Aspiring entrepreneurs enthralled by Colorado’s successful sports betting launch may want to find a way into the gambling industry. Opening a casino may seem like a dream, but there are many barriers to overcome. The cost alone would make investors blush, but the regulatory and competitive environments add to the challenges aspiring casino operators face.
How Do You Even Get Started Opening A Colorado Casino?
Anyone planning on opening a Colorado casino has an unimaginable amount of paperwork ahead of them. First, a casino owner must:
- Go to the Colorado Department of State website.
- File a new form under the ‘File a Business Document’ section of the website.
- Complete and submit the form along with the necessary payment for processing fees.
However, registering a business with Colorado’s Department of State is the easy part. The Department of Revenue has the daunting pile of paperwork. The Colorado Business License Application for gaming operators lists the many pieces of information needed, including:
- The long list of additional forms in Sections 2 through 5.
- The fees and background deposits, which hover around $10,000 each.
- The questionnaire at the end, which could automatically disqualify founders from legally opening a casino.
That may sound like a lot, but no one who’s serious about opening a casino should be surprised. Gambling is a heavily regulated industry to prevent money laundering, match fixing, and fraud. That’s why there are automatic disqualifiers that can stop would-be founders in their tracks. Automatic disqualifiers include past felonies or gambling convictions and being a police officer in one of the counties where gambling is legal. Conflicts of interest are weeded out early, making gambling safer for consumers.
Where Can Casino Founders Open A Casino In Colorado?
In 1990, Colorado voters decided that gambling could be legal in three cities:
Gambling is further restricted down to specific counties and commercial districts within these cities. Aspiring casino owners would have limited construction space and little room to negotiate with landlords. And that’s before considering what the competing casinos would do.
Changing the law to expand casino locations is difficult too. That would require an amendment to the Colorado Constitution. In fact, Coloradans had to vote on Amendment 50 to raise the maximum bet limit from $5 to $100 in 2009. Amendment 50 also allowed craps and roulette into casinos and allowed casinos to operate 24 hours per day. It passed with 58.70% of the voters’ support, so voters are amenable to gaming expansion. However, relying on the democratic process for change is slow–but admirable. Entrepreneurs who want to open a casino should consider the current three betting cities their only options.
How Do Colorado’s Casinos Compete With Each Other?
Once the paperwork is done, aspiring casino owners must figure out how they’re going to stand out from the other casinos. There are tight limits on the games and maximum wagers that Colorado casinos can offer. That means the things that set casinos apart from each other are small.
One gaming industry study found something casino owners may be interested in. According to the article’s abstract, patrons who used certain casino amenities tended to gamble more money. That included patrons who:
- Frequented high-end restaurants and coffee shops.
- Watched shows at the hotels and casinos.
It makes sense, since these amenities keep customers in the casino. The more time customers spend on the casino floor, the more likely they are to gamble. (It’s also why casinos don’t have clocks.) All casinos have glitzy environments, gorgeous slot machines, and gambling options that look eerily similar to the other casinos. They compete on trivial differences that aim to keep bettors on the casino floor longer and get more customers through the door than their competitors.
How Much Does Opening A Colorado Casino Cost?
If anyone out there still wants to open a casino, they still have to confront the price tag. This is only an estimate, but this is how founders go present to investors.
The licenses will run about $20,000. That covers a retailer license and an operator license. That’s before renewal fees, but founders won’t have to worry about those for two years after securing their first licenses.
Then there’s every cost that goes into opening the casino. The construction, the design, the extravagant floors and ceilings. Every video slot machine, craps and roulette table, and every other gaming table–complete with staff–are a massive cash investment. The MGM Grand Resort and Casino cost about $1 million to build, and it was far from the most expensive.
Finally, the ongoing operating costs will continue burning holes in a casino founder’s wallet. Comps, taxes, payroll, and other expenses can make up about two-thirds of a casino’s revenue. For a new casino making $273.8 million the first year, that could be $180.71 million in operating expenses. That would leave $93.7 million to pay investors back, which sounds pretty good.
But if a new casino can’t make the slim margins on its games work, then a founder could be at least $1 million in debt with investors and staff breathing down their necks for money. To prevent that, founders need an aggressive marketing budget pre and post launch to get enough customers.
That’s a tentative $1.1 million budget to start with. Have fun putting that investor pitch together.
Do You Still Want To Open A Casino?
The mountain of paperwork that casino founders have to do is one extensive. However, it weeds out bad actors who shouldn’t be running casinos, anyway.
It’s also the least of a potential founder’s worries. Casino founders can only build casinos in three Colorado cities. (Tribal authorities have their own rules and guidelines, and most founders won’t open on tribal lands, anyway.) Founders can only differentiate their casinos in small ways from the recognizable brands that’ll be right next door. And if all that wasn’t enough, it’ll cost a conservative $1.1 million to get it all started.
Colorado may not be the best place for a founder to open their first casino. However, a successful brand could come in from out of state and put a location up in one of the three casino cities. They’d need some of the limited space in one of Colorado old mining towns, so it could be hard to secure space for a new casino. But if Colorado innovators want to get into the gambling business, they may consider finding another way in.