However, the concern from states without iGaming is that the online product will eventually cannibalize the retail casinos in their respective borders.
If Michigan is any indication, that theory is just not true.
As the state’s online casino industry is thriving, Michigan’s tribal casinos are reporting gaming revenue ahead of 2019’s pre-pandemic numbers.
While Detroit’s three retail casinos aren’t hitting the same marks, their first quarter of 2023 was the strongest revenue showing since 2019.
Mix in the influx of online sports betting an iGaming revenue to their bottom line, and Michigan casinos are as strong as ever.
They should provide a great example for other states that are on the fence about legalizing online casinos.
2022 commercial gaming sets records in Michigan, U.S.
Across the United States, 2022 was a record year for the gambling industry, Michigan included.
In Michigan, the total commercial gaming value was $3.3 billion, which was a 20.7% increase from 2022.
Michigan’s 2022 numbers breakdown like this:
- Detroit retail casino revenue: $1.3 billion
- Detroit retail sports betting revenue: $19.1 million
- Michigan online casino revenue: $1.6 billion
- Michigan online sports betting revenue: $400 million
According to the American Gaming Association, all of the three major verticals – casino slots and table games, sports betting and iGaming – generated individual revenue records in 2022 in the United States.
Casino slots and table games generated a combined total of $47.83 billion. That accounted for 79.3 percent of total commercial gaming revenue. Sports betting brought in $7.5 billion (12.4%) while online casinos totaled $5.02 billion (8.3%).
The chart below shows that even as online casinos continue to grow in revenue, the same can be said for land-based casinos.
Tribal gaming surpassing pre-pandemic revenue levels
Michigan’s commercial gaming total doesn’t factor in tribal gaming revenue.
According to the 2022 Tribal Gaming Report from the Michigan Gaming Control Board, Michigan’s 23 tribal casinos made a collective payment of $30.8 million to local entities in 2022.
That number represents roughly 2% of the casino’s respective net win accrued over the year for its Class III slot machines. It’s the lone public insight into annual tribal casino revenue in Michigan.
That payment pushed out 50x is $1.54 billion, and that still doesn’t equate to the actual total of gaming revenue tribal casinos bring in.
The 2022 payment was just 2.2% short of matching 2021’s record payment of $31.5 million and was ahead of 2019’s payment of $30.5 million.
Similar to commercial gaming, the U.S. saw a new record for tribal gross gaming revenue in the last AGA report in the fall of 2022. In 2021, 515 tribal casinos nationwide produced $39 billion in GGR. That was a 13% jump from the previous record in 2019 ($34.6 billion).
What do online casinos provide retail operators?
Each brick-and-mortar casino operator in the state has struck deals with online casino and sportsbook operators.
These deals vary by casino and operators and aren’t clearly spelled out in terms of what the retail operators receives in revenue kickback.
In 2022, BetRivers brought in $104.3 million in online casino revenue and just under $4 million in online sports betting revenue.
“Actually, I think we did a good job (with our agreement with BetRivers). Our staff was already seasoned with online gaming, because they came from other states that had already had it. So, I think that the arrangement that we did, being a small casino and not having a whole lot of money, I think we’ve come out okay,” said Little River Tribal Ogema Larry Romanelli. “If you’re looking at the numbers of our online as compared to other casinos in the state, we haven’t done bad over the last couple of years.”
Hannahville Tribe thriving despite online struggles
Not all tribes are necessarily seeing things as optimistically, but that may be for good reason.
One tribe that has spoken out about online casinos is the Hannahville Indian Community, which operators Island Resort & Casino in Harris.
In an interview with the New York Times, Hannahville’s Chief Financial Officer Scott Herioux indicated that he feels online gaming is a hinderance to the retail product.
“If you’re a remote tribe that doesn’t have a large populace, and your competitive advantage was, ‘We have slot machines,’ well, that’s taken a hit now,” said Herioux in the interview.
Herioux’s frustration may come from its original online partner, TwinSpires, opting to get out of the Michigan online casino and sports betting industry last year.
That left Hannahville without an online casino partner for multiple months in 2022. Sports Illustrated took over the online sportsbook product and eventually received an online casino license in February of this year.
While Hannahville has been lagging behind with iGaming revenue compared to its peers, its brick-and-mortar casino appears to be performing ahead of the pack.
Hannahville made a $1.2 million 2% payment for 2022 over its tribal gaming revenue. That was a 6.3% jump from 2021, which was the second-highest increase of the state’s 12 tribes. It also was a 13.1% increase from its 2019 payment, which was also second-highest of the state’s tribes.
Though its online product may be going through some speed bumps, Island Resort & Casino appears to be stronger than ever.
Detroit casinos still catching up from 2019
Detroit’s three retail casinos have seen the biggest challenge of returning to pre-pandemic levels.
Despite leveling out in revenue from 2021 to 2022, the three casinos are still 13.6% down in retail gaming revenue since 2019.
Those numbers coincide with declining visitor spending numbers in Wayne County, home to the three casinos. In 2021, visitor spending in Wayne County was $5.5 billion, down 30% from 2019.
Even when looking at the three casinos, online cannibalization is a hard case to make outside of one.
The MGM Grand Detroit made just shy of $600 million in casino revenue for 2022. It would need to recoup just 4% of BetMGM Michigan’s online casino revenue from 2022 ($589 million) to reach its 2019 record of $623.5 million in retail revenue. That’s also not factoring in $6.24 million in retail sports betting revenue.
MotorCity Casino had $396.5 million in retail revenue for 2022 and $258.7 million in online casino revenue with FanDuel Michigan. That would require a larger chunk, 38%, of the online casino revenue to meet its record year of 2019 with $493.6 million.
Hollywood Casino at Greektown is the one of three to see the biggest declines since online gambling was legalized. 2022’s revenue of $260.5 million was 22.8% lower than that of 2019’s $337.2 million.
With its online casino partner, Bartstool Michigan, producing just $52 million in revenue for 2022, it has work to do to catch up to pre-pandemic revenue totals.
Even with these numbers, Detroit remained the eighth-strongest commercial gaming market in the country for 2022, according to the AGA. It’s $1.28 billion was just behind Philadelphia’s $1.37 billion for seventh place.
The $326.2 million in retail revenue for the three combined in Q1 of 2023 is also up 3.4% from 2022’s Q1 of $315.5 million.
In-person experience still triumphs at Michigan retail casinos
Casino operators in the state aren’t expressing much concern about online casino’s continued growth in Michigan.
Regardless of what online operators offer, it still can’t match the social experience of a brick-and-mortar casino.
“There’s people that say, ‘Oh my gosh, someday it’ll probably take it all over.’ It never will, in my opinion,” Romanelli said of online casinos. “(Retail casinos) are a social aspect for people that like to gamble. They like to go where there’s lights, and there’s action, and there’s other people, and maybe have a beer or two. So, online gaming doesn’t satisfy that need of people. We knew that there would be a percentage that would be taken away by online. So, we prepared for that and we’ve kind of leveled out.”
It’s the social setting that still drives many Michiganders to retail casinos. Facebook group What Happens At The Casino Stays At The Casino has over 11,000 members that still prefer to play at the casino amongst friends at family.
“I will tell you I haven’t done (online gambling) and I don’t intend to do it because for me the excitement for me is going to the casino,” said Tim Stevens, one of the group’s founders. “Online casinos don’t have the sounds and the environment that going to the casino does. Plus, I enjoy being at the casino with my friends. Just doing it on my phone doesn’t interest me.”
Retail casinos getting younger demographics
Though technology is typically a young-person’s game, retail casinos are actually seeing a younger average age.
Following the pandemic, the median age of casino-goers has been dropping. Whether it be safety concerns, or just a desire to socialize, the median age in 2022 was 42.4. That is compared to 49.6 in 2019, according to the AGA.
Casinos returning to non-gaming entertainment options
Retail casinos also have revenue drivers in non-gaming formats that are drawing in consumers.
As the state moves further from the pandemic, retail casinos have seen an increase in shows and concerts as well as restaurant and buffet options.
“We also want to attract the younger patronage as well, and that’s why we’re bringing dance and things like that back,” Romanelli said. “There’s some things that had to go away during COVID. Obviously, we distanced our machines more to make it safer for patrons. Now, we’re looking at things like bringing more music back, like acts on the weekends, maybe music during the week, and local bands. I think that’s part of the attraction of casinos.”
As the AGA study shows, while fewer people are going to casinos to primarily take in non-gambling entertainment, more are going to gamble and also make use of the other entertainment options.
All these indicators and studies shows that retail casinos are not being swallowed up here in Michigan. The addition of online casinos has only brought in more money for the state and strengthened the overall status of Michigan’s gambling industry.