Lottery sales lag as casinos open
Local business hurt, blame big Keno prizes and free drinks
This story was orginally published on June 23, 2008.
Gambling halls can't seem to open fast enough in Western New York.
The Seneca Niagara Casino. Seneca Allegany Casino. The upcoming Buffalo Creek Casino.
But at lottery counters across the region, business is foundering, even dropping in some communities, including those where casinos operate.
"It's the casino," said Joann Massaro, a Niagara Falls bar owner. "My Quick Draw is down I would say $2,000 a month. You'll have six people at the bar, and four of them will start talking and they all go to the casino. It's got a lot of my business."
While lottery sales statewide jumped 26 percent between 2002 to 2007, sales in Cattaraugus County -- home of the Seneca Allegany Casino -- plunged 7 percent, representing one of the biggest drops in the state.Lottery sales in Niagara County, home of the Seneca Niagara Casino, dropped after the casino opened in 2003 and have been generally flat ever since, up just 1.5 percent over the five-year period.
And Erie County, where a small temporary casino operates until Buffalo Creek opens, is among a handful of counties statewide that saw lottery sales dip in each of the past two years.
Lottery sales fall
Other communities in Western New York are having similar experiences. The five New York counties where lottery sales dropped from 2002 to 2007 include Chautauqua, Wyoming and Cattaraugus. Six of the eight Western New York counties saw lottery sales decline in the past two years. Beyond the area's population loss -- about 3 percent since the beginning of the decade -- state lottery officials speculated the lackluster lottery sales in Western New York reflect competition for gamblers' dollars.
"The whole gaming environment is increasingly competitive," said New York Lottery Director Gordon Medenica, citing video lottery terminals, horse racing and cross-border lottery games as well as casinos. "It's a tough, competitive business."
Lottery officials said they don't know the specific impact of casinos on the lottery market. The Buffalo Niagara region -- with Seneca Niagara and soon a full-service Buffalo Creek -- is the only large New York market with a casino, they said. Turning Stone, an Indian-run casino near Utica in Central New York, is in a much smaller market, as is the Seneca Allegany Casino.
"The only relevant market is probably Buffalo," Medenica said.
Canadian officials, who have experience building casinos as well as operating a government-run lottery, don't believe there's a relationship between casinos and lottery games.
"Our lottery business has held steady and continued to increase modestly, even as casino sites have been developed in the past 10 to 15 years," said Don Pister, a spokesman for the Canadian lottery and casino operations. "They are different products. A casino is going out for a period of time, and the lottery is more wish and dream." Nonetheless, of 120 Niagara County merchants who sold lottery tickets in 2002 and remained open selling lottery tickets in 2007, 60 saw their New York lottery sales decrease, a Buffalo News analysis found. Among those businesses is Joann's Village Gate, a neighborhood bar on Niagara Street in Niagara Falls, a couple of miles from Seneca Niagara Casino.
Sitting at the bar, Pete Paonessa said the lottery business was booming when he owned the tavern in the 1980s and 1990s, particularly when the Quick Draw game was introduced, offering a chance to win every four minutes.
But since the casino opened in 2003, the lottery business has trailed off, said Joann Massaro, who took over the business in 2001.
"A lot of people who came here to play Quick Draw stop by the casino," Paonessa said. "At the casino, you get food cheap, drinks free, you can smoke and [your chance of winning] money is better."
Casino's enticements
Albert Eugene, 67, a retired Occidental employee who stopped by Joann's for a drink, agreed.
Eugene used to be a regular Quick Draw player at Joann's, but he doesn't play there anymore. Instead, he stops in at Seneca Niagara Casino just about every day to play Keno, a similar game that pays players based on how many numbers drawn match the numbers the players selected on their tickets.
"Five numbers at Quick Draw wins you $300, but it's $800 at the Keno game at the casino," Eugene said.
Not only that, the draft beer at the casino is free.
"It's nice," he said.
The casino, however, isn't the only reason for the drop in lottery sales, vendors and customers said.
Down the street, Niagara Merry Mart store owner Wael Rizek blamed the economy for his worsening lottery sales.
"People lost their jobs. They are low-income," he said. "Ten years ago, people had money. Today, people would rather spend their money on more important things, rather than gambling money on the lottery."
Kathy Herrscher, who owns a Sunoco convenience store on Maple Road in Amherst, cited the economy and rising gas prices as reasons her sales are down.
"They're putting it into their tank," Herrscher said of those who have cut back buying lottery tickets. "With the gas problem right now, people are more conservative."
Her sales were down nearly $11,000 the first three months of this year compared with the same time last year.
Saturation point?
Whatever the reasons, whether casinos or the economy, the lottery business decline is evident in much of Western New York, raising questions about whether the region has hit a saturation point -- and about what portion of gambling revenues end up with the state Lottery Division, which sends a portion of the money to New York school districts, and what portion goes instead to the Seneca Nation.
In 2005, the Ontario government ended a decade of expansion of the gambling industry, raising speculation that the market reached its saturation point. No more casinos. No more video lottery terminals. No more slot machines. Lottery venues, however, were allowed to expand.
In Canada, the government oversees the entire legalized gambling operation, everything from lottery tickets to casinos.
In New York State, the Seneca Gaming Corp., which runs the casinos in Niagara Falls, Allegany and Buffalo, doesn't sell lottery tickets.
As for gambling, the Seneca Nation reported its gambling and hospitality net revenues up 11 percent in the second quarter of 2008, to $151 million, compared with the same period last year. The Nation sees room for further expansion, although it views its market as being beyond just Western New York.
"We are investing $333 million in Buffalo, so are confident that project is going to be successful," said spokesman Philip Pantano. "Our intent with all three of our properties -- Seneca Niagara, Allegany and Buffalo Creek -- is to attract visitors from outside of the region. To recoup a $333 million investment, we need to bring in outside visitors. There's not enough wealth locally to be able to recoup that significant investment just depending on the local customer base.
"We are looking at growing our presence in the Canadian market as well as places like Michigan, Connecticut and New England," Pantano said. "When we invest in our facility and build these resorts, we're not just looking at it as a local destination. It's a regional, as in Northeastern, destination."
As for the lottery, the Seneca Gaming Corp. doesn't view the state-sponsored game as its competition, he said.
"It's a different experience altogether -- playing the lottery versus visiting a full-service resort," Pantano said, echoing the Canadian lottery official.
New York lottery officials don't think their market is saturated, either. And they are pushing to expand their gaming business, particularly in upscale markets the lottery has trouble breaking into.
Most of their focus is downstate, which represents the bulk of lottery sales. The lottery's biggest market, for example, is in Brooklyn, where sales have increased by 36 percent in the past five years, followed by Queens, where sales went up 32 percent, and Manhattan, where sales increased 33 percent. Combined, these three New York City boroughs make up 37 percent of lottery sales statewide.
The eight counties of Western New York represent 6 percent of all lottery sales.
Still, Western New York is included in the lottery's statewide expansion plans.
In Buffalo and working-class communities such as Cheektowaga and Tonawanda, it seems there are lottery outlets on just about every corner.
But that's not the case in wealthier communities, like Orchard Park or Williamsville, where finding a lottery vendor can be a challenge.
"It was an easy decision not to offer the lottery here," said Maria MacPeek, general manager of The Irishman Pub & Eatery on Main Street in Williamsville, whose menu promotes "a commitment to authenticity."
"I don't think anything about it would fit here," she said. "I don't think our customers would play it or enjoy it."
"We've never had a call for it," added Charlie Muscarella, owner of Muscarella's Pizza, also in Williamsville. "No one's coming here to play the lottery. They're coming here to buy food."
The state's lottery director doesn't like to hear comments like these, but he said they nonetheless confirm his claim that there are many markets the lottery has yet to break into.
His goal, Medenica said, is to add 1,000 lottery outlets to the 16,000-plus now selling tickets.
"We should be like Coca-Cola," Medenica said. "We should be everywhere."
New York Lottery sales
How Western New York compares with the rest of the state
•Online games such as Win 4 and Daily Numbers are popular in Buffalo and New York City
•Lottery sales have not grown in Western New York as they have in most of New York State
•Quick Draw sales increased faster in most downstate communities than in Western New York
•MegaMillions sales rose faster downstate than in Western New York
sschulman@buffnews.com and plakamp@buffnews.com
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