Motley Fool Hidden Gems selection Ameristar Casinos this week announced the results of its study of the potential impact of a casino in three locations: Cape Girardeau, in southeastern Missouri; Sugar Creek, to the east of Kansas City; and Chain of Rocks, to the north of St. Louis.
Not surprisingly, Ameristar determined that placing the 13th casino in Cape Girardeau would provide the greatest increase in adjusted gross revenue (AGR) for the state, and thus the greatest tax benefit. It's not surprising because Ameristar already operates in both Kansas City and St. Louis, where others also offer gamblers a place to play.
Earlier this month, 15 groups reportedly had told the Missouri Gaming Commission they were interested in the license.
East of Kansas City … nah
Kansas City is not a growth market now and wasn't a growth market even before the downturn in the economy. Kansas City particularly doesn't need a casino on the east side of the market (the Missouri side), an area controlled by Ameristar, Harrah's, and Penn National's
If an area of Kansas City did need a casino, it would be the west side (the Kansas side), where both Pinnacle and Las Vegas Sands
North of St. Louis … uh-uh
A casino in north St. Louis might make sense if Missouri really wanted to compete with Illinois for gamblers in the area who now head to Penn National's Alton Belle on the Illinois side of the river. On the other hand, with the removal of the President Casino, the Alton Belle will be dead-last in the greater St. Louis market by a healthy margin, producing just $84 million in adjusted gross revenue, compared with the Casino Queen in East St. Louis, which was next-worst at $147 million.
So north St. Louis doesn't seem to be an area of pressing need.
Meanwhile, Ameristar and Harrah's dominate the west side of St. Louis, and Pinnacle controls the downtown metro-east area and south St. Louis.
Cape Girardeau in the southeast … now you're talking
Meanwhile, a casino in Cape Girardeau would make boatloads (pun intended) of sense for Ameristar. It's a great location. It's right off the major highway connecting St. Louis to Memphis (I-55) and about half-way between St. Louis and the next casino truck stop (Caruthersville), where Isle of Capri
A casino in Cape Girardeau would be a local area monopoly, and would not do much to cannibalize existing gaming business in Missouri, or at least not nearly to the extent that a proposed casino in Sugar Creek, east of St. Louis, or Chain of Rocks, north of St. Louis, would.
Ameristar projects that a casino in Cape Girardeau would produce adjusted gross revenue of $87 million, or roughly the current size of the north St. Louis gaming market without competition.
Jeff Hwang contributed to this piece; he owns shares of Ameristar Casinos, which is a Motley Fool Hidden Gems selection. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.