On Tuesday, the Tennessee Department of Tourist Development announced that in 2018 the state saw 119.3 mm domestic visitors, up a whopping 5.1% from 2017. A record $22 billion was spent by domestic and international travelers, up 6% compared to the year prior, the agency said.
The record comes ahead of the state’s launch of online/mobile sports wagering, which will serve 3.5 mm tourists annually who are expected to be bettors, according to a state fiscal analysis of this year’s sports betting legislation that became law July 1. Tennessee is expected to begin sports betting in January 2020, though Gov. Bill Lee hasn’t yet nominated anyone to the state’s sports betting advisory council.
The state Department of Tourist Development told TN Bets Thursday that it’s too early to project what kind of impact sports betting will have on tourism.
“The Tennessee Department of Tourist Development has not commissioned a study at this time, so I do not have specific data to predict the impact on tourism,” a spokesperson said.
The fiscal analysis prepared in late April projected that a small but significant percentage of the annual tourists will gamble on sports, but it didn’t project how sports betting could itself boost visitation. By being an early adopter, Tennessee will draw gamblers in from other states without legal betting, namely Alabama, Georgia, and Kentucky.
Deeper look at the numbers
While 3.5 mm visitors engaging in sports betting each year might sound like a large number, it actually appears to be a rather conservative estimate.
The state fiscal analysis only considered that leisure visitors would be sports bettors. It didn’t account for sports betting among people who are visiting the Volunteer State for work or business. The Department of Tourist Development said that last year 81.3% of the 119.3 mm visitors were there for leisure.
The state fiscal memo projected that 5% of leisure visitors age 21 and older would be sports bettors. It’s estimated that 75% of those leisure visitors are of legal age to gamble. Based on the most recent tourism figures, that would translate to more than 3.6 mm visitors betting on sports each year.
However, if you apply that same 5% participation rate to 21+ visitors in total (including those who are visiting for work/business), the state could be looking at about 4.5 mm out-of-state bettors. That still could be a conservative estimate considering that those visiting for work/business are more likely to be of age to gamble than leisure visitors, which include families.
It’s unclear where Tennessee got that 5% sports betting participation rate.
The state is expected to approve 10 online/mobile sportsbooks.
The state fiscal memo projected average annual spending per sports-betting visitor at $30. That’s gross gaming revenue, not handle. The state’s sports betting industry could see between $105 mm and $135 mm in gambling winnings from tourists each year. Tennessee will collect 20% of that in tax revenue.
Tennessee is also expecting that its 4.95 mm residents of legal age to gamble will generate about $148.77 mm in annual GGR. There’s no official estimate on the number of Tennesseans who will bet.
There’s a lot of money on the table, but it’s not going to move the needle a ton for the state’s tourism industry as a whole. The Tennessee Department of Tourist Development said in its presser than Tennessee visitors spend an estimated $60 mm per day.
Sports betting will be an added amenity for Tennessee, and also a way to capture dollars that are being spent via underground bookies or offshore websites.
Governor’s anti-gambling position
Tourism is touted as the state’s “no. 2 industry,” so it’s no surprise that Gov. Bill Lee, a Republican, is a champion of the state’s recent success.
“From our thriving cities to our beautiful rural landscapes and everything in between, Tennessee has solidified its place as a leader in tourism across the country,” Lee said in a statement this week. “Our booming tourism sector is outpacing the nation in every category. World-class food, music, and adventure are just a few things folks find when they come to Tennessee, and thankfully, folks are visiting this remarkable place more than ever.”
Lee is opposed to gambling, but he reluctantly let the sports betting bill become law without his signature. Lee’s position on gambling contradicts to some extent his enthusiasm toward the state’s successful tourism industry. The state isn’t home to any casinos, so currently people are not traveling to the state to place casino-style wagers. Some will be thanks to the upcoming sports betting platforms.
Sports wagering from a smartphone is very unlikely to pose a risk of cannibalizing existing revenues from the hospitality sector. Same goes for it taking a bite out of other forms of entertainment. That argument could apply to brick-and-mortar casinos, which Lee vehemently opposes, but online/mobile sports wagering allows sports fans to wager from anywhere in the state at their convenience.
Lee opposed retail sportsbooks, likely in part out of uncertainty regarding the tourism impact.
Online/mobile sports wagering is projected to have a more than $500 mm total economic impact for Tennessee, according to 2017 study from Oxford Economics. That amount, which includes downstream spending as a result of legal sports betting, could further fuel growth in Tennessee’s tourism industry.