Pennsylvania sees gaming revenue decrease

Officials cite growth


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Pennsylvania's streak of winning hands, at least in terms of gambling revenue, has come to an end.

For the first time since the first racetrack casino opened in the state in 2006, total gambling revenue dropped last year, according to numbers released Thursday by the Pennsylvania Gaming Control Board.

Combined gross revenue from slot machines and table games fell by $44.4 million, or 1.4 percent, in 2013 after seven years of steady gains. Over that period, total revenue grew from $31.6 million in 2006 to $3.16 billion in 2012. Last year, it was $3.11 billion.

The decrease was driven largely by losses in slot machine revenues, which fell 3.5 percent last year to $2.4 billion. Gross revenue from table games rose by 6.2 percent to $730 million last year, but it was not enough to offset the slots decline.

State gaming board officials attribute the losses to growing competition from Ohio, where a host of casinos and racinos have opened in the last two years, and from other border states, including Maryland.

"There's no doubt that the biggest reason for the decrease is that there is more and more competition along our borders," said Doug Harbach, gaming control board spokesman.

While the decrease is a first in a state that has seen gambling -- and overall revenue -- explode since 2006, gaming officials aren't overly concerned about it.

Mr. Harbach pointed out combined gross revenue from slots and table games topped $3 billion for the third straight year, while tax revenue from both totaled $1.4 billion.

Richard McGarvey, another gaming board spokesman, noted there is still huge interest in a license for a second casino in Philadelphia as well as one for a horse track and casino in Lawrence County.

That's not to say the decline has gone unnoticed. "It's certainly something we're watching," Mr. McGarvey said.

Some experts say it's too early to tell whether the state's luck -- or at least the annual growth in revenue from gambling -- has run out.

Mark Nichols, a professor of economics at the University of Nevada at Reno, said the drop in revenue could be the result of nothing more than a bad year.

"It might signal just sort of the lack of the novelty effect taking place. It may be that the casinos may have to invest and attract people with different games and amenities. Gaming is one of those things that has to reinvent itself because people do get burned out," he said.

But he and other experts also wonder whether gaming has reached a saturation point in the United States, since 39 states now have some form of commercial or tribal casino gambling.

Michael Paladino, senior director of the gaming sector for Fitch Ratings in New York, said a lot of markets in the Northeast have reached that point. That, he noted, raises questions about the potential impact of a second casino in Philadelphia.

"You reach a point where new capacity is not necessarily growing the market, it's taking away from existing operations," he said.

If one casino has bragging rights, it is the Rivers Casino on the North Shore. It was the only one in the state last year to see an increase in gross slots revenue -- a mere 0.77 percent. While table games revenue fell 2.9 percent, combined revenue rose by $125,716.

The Meadows Racetrack and Casino in Washington County didn't do as well. Slots revenue was down 7.7 percent and table games revenue 2.5 percent. Combined revenue fell by $20 million.

Sean Sullivan, The Meadows general manager, said the casino has been hurt by competition from Ohio and the new Lady Luck Casino at Nemacolin Woodlands Resort in Farmington.

With 11 casinos within 175 miles of The Meadows, Mr. Sullivan believes the region has reached saturation. It is one reason The Meadows opposes the proposed Lawrence County venue, he said.

"We don't think that's good for the market. We don't think it's healthy for southwestern Pennsylvania," he said.

To try to keep pace with the competition, The Meadows has spent $27 million over the last few years adding amenities including a second parking garage, new banquet space, new high-level gambling space, new slot machines and new barns for the race track. This year, the casino's restaurants and bars are receiving a full makeover.

In addition, a 155-room Hyatt Place Hotel is being built on a 4-acre parcel in front of The Meadows with a foot bridge that will connect to the casino.

"We just keep upping our game to fight as hard as we can so that customers don't go to competing venues," Mr. Sullivan said.

Rivers Casino managed to post a gain in gross revenue last year even though it estimates it lost about a third of its business from Ohio. General manager Craig Clark attributes the increase in part to a number of improvements the riverfront venue has made.

The casino invested more than $1 million last year to expand its players club and make changes to the gaming floor. It also has created new high-level slots and table game areas and added more blackjack and craps tournaments. Additionally, the casino has been buying new slot machines or changing themes.

To combat losses from Ohio and to expand its customer base, the casino has been working with Pittsburgh area hotels to bring visitors to the venue. It is exploring the possibility of adding its own hotel, an amenity that has been talked about for some time.

"We're actively considering what the impact of a hotel would be and if it can help us create longer destination stays," Mr. Clark said.

Mark Belko: mbelko@post-gazette.com or 412-263-1262.


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