Be sure to read the highlighted
sections. Massachusetts casino fortunes will be revealed. Read 'em and weep
. . .
http://www.mcall.com/news/local/mc-pa-casino-revenues-peak-20130330,0,1079672.story
March 30, 2013
It raises the question: Has Pennsylvania peaked?
"Market saturation is happening. No question. And it's hurting Pennsylvania, no question," said Shawn McCloud, a vice president for Spectrum Gaming Group, a New Jersey company that tracks gambling nationwide. "But does that mean Pennsylvania has stopped growing? Maybe, but I don't think we have all the answers on that yet."
No one is suggesting that Pennsylvania's young gambling industry is a bust. Last year, when it hauled in $3.2 billion in total revenues, it officially overtook New Jersey as the nation's second-busiest gambling state, behind only Nevada.
And while Pennsylvania was tripling its first-year revenues by year five, New Jersey's $5.2 billion take in 2006 had plummeted to $3 billion in 2012.
But after years of huge annual gains, Pennsylvania's growth spurt has stopped.
In four of the past five months, Pennsylvania's 11 casinos have collectively reported fewer slot machine revenues than in the same month the previous year and that will become five of six when the state releases the March numbers Tuesday. Sands Casino Resort Bethlehem is the only gaming hall in the state on pace to match last year's revenue, but it started to show signs of falling in February, when its revenue dropped for the first time in nearly a year.
Even statewide table games, which didn't open until 2010, experienced their first decline in February. So what's the problem? In addition to a fiscal cliff-slowed economy, it appears that other states are now doing to Pennsylvania what the Keystone State has been doing to Atlantic City.
"Obviously, the days of double-digit gains are gone," said Richard McGarvey, spokesman for the Pennsylvania Gaming Control Board. "But I'm not ready to declare that the growth is over. We're still a pretty new industry in Pennsylvania. There's no history to look at."
Certainly, the most recent history is less than encouraging.
When Pennsylvania's first casino opened in late 2006, its primary competition was 11 Atlantic City casinos that required hours in the car for most Pennsylvania residents. Now, it is surrounded by new competitors. Ohio and Maryland both opened casinos in 2012. New York added slot machines to its race tracks. And to beat back Pennsylvania's new threat, Delaware and West Virginia added table games to their existing slot-machine casinos.
Diminishing returns
It's exactly the argument that casino opponents made when state officials were debating whether to legalize casino gambling: Dianne Berlin, coordinator of CasinoFreePa, argued that the state's effort to generate $1 billion in tax relief would come largely from its own residents.
"We expected this," Berlin said. "Now we're left with picking the pockets of our own residents."
State officials note that the casinos are among the most successful in the nation and are doing precisely what they were intended to do — create $1 billion in tax relief for property owners.
Perhaps the best evidence of the impact is Presque Isle Downs & Casino, in Erie, on the border of Ohio. It is the state's smallest race track casino, but since opening in 2007 it has consistently outperformed what experts projected, raking in $167 million in slots revenue in 2011.
As of the first quarter of 2012, Presque Isle remained on pace to at least match its previous year revenues. But from the moment the Horseshoe Casino in Cleveland opened in May, roughly 100 miles down Interstate 90, Presque Isle went on a run of double-digit declines. Its slot machine take fell to $151 million in 2012 and so far this year, its revenues are down a depressing 24 percent compared with last year.
"There's no debate here. Ohio opened and we went down," said Joe Billhimer Jr., chief operating officer for Presque Isle owner MTR Gaming. "We'll adjust and compete. We still have high hopes for Presque Isle."
Presque Isle isn't the only loser. Parx in Bensalem, Buck County, and Harrah's in Chester are on six-month losing streaks. At least some of that comes from competition from within the state: SugarHouse Casino opened in Philadelphia in 2010.
But all three of those Philadelphia region casinos — and even the Hollywood Casino near Harrisburg, which has seen eight months of declines — are facing new competition from the south. And things seem more likely to get worse before they get better.
Maryland opened its first casino in 2010; it now has three and two more are set to open by 2014, including one on the border town of Flintstone. Adding even more weapons to their arsenal, several of Maryland's casinos will be adding table games such as blackjack and roulette this year. All of that has, and probably will, keep Maryland gamblers who have been driving into Pennsylvania from leaving their home state, analysts say.
Soft economy
Still, the drop isn't all about what other states are doing, said Mike Bean, president and general manager of Mohegan Sun Casino near Wilkes-Barre. Mohegan Sun is more than 100 miles from the nearest New York racetrack that started slot machines gambling in 2011, and it's even farther from the Maryland and Ohio borders.
Yet when figures are released next week, it will reveal the ninth straight month in which slot machine revenues at Mohegan Sun fell compared with the previous year. The downturn, according to the casino's research, comes from a combination of a soft economy, uncertainty over fiscal cliff issues and the federal Social Security payroll tax increasing by 2 percent to return to 6 percent Jan. 1. That one tax increase alone takes roughly $100 out of the average casino customer's monthly income.
In other words, Mohegan Sun isn't competing for dollars with Ohio, Maryland and New York, it's competing with groceries, the light bill and gas. Add big local real estate tax increases, and the result is a squeeze on the disposable income people lose at casinos.
"It's hard for us to blame other states when only 7 percent of our customers are coming from out of state," Bean said. "This is more about the fiscal cliff, the tax increase and the increased pressure on our local economy. We're optimistic all of these conditions will ultimately improve."
A spokeswoman for Sands Casino Resort Bethlehem made the same argument as Bean, blaming the economy and tax increases. For much of the year, it appeared Sands was defying the trend as the only Pennsylvania casino on pace to outearn the previous year. But last month, slot revenues fell 7 percent, the first month-to-month loss in nearly a year for Sands.
Whether it's new competition or a limping economy, the trend is undeniable. Yet it's not a bad thing for everyone, experts noted. While it may be a headache for people like Billhimer and Bean, it's a win for the average gambler because it's forcing Pennsylvania casinos to step up their game.
Mohegan Sun is building a $50 million, 238-room hotel it hopes will double its territory, and Presque Isle is remodeling its gaming floor and considering a hotel of its own. Meanwhile, their out-of-state competitors are doing the same. Delaware recently added table games to its slot casinos, Maryland had the two casinos opening by the end of 2014, Ohio is adding six casinos to its existing five and New York legislators are debating whether to add table games and as many as seven casinos.
Perhaps the biggest effect of the downturn is that it's forced some casinos to recalibrate their expectations. Turns out, the days of getting hordes of gamblers to cross state lines to play were a temporary luxury that most Pennsylvania casinos can no longer count on.
No reason to complain about it, Billhimer said. It's business.
"The gaming industry is becoming more regional. We have to focus on our own property and our own territory," Billhimer said. "We have our niche and we'll compete to keep it. Pennsylvania's still a great place to do business."
State's casinos on a losing streak
Has Pennsylvania, the nation's second-busiest casino gambling state, reached its peak? It's feeling competition from other states.
By Matt Assad, Of The Morning CallMarch 30, 2013
After five years of getting rich by
wrestling customers away from New Jersey gambling halls, Pennsylvania casinos
are now finding that they're not the only new bully on the block.
Ohio, Maryland, Delaware, New York and
West Virginia have all added or expanded casino gambling, causing an abrupt halt
to what was five straight years of Pennsylvania casino industry growth.
It raises the question: Has Pennsylvania peaked?
"Market saturation is happening. No question. And it's hurting Pennsylvania, no question," said Shawn McCloud, a vice president for Spectrum Gaming Group, a New Jersey company that tracks gambling nationwide. "But does that mean Pennsylvania has stopped growing? Maybe, but I don't think we have all the answers on that yet."
No one is suggesting that Pennsylvania's young gambling industry is a bust. Last year, when it hauled in $3.2 billion in total revenues, it officially overtook New Jersey as the nation's second-busiest gambling state, behind only Nevada.
And while Pennsylvania was tripling its first-year revenues by year five, New Jersey's $5.2 billion take in 2006 had plummeted to $3 billion in 2012.
But after years of huge annual gains, Pennsylvania's growth spurt has stopped.
In four of the past five months, Pennsylvania's 11 casinos have collectively reported fewer slot machine revenues than in the same month the previous year and that will become five of six when the state releases the March numbers Tuesday. Sands Casino Resort Bethlehem is the only gaming hall in the state on pace to match last year's revenue, but it started to show signs of falling in February, when its revenue dropped for the first time in nearly a year.
Even statewide table games, which didn't open until 2010, experienced their first decline in February. So what's the problem? In addition to a fiscal cliff-slowed economy, it appears that other states are now doing to Pennsylvania what the Keystone State has been doing to Atlantic City.
"Obviously, the days of double-digit gains are gone," said Richard McGarvey, spokesman for the Pennsylvania Gaming Control Board. "But I'm not ready to declare that the growth is over. We're still a pretty new industry in Pennsylvania. There's no history to look at."
Certainly, the most recent history is less than encouraging.
When Pennsylvania's first casino opened in late 2006, its primary competition was 11 Atlantic City casinos that required hours in the car for most Pennsylvania residents. Now, it is surrounded by new competitors. Ohio and Maryland both opened casinos in 2012. New York added slot machines to its race tracks. And to beat back Pennsylvania's new threat, Delaware and West Virginia added table games to their existing slot-machine casinos.
Diminishing returns
It's exactly the argument that casino opponents made when state officials were debating whether to legalize casino gambling: Dianne Berlin, coordinator of CasinoFreePa, argued that the state's effort to generate $1 billion in tax relief would come largely from its own residents.
"We expected this," Berlin said. "Now we're left with picking the pockets of our own residents."
State officials note that the casinos are among the most successful in the nation and are doing precisely what they were intended to do — create $1 billion in tax relief for property owners.
Perhaps the best evidence of the impact is Presque Isle Downs & Casino, in Erie, on the border of Ohio. It is the state's smallest race track casino, but since opening in 2007 it has consistently outperformed what experts projected, raking in $167 million in slots revenue in 2011.
As of the first quarter of 2012, Presque Isle remained on pace to at least match its previous year revenues. But from the moment the Horseshoe Casino in Cleveland opened in May, roughly 100 miles down Interstate 90, Presque Isle went on a run of double-digit declines. Its slot machine take fell to $151 million in 2012 and so far this year, its revenues are down a depressing 24 percent compared with last year.
"There's no debate here. Ohio opened and we went down," said Joe Billhimer Jr., chief operating officer for Presque Isle owner MTR Gaming. "We'll adjust and compete. We still have high hopes for Presque Isle."
Presque Isle isn't the only loser. Parx in Bensalem, Buck County, and Harrah's in Chester are on six-month losing streaks. At least some of that comes from competition from within the state: SugarHouse Casino opened in Philadelphia in 2010.
But all three of those Philadelphia region casinos — and even the Hollywood Casino near Harrisburg, which has seen eight months of declines — are facing new competition from the south. And things seem more likely to get worse before they get better.
Maryland opened its first casino in 2010; it now has three and two more are set to open by 2014, including one on the border town of Flintstone. Adding even more weapons to their arsenal, several of Maryland's casinos will be adding table games such as blackjack and roulette this year. All of that has, and probably will, keep Maryland gamblers who have been driving into Pennsylvania from leaving their home state, analysts say.
Soft economy
Still, the drop isn't all about what other states are doing, said Mike Bean, president and general manager of Mohegan Sun Casino near Wilkes-Barre. Mohegan Sun is more than 100 miles from the nearest New York racetrack that started slot machines gambling in 2011, and it's even farther from the Maryland and Ohio borders.
Yet when figures are released next week, it will reveal the ninth straight month in which slot machine revenues at Mohegan Sun fell compared with the previous year. The downturn, according to the casino's research, comes from a combination of a soft economy, uncertainty over fiscal cliff issues and the federal Social Security payroll tax increasing by 2 percent to return to 6 percent Jan. 1. That one tax increase alone takes roughly $100 out of the average casino customer's monthly income.
In other words, Mohegan Sun isn't competing for dollars with Ohio, Maryland and New York, it's competing with groceries, the light bill and gas. Add big local real estate tax increases, and the result is a squeeze on the disposable income people lose at casinos.
"It's hard for us to blame other states when only 7 percent of our customers are coming from out of state," Bean said. "This is more about the fiscal cliff, the tax increase and the increased pressure on our local economy. We're optimistic all of these conditions will ultimately improve."
A spokeswoman for Sands Casino Resort Bethlehem made the same argument as Bean, blaming the economy and tax increases. For much of the year, it appeared Sands was defying the trend as the only Pennsylvania casino on pace to outearn the previous year. But last month, slot revenues fell 7 percent, the first month-to-month loss in nearly a year for Sands.
Whether it's new competition or a limping economy, the trend is undeniable. Yet it's not a bad thing for everyone, experts noted. While it may be a headache for people like Billhimer and Bean, it's a win for the average gambler because it's forcing Pennsylvania casinos to step up their game.
Mohegan Sun is building a $50 million, 238-room hotel it hopes will double its territory, and Presque Isle is remodeling its gaming floor and considering a hotel of its own. Meanwhile, their out-of-state competitors are doing the same. Delaware recently added table games to its slot casinos, Maryland had the two casinos opening by the end of 2014, Ohio is adding six casinos to its existing five and New York legislators are debating whether to add table games and as many as seven casinos.
Perhaps the biggest effect of the downturn is that it's forced some casinos to recalibrate their expectations. Turns out, the days of getting hordes of gamblers to cross state lines to play were a temporary luxury that most Pennsylvania casinos can no longer count on.
No reason to complain about it, Billhimer said. It's business.
"The gaming industry is becoming more regional. We have to focus on our own property and our own territory," Billhimer said. "We have our niche and we'll compete to keep it. Pennsylvania's still a great place to do business."
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