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US – Pennsylvania ends two year decline to dwarf Atlantic City’s revenues

By Phil - 18 January 2016

As Atlantic City’s casinos fell further into decline, Pennsylvania’s posted their strongest ever results, eclipsing their North east neighbours and proving their dominance in the region along with their position as second top earning casino market in the United States.

A total GGR of $2.56bn in 2015 in New Jersey played $3.17bn in Pennsylvania, prompting the question of just what can Atlantic City do to steal back its share of the market. Some hope is being pinned to the development of two resort casinos in North New Jersey but even they could spell further trouble for Atlantic City’s remaining casinos.

With the inclusion of 2015’s figures, Atlantic City’s casinos have now lost more than half of their gaming revenue over the space of nine years with this year’s revenue falling a further 6.5 per cent.
The state Division of Gaming Enforcement released figures showing that the city’s eight casinos generated revenue of $2.56bn in 2015 compared to $5.2bn in 2006.

There were of course four more casinos last year with the good news being that the remaining eight properties collectively posted revenues 3.1 per cent higher than last year. The four casinos that shut in 2014 were the Atlantic Club, Showboat, Revel, and Trump Plaza.

Indeed five of the eight casinos posted revenue gains with the Golden Nugget up 24.6 per cent for the year to $231.2m. The largest drop was experienced at Trump Taj Mahal, which was down 16.5 per cent to $180.2m.

Mayor Don Guardian said: “We had a monopoly and 12 casinos. Now there are 30 something casinos in the Northeast, and we’re about to have gambling in the northern part of the state. There are more gambling places than there are gamblers willing to gamble.”
Twelve of those competing casinos are located in neighbouring Pennsylvania. The Pennsylvania Gaming Control Board revealed that the state’s 12 casinos brought in $3.17bn in gross revenue in 2015, representing a three per cent increase from 2014 and $15m above the 2012 record. It ended two years of decline in Pennsylvania, quelling fears that the good times were already over in this most competitive of markets.

Record table games revenue in Pennsylvania helped propel overall gaming revenue this past year to the highest annual figure since legalised casino gaming began in the state.

Gross revenue of $808,135,353 from the play of table games at Pennsylvania’s 12 casinos in 2015 was nearly eight per cent higher than revenue in 2014.

Combined with previously reported annual slot machine revenue figures, the $3,173,787,012 total revenue produced from casino gaming in 2015 was 3.41% higher than in 2014.

The 2015 figure also edged out 2012 as the highest gaming revenue year in Pennsylvania to date and marks the fifth straight year in which the total casino revenue figure topped $3 billion. Total gaming revenue generated since the first casino opened in Pennsylvania now totals over $22.6 billion through the end of 2015.
The following chart tracks slot machine and table games gross revenue since the first slots-only casino opened in November 2006. Table games were added to Pennsylvania casinos in July 2010.

The biggest increase was felt at Lady Luck Casino in Southwestern Pennsylvania where GGR increased by 11 per cent. In Bethlehem, Sands Casino, the top earning casino with $214,407,351i, saw an increase of nine per cent, Parx Casino in Philadelphia was up seven per cent whilst Valley Forge Casino, also in Philadelphia, was up six per cent.

Tax revenue in 2015 from the combined play of slot machines and table games was $1,379,226,502*. Revenue returned to Pennsylvania in the form of taxes and license fees since the first casino opening now stands at approximately $11.8 billion dollars.

“The casino gaming market remains strong in Pennsylvania,” Gaming Control Board Chairman David Barasch said. “This is good news for state residents who once again saw a return of nearly $1.4 billion in tax revenue that is used by the Commonwealth and communities statewide for a myriad of projects, and to all homeowners for a reduction in their school property taxes.”

The record year came despite increasing competition from Maryland, which legalised casinos in 2010 and Ohio which made the move two years later.

Richard McGarvey, Gaming Control Board spokesman, said: “There was a lot of concern that 2012 was the high water mark that we were never going to get back there again. But when you look at it, we never really fell that far. It was nothing like what happened to Atlantic City, so it was a lot easier to come back from.”
Along with the growth in live table gaming, the winning card in Pennsylvania’s hand is the fact that it doesn’t allow on tourists from outside the state.

Alan Silver, a gaming analyst and professor at Ohio University, described Pennsylvania as a ‘convenience gambling state.’
Pennsylvania, he said, was different to Las Vegas and Atlantic City because it got most of its customers from its own neighbourhood.

Pennsylvania’s casino revenues collectively overtook New Jersey’s in 2012 after the introduction of table games but having witnessed its birth as a national gambling powerhouse, Pennsylvania’s neighbours turned the tables by introducing their own competition. Maryland now has five casinos whilst Ohio has 11. Not to be left behind, New York permitted its horse-racing tracks to become VLT racinos in 2011 whilst West Virginia immediately reacted to Pennsylvania’s move towards gaming by adding table games to its slot halls back in 2008.
The effect on Pennsylvania was noticeable with GGR sliding from a record $3.16bn in 2012, by $45m in 2013 and a further $45m in 2014.

Chris Jones, an analyst for Union Gaming believes the maturity of the table games market at powerhouses such as Sands Bethlehem have been crucial to Pennsylvania returning to gaming growth. Sands led the way in terms of table gaming posted table revenue of $214,407,351 in 2015, up 13 per cent on the year before.

Mr. Jones described table gaming as a ‘player-development business’ highlighting how it takes years to build a loyal base of returning customers who bet big on the tables. He attributed the table gains at places such as Sands as a sign of the market’s maturity.

However more competition is on the way. A partnership between The Cordish Companies and Parx Casino will see a new casino open in Philadelphia with 2,000 slots and more than 125 table games.
MGM National Harbor has won the license to operate the sixth casino in the State of Maryland brining a further 3,600 slots and 140 table games to the market.

New York is building three upstate casinos whilst New Jersey voters will get to decide on adding two resort casinos in the North of the state.

Joe Weinert, an analyst with Spectrum Gaming Group highlighted that whilst there was growth for casinos in the mid-Atlantic region, it was collectively only just above one per cent over the last year.
“In many respects, states are saying that the solution to saturation is to add casinos,” he warned.

The squeeze is about to be reapplied and for casinos in the region that means the battle to survive will be more intense than anything seen in previous years.