Dubuque casino sees huge spike in profits; new agreement ahead

Dubuque’s city-owned casino saw exceptional profits in 2021, and city and casino officials hope that with a new agreement, the community will see those profits continue.

Officials with Dubuque Racing Association, which acts as the license holder for both Q Casino and Diamond Jo Casino and leases the Q facility from the city, reported that Q Casino generated about $12 million in profits in 2021, based on the financial performance of the first 11 months of the year. These profits will be distributed to the city and local charities.

Those profits far exceed the previous year, which saw about $4 million in profits, and even exceed pre-pandemic 2019, in which the casino generated $4.6 million in profits.

“It was a very good year for gaming at the Q Casino,” said Kevin Lynch, chairman of the DRA’s executive committee. “What’s important is that we are now looking to maintain that level of profit.”

The exceptionally high profits of the Q Casino were revealed amid an effort by the DRA and the city to amend its current lease agreement, which requires the casino’s profits to be evenly distributed between the city and local charities.

Under the new deal, which received Dubuque City Council approval on Monday and has already been approved by the DRA, those profits would instead be divided three ways, with one-third going to the city, one-third going to charities and the last third going to funding improvements to Chaplain Schmitt Island, where Q Casino is located.

The new agreement still requires approval from the Iowa Racing and Gaming Commission, which will meet and vote on the agreement Thursday.

Despite the further diffusion of Q Casino’s profits, the DRA still anticipates the allocations in 2022, under the new agreement, would far exceed the amount it typically distributes to both the city and local charities. Each of the entities is slated to receive about $4 million — double the nearly $2 million each distributed to the entities last year.

High profits for Q Casino

The rise in profits in 2021 can be attributed to a number of factors, but Alex Dixon, president and CEO of Q Casino, said the main reason the casino performed so well stems from a sharp decline in operating and marketing expenses the casino was forced to implement as a result of the COVID-19 pandemic.

“We are spending less money on marketing than we did in pre-COVID, and we are doing a better job of reducing expenses to run the facility,” Dixon said. “After COVID, we have gotten smarter and better, like a lot of companies.”

Part of that decline in expenses stems directly from the COVID-19 pandemic, which saw drops in attendance, staffing shortages and the temporary closing of some amenities. But there were also deliberate moves by Q Casino officials to improve overall spending efficiency while attendance was low, particularly by reducing how much it spends on marketing the casino. Additionally, the casino paid off the remainder of its debt for previous facility improvements. In total, the casino saw a 15% decline in operating and marketing expenses in 2021 compared to 2019.

While decreasing expenses, the casino still managed to increase revenue by 4% this year, despite an overall drop in casino attendance. Dixon said the casino saw higher average spending per casino guest, and the hotel connected to the casino saw an increase in occupancy.

“We have fewer guests coming to the casino, but the guests who are coming are playing more,” Dixon said.

The Iowa Racing and Gaming Commission reported in fiscal year 2020, which began on July 1, 2019, and ended June 30, 2020, Q Casino’s overall gaming revenue reached $39 million. This was a decrease of more than $10 million from the previous fiscal year, largely caused by the pandemic.

In fiscal year 2021 — July 1, 2020, to June 30, 2021 — Q Casino gaming revenues had rebounded to pre-COVID-19 numbers at about $50 million. On top of this, the casino saw an additional boost in sports wagering revenue, generating $815,957 in sports wagering net receipts. The Iowa Racing and Gaming Commission report for fiscal year 2022 shows the casino remains on track to perform similarly by the end of the fiscal year.

Investing to continue upward trend

While the increase in profits is a positive sign for the community, DRA and city officials hope the newly proposed lease agreement will allow for long-term investment in Chaplain Schmitt Island that will ensure those high profits continue. Under the agreement, a third of all profits generated by the casino would be diverted to making improvements to Chaplain Schmitt Island and the facilities located on it, improvements that could further drive tourists to come to the island.

The Chaplain Schmitt Island Master Plan, developed by the city, outlines a number of potential enhanced outdoor and recreational opportunities, including expanding amenities at Q Casino.

“We are in competition with Wisconsin and Illinois,” said Dubuque City Manager Mike Van Milligen. “The better we can make Chaplain Schmitt Island, the more tourism revenue we are going to generate.”

Additionally, the new lease agreement also increases the amount of the annual operating budget retained by the DRA each year from 5% to 10%, giving the casino more funds to make improvements to the casino, Dixon said.

“That will give us more working capital throughout the year,” Dixon said. “We will have more money in the bank to reinvest in the business.”

Dixon said he believes the added investment will result in further increased profits for the casino, which in turn will generate more money for the city and local charities. However, he also warned that it will take time for the benefits of that investment to take effect. In 2022, Dixon anticipates that increased competition from a newly opened casino in Rockford, Ill., and higher starting wages for staff will likely result in lower profits than were seen in 2021.

The new lease agreement also would generate more money for the city by increasing the amount the city receives through leasing rent. Currently, the city is paid rent based off a percentage of table game betting, sports betting and “coin in,” or money played at slot machines. The new agreement increases the percentage of coin-in betting going to the city from 1% to 1.5%, expected to generate an additional $2.1 million in revenue for the city.

Whether the DRA’s additional investment in Chaplain Schmitt Island will result in increased tourism revenues remains to be seen, but officials are confident that if the agreement is approved, the improvements to the island will ultimately result in increased profits.

“You need to continuously make improvements and update,” Lynch said. “That has shown that people will come back and they will spend more.”