Record 2015 PA Casino Revenues Push Cannibalization Issue To The Side

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Cannibalization? Who thinks there’s cannibalization? Certainly not Pennsylvania’s casino industry, considering it not only rebounded after two straight years of declining casino revenue, but was able to shoot past 2012’s record-setting tally and post its best year to date in terms of revenue. The state’s 12 casinos are proving to be a strong source of revenue for the state, as the state’s cut of casino revenue in 2015 reached $1.3 billion, and more importantly, all of the state’s casinos appear to be on solid financial footing moving forward. Inside the PA casino numbers 2015 saw casino revenue jump to $3.173 billion, a 3 percent year-over-year increase in revenue, and just a whisker above the previous high water mark set in 2012, when the industry posted $3.158 billion in grass gaming revenue. A historical look at Pennsylvania casino revenue from 2006-2015:
2006: $31,567,926
2007: $1,039,030,723
2008: $1,615,565,758
2009: $1,964,570,480
2010: $2,486,408,061 (table games introduced)
2011: $3,024,772,959
2012: $3,158,317,863
2013: $3,113,928,591
2014: $3,069,077,597
2015: $3,173,787,012 Overall, the state’s casinos have been extremely consistent since 2011. Revenue over the past five years has varied only 5 percent. Who were the big gainers? Pennsylvania’s top two casinos were two of the biggest gainers in 2015, as Parx Casino saw YoY revenue increase seven percent, while Sands Bethlehem Casino posted nine percent YoY growth. Interestingly, the state’s two “resort” casinos (a misnomer in the gaming industry as Pennsylvania’s “resort” designation is for resorts with strict limits on gaming), were also among the biggest gainers, as Lady Luck Casino posted an 11 percent YoY increase and Valley Forge Casino a six percent gain. The remaining casinos saw minimal YoY changes. Where did the revenue come from? Table game revenue was up nearly 8 percent YoY, as the state’s casinos totaled $808,135,353 in 2015, compared to the $749,543,217 they generated in 2014. Meadows Casino, Parx Casino, and Sands Casino all saw table game revenue rise at least 10 percent, while Harrah’s Philadelphia was the only casino in the state to see table game revenue drop YoY, but it should be noted that the drop was just 1.1 percent. Slot machine revenue was up 2 percent YoY, and outside of four casinos, was pretty much flat across the board. The four casinos that posted gains were the same four that posted the largest total revenue gains, as slot revenue at Sands (6.6 percent), Parx (5 percent), Valley Forge (6.2 percent), and Lady Luck (12.2 percent) all went up in 2015. Contrasting Pennsylvania gambling with Atlantic City Pennsylvania’s strong 2015 revenue is challenging the notion that cannibalization and over saturation will destroy casino markets. Since Pennsylvania’s casinos opened their doors in 2006, Atlantic City has struggled. After 27 consecutive years of growth, the AC casino industry experienced its ninth straight year of decline in 2015. Gross gaming revenue fell another 6.5 percent in 2015, to $2.56 billion, a number that is less than half its tally from 2006, when the city’s casinos pulled in over $5.2 billion.
2006: $5.2 billion
2007: $4.9 billion
2008: $4.5 billion
2009: $3.9 billion
2010: $3.6 billion
2011: $3.3 billion
2012: $3 billion
2013: $2.9 billion
2014: $2.7 billion
2015: $2.6 billion But Pennsylvania has avoided Atlantic City-like declines despite new competition in Ohio and Maryland. As Richard McGarvey, a Pennsylvania Gaming Control Board spokesman told the Morning Call, while there was some trepidation over the recent revenue declines in 2013 and 2014, “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.” Increased competition will certainly make things more difficult (New York and Massachusetts are opening new casinos, and there is serious talk of a North Jersey casino in the near future), but Pennsylvania’s continued success is certainly making people reconsider why casinos are cannibalized beyond competition and over saturation, and perhaps making the case that new casinos – or reinvestment into existing casinos – are the best forms of medicine, as they force current operators to either up their game or call it a day. Gaming reform bill The Pennsylvania casino industry could get another boost in the coming months, if the legislature can pass a sweeping gaming reform bill it is currently considering. If the proposed gaming reform package is implemented, it should lead to even greater revenues for the state’s casinos, as most of the gaming expansion is thought to be non-cannibalistic and runs through the state’s current casinos. Chief among these reforms are:
The legalization of online gambling;
The addition of slot machines (provided by current casinos) in secured, post-check-in locations at the six international airports in PA;
Allowing resort casinos to buy-out from their membership requirements and increase the number of slot machines and table games for a one-time fee;
The addition of video game terminals at off-track-betting parlors provided they are 50 miles from a casino;
Potential fantasy sports legalization and regulation, which would be run through the state’s casinos.

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