Colorado casinos went bust when coronavirus hit. Here’s why they see a lucky streak ahead.

BLACK HAWK — Sean Demeule leans over the railing and surveys a silent sea of slot machines in the state’s largest casino. 

The general manager of the 523-room, 1,250-slot Ameristar Casino Resort shakes his head and chuckles quietly. It’s the only sound in the cavernous gambling hall. 

“It would never be like this. Ever,” he says. “I’ve never seen it like this.”

The shuttering of casinos on March 16 triggered the steepest decline in Colorado casino revenue and gambling taxes since voters first approved limited-stakes gambling in Cripple Creek, Black Hawk and Central City in 1990. In the past 30 years, the state’s now three dozen casinos endured growing pains, corporate ownership and recessions with aplomb. But COVID-19 will leave a scar on Colorado’s resilient gambling hamlets, where casinos have spent the past decade weaning themselves from overwhelming dependence on gambling with festivals, concerts, hotels, outdoor recreation and amenities beyond betting. 

As casino operators large and small ponder the next card to fall, they wonder if they can lure gamblers who are reticent about a trip to Las Vegas. They pray the pandemic subsides in the Front Range, which would enable them to partially open by midsummer. They worry that a prolonged closure of the casinos would undo the progress made on building a destination. And a state that has grown dependent on a steady flow of gambling taxes is just as eager to turn the gaming spigot back on. 

The takes from losing gamblers fell to $31.9 million in March, down from $72.8 million in March 2019. Gambling taxes collected from casinos fell to $5.1 million in March, compared with $13 million in the same month last year. April’s gambling tax collections will be zero this year, down from $12.3 million last year. And, barring any unlikely changes in state health orders limiting gatherings and travel to slow the spread of COVID-19, the gambling tax collections for May won’t be anywhere near the $13.6 million collected in May 2019. 

In March, April and May last year, gamblers in Colorado’s 33 casinos lost $213.4 million, which generated $38.9 million in taxes for the state, roughly the same amount as the same span in 2018. Those taxes support the Colorado Tourism Office’s $15 million annual budget, History Colorado and the state’s community colleges.

A lion’s share of casino revenues and taxes come from Gilpin County’s 12 large Black Hawk casinos and six smaller casinos in Central City. Noting how more than 82% of the county’s 5,900 residents work in hospitality around casinos shuttered by the COVID-19 pandemic, USA Today last week ranked Gilpin County as the nation’s most economically ravaged location, even though the county has only one confirmed case of the disease caused by the coronavirus. 

To make matters worse, up until late last week, casinos were left out of the federal relief effort. 

Some casinos now qualify for forgivable federal loans

CinDee Spellman worried for her family’s business when the Small Business Administration’s Paycheck Protection Program excluded businesses that counted more than a third of their revenue from gambling. 

“Quite frankly if you are in the casino business and you have less than 33% coming from gaming, you are in the wrong business,” says Spellman, whose mom and dad started Central City’s Dostal Alley casino and restaurant in 1991. 

Dostal Alley remains a family affair. Spellman’s brother Buddy Schmalz brews the beer and sister Lisa Boulter manages the casino, brewery and restaurant. Spellman does the books. They have 22 employees and without federal assistance, the family was worried about those workers. Late last week they heard that the unlikely D.C. alliance of Boulder Democrat U.S. Rep. Joe Neguse and Yuma Republican U.S. Sen. Cory Gardner had persuaded the SBA to adjust its Paycheck Protection Program to allow participation by small businesses that collect revenue from gambling.

“Oh my gosh, such a blessing. Just a huge relief,” Spellman says. “I had to read it twice.”

The larger casinos in Black Hawk — many owned by publicly traded companies — probably won’t qualify for SBA relief, but that doesn’t mean they haven’t been injured. 

After a year of surpassing earnings goals, the publicly traded Monarch Casino & Resort Inc., last week reported a 13% decline in net revenue, a 71% decline in net income for the first three months of 2020. The company, which operates another casino in Reno, is nearing completion of a $442 million expansion of its Black Hawk property, which will double casino space and offer more than 500 hotel rooms in a 23-story tower. 

In February, the company’s stock was trading at all-time highs of more than $56 a share. After sinking to less than $15 with the closure of its casinos in mid-March, the stock price has rebounded to more than $32 a share. 

Ameristar Casino Resort owner, Gaming and Leisure Properties Inc., is a Pennsylvania real estate investment trust that collects rent from 46 independently operated casinos in 16 states. The REIT, which earlier this month finalized its acquisition of Las Vegas’ famed Tropicana, reported a net income of $391 million on $1.2 billion in total revenues in 2019. That year-end financial report was released in late February and the company’s stock price peaked at a 52-week high of $50.30. Like gambling companies, its stock price collapsed in mid-March, reaching a low of $15.14 before rebounding to around $27 in late April. 

The roughly 50% decline in stock value mirrors other publicly traded casino operators across the country and in Colorado. 

Colorado Springs’ growing Century Casinos, which operates 11 casinos and racetracks — up from two casinos in Central City and Cripple Creek in early 2019 — was trading for around $4 a share in late April, down from more than $8 for most of the last year. 

Rhode Island’s Twin River Worldwide Holdings, which owns Aurora’s Arapahoe Park racetrack, in January acquired the Golden Gates, Golden Gulch and Mardi Gras casinos in Black Hawk for $51 million. Twin River was trading for close to $30 a share in February and less than $15 in late April. 

David Farahi, the chief operating officer of Monarch Casino Resort, said his company is not applying for the PPP, but cheers the inclusion of smaller casinos. 

“There are 33 casino licenses in the state and the majority of them will be able to benefit from being included in the PPP. It’s just hugely beneficial for the industry,” says Farahi, who also serves on the Colorado Tourism Board. 

It used to be that gambling was recession-proof and able to weather the ups and downs of the U.S. economy. But that was when there was a limited supply of casinos and gamblers had to travel to Las Vegas or Reno or Atlantic City to play. In the past decade, the number of casinos across the country has grown, giving gamblers a wider choice of options, with some casinos thriving while others fall behind. “I don’t believe that gaming as an industry is recession proof at all anymore,” Farahi says. 

And casinos have never had to shut down, coast to coast. The pandemic could be the final hand for casinos that already were not healthy.

“Already one small casino in Lake Tahoe has announced it is closing and not reopening,” Fahari says. “I would not be surprised if we hear more of that in the coming weeks and months. I guess I would call it a market correction.”

But Farahi, who plans to hire an additional 1,000 workers when he opens his 23-story tower with 500 rooms, is not worried about Black Hawk and Central City. He sees Gilpin County’s casinos not keeping up with the explosive growth of the population and economy on the Front Range. Most mature gambling markets, he said, keep up with neighboring urban areas.

“In Colorado’s case, I think it’s less of a supply and demand issue and more of a quality of supply issue,” says Farahi, noting that Denver area residents make up the fourth largest feeder market for Las Vegas, indicating that Front Rangers are fans of gambling resorts, “but many choose to go out of state.” 

“We certainly believe there is untapped demand in the Front Range and there may be even more than we are providing,” he says.

“We need to make sure it’s safe down there before we can let anyone up here”

Gilpin County Commissioner Ron Engels has been working with Jefferson County Public Health to plan how casinos might open. (The county is relying on the Jefferson County health department’s direction during the pandemic.)

“Which is nowhere near soon enough,” says Engels, scraping a bit of paint from his forearm after a few hours of work on the 1887 house he has spent more than 20 years renovating with his husband, Zane Laubhan, Gilpin County’s coroner. “We are figuring at the very best, some time in June or maybe even July. We need to see things stay under control in the metro area. We need to make sure it’s safe down there before we can let anyone up here.”

And he’s not sure people will want to come gather in casinos anytime soon. That leaves him wondering if smaller casinos will open first as the larger venues wait. 

“That is pure speculation, but it feels like a reasonable path for us to get back open,” he says. 

Engels says if the gambling industry and state lose 25% of their annual revenues and taxes, “we’ll be lucky.”

“Certainly before the summer is over we have got to get people back up here. For a tourism-based economy, we cannot go for months and months and months without having our visitors,” he says. “We will feel huge impacts all summer long.”

One of Engel’s longtime platforms for Central City, where he served a decade as an alderman and mayor, and now with Gilpin County, is the idea of expanding beyond gambling. He has supported the expansion of events at the venerable Central City Opera, a calendar of festivals and gatherings every summer in Central City as well as Black Hawk’s expansive work to grow beyond casinos.

In the past five years Black Hawk has expanded downtown’s Gregory Street to fit a casino-free pedestrian plaza as part of a plan to diversify the city’s economy with restaurants, venues, breweries and bars. The city of fewer than than 150 residents has launched massive new projects that include the largest distillery in Colorado, a hotel, event venues, housing, bike trails, camping and amenities beyond gambling. Last month the Black Hawk City Council annexed more than 221 acres for the Lake Gulch Whiskey Resort project, which will include a new Colorado distillery for Tin Cup Whiskey. In 2016 the city of fewer than 150 residents orchestrated a land swap with the Bureau of Land Management for hundreds of acres atop Maryland Mountain above town, where the city is developing trails and a reservoir. 

“I’ve been in the public office for 15 years now and I’ve been beating the run of economic diversity since day one and it’s finally getting some traction,” Engels says.”That is absolutely the biggest takeaway from this. Making sure we are no longer dependent on one industry. It’s hard though. That’s been the story of Gilpin County since 1859.”

Casino bosses wonder if fear of flying will bring Vegas gamblers to tables closer to home

Demeule, at Ameristar, sees a slow, phased return of gambling in Black Hawk and Central City to a pace similar to the days before the state ordered casinos closed. At first, every other slot machine would be turned off. Table games would be limited to only three players. Tables in restaurants would be removed to limit proximity of diners. He’s not seeing a big roster of events or concerts on the near horizon.

He wonders, like Farahi at Monarch Casino, if maybe Colorado’s Las Vegas-bound gamblers might be more keen to stay closer to home. 

“I imagine it’s going to be some time before people feel comfortable getting on a plane,” Demeule says. “Once it’s safe for us to reopen again, I hope we are seen as a great alternative to Vegas for folks who normally travel for their gaming experience.”

Spellman, cradling her dog on the outdoor patio of her family’s restaurant casino, also wonders what the reopening will look like. Maybe restaurants will open before the casinos? Maybe the small casinos open before the larger operations? Maybe Central City’s Hot Rod Hill Climb in September can happen, like last year, when her parking lot was lined with food trucks and beer taps. 

“It’s not an if, but when. And when we open, we will, of course, make sure we are complying with all the rules and providing the safest, most sterilized — isn’t that such a bizarre thing to say — environment for our guests and employees,” she says. “What will that look like? It will be different. But different doesn’t mean bad.”

Spellman’s grandparents moved to Central City in 1958. Her mom and dad moved their family of six to the mining town in 1972. The Schmalz family has seen gold mining in what was once known as the “richest square mile on Earth” be replaced by mining for gambler dollars. They watched mom-and-pop casinos struggle under the shadow of massive casinos in Black Hawk that sprouted when Central City leaders imposed a development moratorium in 1992. 

They’ve been through a crisis or two. What have they learned over the years that is helping them stay afloat in this pandemic?  

“We are family-run … and this is the epitome of family-run right now,” says Spellman, rolling through the myriad tasks she and her siblings have on their daily to-do list as they keep the family business afloat without employees. “Every single one of us in the last six weeks has been doing something we’ve never done in 29 years here.”

The Central City Opera hasn’t officially announced its plans for the 2020 Festival, which features almost daily events through July at the 550-seat historic venue. Commissioner Engels suspects they will cancel and remain dark all summer. That would send even more painful ripples through the community of Central City. 

“We are waiting for an announcement from them,” says Eric Miller, president of the Gilpin County Arts Association, the longest continuously operated nonprofit arts association in Colorado. 

Miller has spent months collecting entries for the association’s annual art show scheduled for early June in the group’s 5,000 square-foot gallery. This year will be the 73rd annual juried art show, which is the single largest event supporting the association. 

“If the casinos aren’t open and the opera house is not open, there’s no reason for us to be open because there won’t be anyone up there,” says Miller, standing in the middle of a carless street in downtown Central City, smoking a cigarette as he takes a break from his day job as a house painter.  

He’s got “somewhere around 30” buildings to paint. Casino operators are calling him with their federal relief money asking for him for touch-ups and new coats of paint. He’s happy to be busy but, like his neighbors, he wonders what the future of Central City gambling holds. 

“I think a lot of people might be saying ‘Wow look at how much I saved this month by not going to casinos,’” he says. “But trust me if the states said the casinos were going to be open tomorrow, we would have 10,000 people up here at 8 a.m. guaranteed. Man do people love to gamble.”