DENVER – Nevada’s major gaming companies avoided Colorado for nearly two decades after casinos were legalized in the historic mining towns of Black Hawk, Central City and Cripple Creek.

It wasn’t much of a gamble.

Initially, bets in the state were limited to $5 and casinos were not open 24/7. The idea behind the 1990 legalization was to boost tourism in old west communities. Instead, analysts said Colorado’s casino customers spent a median amount that was far below the national average.

There was zero interest by Las Vegas or Reno casino operators to enter Colorado.

“The three gaming markets lacked quality assets,” said JMP Securities gaming analyst Jordan Bender. “These are not the easiest markets to get to, especially during the winter with snow and ice on the ground. The casinos were not ‘must go to’ destinations.”

Voters and Colorado casino supporters, however, didn’t give up.

Ballot questions in 2009 and 2020 increased and subsequently eliminated betting limits while adding gaming options normally found in Nevada casinos. Sports betting legalization in 2021 also helped make Colorado a market that gaming operators could no longer ignore.

Colorado's mountainous rural casino communities, where an old west setting mixes with the 21st century and where only a few working gold mines still exist, have turned the state into one of the top 15 gaming revenue-producing regions.

Macquarie Securities gaming analyst Chad Beynon said Colorado gaming has transitioned away from being an industry afterthought.  

“The changes have been slow. We’ll see if the growth continues,” he said.  

Expansion from tiny storefront casinos to mid-sized resorts has been taking place over the last few years. In Black Hawk, three properties account for more than 1,300 hotel rooms, roughly 85 percent of the total market. In Cripple Creek, a 300-room hotel-casino that is being built by Las Vegas-based Full House Resorts will double the market size when it opens next year.

Las Vegas and Reno gaming companies committed millions of dollars to change the perception of the Colorado casino communities, but also use the market as a way to draw new business, especially from the population-rich Denver area, to Nevada.

“This was an opportunity for us because Black Hawk didn't have a high-end property,” Monarch Casinos CEO John Farahi said of his Reno-based company’s 2012 acquisition of the former Riviera Black Hawk. “For us, this opened the market to attract more high-end clients.”

At the time of purchase, the Riviera casino was 32,000 square feet with 700 slot machines, 12 table games and a buffet. The casino did not have any hotel rooms.

Ten years and $442 million later, Monarch completed a total renovation of the renamed Monarch Casino Resort Spa Black Hawk that saw the casino double in size, expand its number of slot machines and table games, add a sportsbook and build a hotel tower that includes 516 rooms and suites, a rooftop pool and spa and 5,000 square feet of meeting space.

“We utilized every square inch of that property,” Farahi said of the site that is the first casino encountered by visitors arriving from the Denver region along Highway 119.

Monarch, which also operates the Atlantis in Reno, does not break out total revenue and cash flow by property in its quarterly earnings. But Farahi said the Black Hawk casino is now the company’s flagship resort.

He said it would be a challenge for another casino operator to copy Monarch’s investment.

“I don't know if there is as much land for somebody to come and do something significant,” Farahi said. “With the betting limits lifted, we were able to expand the property and bring the high-end market to Black Hawk, which is something you couldn’t do before.”

Truist Securities gaming analyst Barry Jonas said in a July research note that Monarch management indicated it was in the “second or third inning” of its strategy to attract big-spending players to Black Hawk. He said Monarch had more than 23 percent of the business in Black Hawk, which he expects will increase.

“Market share accelerated in the fourth quarter of 2020 when the first hotel rooms and expanded casino came online,” Jonas said. “The property is designed to attract higher-worth gamblers with a Vegas-esque experience.”

A Nevada influence in Black Hawk

In Black Hawk, a mountain town 45 minutes west of Denver, ownership changes reflect ties to multiple Nevada-based gaming companies.

In 2004, Las Vegas-based Ameristar Casinos bought the bankrupt Mountain High Casino and spent $80 million to renovate the property and change the name to Ameristar Black Hawk. The company spent $235 million to add a 536-room hotel tower in 2009 when gaming limits were first increased.

Ameristar is now owned by Penn Entertainment, which operates M Resort in Henderson and two casinos in the northeastern Nevada community of Jackpot.

Prior to acquiring Caesars Entertainment in 2020, Reno-based Eldorado Resorts bought Isle of Capri Casinos in 2017, which included the 300-room Isle Casino Black Hawk. The property was rebranded last month as Horseshoe Casino Black Hawk.

Reno-based Jacobs Entertainment operates two Black Hawk casinos, The Lodge and Gilpin Casino. Bally’s Corp., which is acquiring Tropicana Las Vegas, took over three Black Hawk casinos formerly owned by Las Vegas-based Affinity Gaming in 2020. A year earlier, Las Vegas-based Maverick Gaming bought a small Black Hawk casino and two Central City properties from a Colorado businessman.

The Grand Z Casino Hotel in Central City has been remodeled by a privately held company, and Johnny Z’s Casino in Central City has been renamed and rebranded as the Dragon Tiger Casino, an Asian-themed property.  

Maverick CEO Eric Persson said the branding comes from Dragon Tiger Noodle Co., a business he co-owns with celebrity chef Jet Tila. He hopes to attract Asian business from Greater Denver to Central City.

“Having baccarat added to what we can offer customers opens everyone up to the Asian communities in Colorado,” Persson said. “Getting rid of the betting limits and adding the games has expanded the market. You also have to credit Monarch because there weren’t a lot of rooms here. Anytime another place adds capacity, it helps everybody.”

Beynon said casino operators used to view their properties as a way to pad customer portfolios with potential players from Denver.

But with the 10-county Denver region having a population of almost 3 million, according to the most recent Census, the market is too big to ignore. Beynon expects the Black Hawk casinos will market to residents of the wealthier Denver suburbs, which weren’t a viable customer base until the operating structure changed.

“The goal is obviously to get those western Denver residents to change their perception of Black Hawk,” Beynon said. “With the changes, I feel like they could market to those customers in a different way. I think that’s important for Monarch in the way they run their business.”

Las Vegas and Reno casino operators also view Denver as a Nevada feeder market.

At Harry Reid International Airport, the Denver International Airport fills the second-biggest number of seats both coming and going. Only Los Angeles International Airport has more. An airport spokesman expects that status will hold through the end of 2022.

At Reno-Tahoe International Airport, Denver is the fourth leading destination for Northern Nevada, behind Las Vegas, Phoenix and Los Angeles.

Stifel Financial gaming analyst Jeffrey Stantial said Black Hawk “is a great market from a fundamentals perspective.” He noted that Denver was ranked as a top economy nationally for multiple years prior to the pandemic.

“Certainly the large-scale Monarch project is disruptive, given Ameristar was previously the only high-end product in town,” Stantial said. “Monarch’s growth thesis is more predicated on growing the VIP pool and overall market versus market share gains.”

No limits, more games

Colorado gaming prospects improved in 2009 when voters elected to increase betting limits to $100 per wager. The casinos were also allowed to add craps and roulette to their lineup.

The game changer came 11 years later when Colorado voters overwhelmingly approved Amendment 77, which removed wagering limits and allowed casinos to begin offering several previously forbidden games, such as baccarat, keno, and the big six wheel.

The market immediately shifted.

Colorado's gaming revenue topped $1.23 billion in 2021, the state’s highest single-year total, and the 14th highest of all commercial gaming states, according to the American Gaming Association.

Black Hawk and Central City casinos combined for $812 million of the total, which made the area the 15th largest commercial gaming market in the U.S. last year, finishing $100 million ahead of downtown Las Vegas.

Through June, Colorado gaming revenue was $646 million, up 15.1 percent for the first six months of 2022.

Sports betting added

In November 2019, Colorado voters narrowly approved Proposition DD, which legalized both online sports betting and retail sportsbooks with the tax revenue being directed toward statewide water-related projects and obligations.

Since launching in May 2020, more than $7.6 billion has been wagered on sports through June, with operators collecting revenue of $464.9 million. Colorado is practically an online monopoly with more than 98 percent of all wagers placed through mobile apps.

The regulations allow Colorado casinos to have sports betting deals with multiple companies. In June, there were 44 online and retail sportsbooks.

“With its very low taxes and license fees and its liberal market access climate, Colorado is arguably the most favorable online sports betting operating environment in the U.S.,” said Eilers & Krejcik Gaming analyst Chris Krafcik, who follows sports betting nationally.

He said Colorado has become “an ideal proving ground” for small sports betting brands with “disruptor-style ambitions” and a launchpad for newer companies. Krafcik also expects the state to see a turnover in sports betting operators.

“We think there is going to be a steady inflow of new supply in the coming years,” he said.

Colorado’s structure has allowed smaller Nevada-based sports betting companies to chart a path outside the Silver State.

Maverick Gaming and Monarch Gaming operate their own sports wagering platforms in Colorado. Circa Sports, which is owned by downtown Las Vegas casino owner Derek Stevens, has an online sports betting agreement with Century Casinos for its Cripple Creek property.

SuperBook, which is operated by the Westgate Las Vegas, has both retail and online sports betting agreements with Jacobs Entertainment at The Lodge in Black Hawk.

All the major sports betting operators are in Colorado. Caesars Sportsbook is building a retail space inside the Horseshoe Black Hawk. Penn National Gaming brought one of its first Barstool Sports retail sportsbooks to Ameristar Black Hawk.

But the process created some unusual market access agreements.

Strip gaming giant MGM Resorts International, which has casinos in eight states but not in Colorado, has an online partnership with the Midnight Rose Casino in Cripple Creek, one of three small storefront gambling halls operated by Colorado-based Triple Crown Casinos.

Bally’s Corp. attached its BallyBet online sportsbook to one of its Black Hawk casinos but signed online partnership agreements with DraftKings and FanDuel that are tied with its two other properties. A DraftKings sportsbook is inside Bally’s Black Hawk North.

Similar to most other states, DraftKings, BetMGM and FanDuel dominate the market with a combined 84 percent of the wagers and revenue.

Krafcik said Colorado’s sports betting environment is favorable to the large and small operators, including international-based sports betting businesses looking to gain a foothold in the U.S.

“If you want to go head-to-head with one of the big three, that's, of course, going to be very, very challenging,” Krafcik said. “If you're looking to proof-of-concept your product or showcase your capabilities in a U.S.-regulated environment, then Colorado is an economical market in which to do so.”

Cripple Creek seeks a larger piece of the action

Cripple Creek, which is located an hour west of Colorado Springs, should see a boost in gaming revenue and visitation through the development of a $250 million casino-hotel by Full House and the transformation of an older casino into a Golden Nugget by billionaire Tilman Fertitta.

JMP’s Bender said Cripple Creek has not expanded like Black Hawk because it doesn’t draw business from Denver, which has almost four times the population of Colorado Springs.

“This goes back to the market being underserved with a quality asset,” Bender said.

Full House, which has five casinos in four states, acquired Bronco Billy’s Casino in Cripple Creek for $30 million in 2016 and immediately expanded by acquiring the adjacent storefronts along East Bennett Avenue.

The investment set up competition across the street with Century Casinos, which combined several storefronts into one casino, and Colorado-based Triple Crown Casinos, which has three storefront properties – The Brass Ass, Midnight Rose and McGill’s.

Full House owns 17 of the 20 storefronts on its side of Bennett Avenue and would have owned the other three except Triple Crown wouldn’t sell the locations.

“They didn’t want us to have a monopoly on the street,” said Bronco Billy’s General Manager Baxter Lee, who came to Cripple Creek from Full House’s Silver Slipper Casino in Bay St. Louis, Mississippi, when company CEO Dan Lee (no relation) asked him to make the move.

The main reason for the switch was to help watch over the development of Chamonix Casino Hotel, which features a theme resembling Chamonix-Mont Blanc, the French alpine resort and site of the first Winter Olympics in 1924.

The property’s planned 300 hotel rooms would more than double Cripple Creek’s current hotel capacity. Chamonix will have an expanded gaming area, restaurants, meeting and convention space that can accommodate concerts and other entertainment, a rooftop pool, a spa, and a 300-space parking garage.

Baxter Lee pointed toward an empty space at the front entrance, where a jewelry store specializing in gold that pays homage to Cripple Creek’s mining legacy will be built. Chamonix is expected to open next year. He noted that many of Bronco Billy’s storefront units are not currently casinos and are being used by companies involved in Chamonix’s construction. One unit has model hotel rooms for Chamonix.

During Full House’s second-quarter earnings call, Dan Lee said Cripple Creek’s status as a historic district prohibited the company from building a large high-rise hotel.

“But we get to a significant size by sprawling out,” he said, explaining that the project took over former parking lots and other vacant land parcels.

“Full House is trying to put together a very nice asset, which the market lacks, in a much smaller encashment area,” Bender said. “From a market perceptive, this will drive more people into Cripple Creek, benefitting other operators, like Century.”

Stantial said it will be incumbent on Full House to increase consumer awareness of Cripple Creek’s transformation into a regional-destination market.

Cripple Creek could soon have another player in the market in Fertitta, whose Houston-based company owns Golden Nugget casinos in Las Vegas; Laughlin; Biloxi, Mississippi; Lake Charles, Louisiana; and Atlantic City.

In April, a $43 million deal for the Wildwood Casino and Hotel was announced. Fertitta said the property, which is currently the largest casino in Cripple Creek with 528 slot machines and 12 table games, and the largest hotel with 100 rooms, would be renamed and branded as a Golden Nugget.

“Golden Nugget entering is a small positive,” Bender said. “The property itself is pretty small, but to have a brand like that come in could draw interest.”

Stantial said Fertitta would not have made the investment if he wasn’t convinced Cripple Creek could support two higher-end properties.

“I see it as a nice vote of confidence. Golden Nugget is a seasoned operator, and clearly sees merits to the growth thesis for Cripple Creek,” he said.