Pennsylvania gambling expands and other states will follow

My latest for Vegas Seven–some thoughts on the meaning of Pennsylvania’s expansion of gambling:

There are two areas of interest for Las Vegans. The first is the expansion itself. In a sense, Pennsylvania’s push may be the final phase of the expansion of American gambling, which started with Nevada’s re-legalization of wide-open commercial gaming in 1931, intensified with New Hampshire’s revival of the lottery in 1964, opened again with the 1976 legalization of casino gaming in Atlantic City and accelerated following Congress’ 1988 passage of the Indian Gaming Regulatory Act. The result of this growth is that legal gambling, which in 1910 was limited to horse race betting in Kentucky and Maryland, is now the norm in the United States.

Read more: Pennsylvania gambling expands and other states will follow

IMHO, more gambling expansion is probably on the way. No big surprise, but I give a few of my reasons in the article.

A Place in the Sun

When it opened in 1952, the Sands casino was known as “A Place in the Sun,” and once it signed Frank Sinatra, Sammy Davis Jr., and Dean Martin as entertainers, it became the most popular casino on the Las Vegas Strip.

Today, the Sands name lives on in Las Vegas Sands, Inc., the company that owns the Venetian, Palazzo, and Sands Expo Center on the Strip as well as casinos in Pennsylvania, Macau, and Singapore.

As a result, the Sands name is found in the world’s top three gambling markets—a fitting tribute to the place where Vegas got much of its magic back in the 1950s and 1960s.

You can read more about the Sands and other Las Vegas hotels  in Roll the Bones: The History of Gambling

Go here to read an excerpt from the book, or learn where to buy your copy.

When it opened in 1952, the Sands casino was known as “A Place in the Sun,” and once it signed Frank Sinatra, Sammy Davis Jr., and Dean Martin as entertainers, it became the most popular casino on the Las Vegas Strip.

Today, the Sands name lives on in Las Vegas Sands, Inc., the company that owns the Venetian, Palazzo, and Sands Expo Center on the Strip as well as casinos in Pennsylvania, Macau, and Singapore.

As a result, the Sands name is found in the world’s top three gambling markets—a fitting tribute to the place where Vegas got much of its magic back in the 1950s and 1960s.

You can read more about the Sands and other Las Vegas hotels  in Roll the Bones: The History of Gambling

Go here to read an excerpt from the book, or learn where to buy your copy.

Fall of the Boardwalk Empire?

My piece in the Las Vegas Business Press about the beginning of the end in Atlantic City is out:

Historians have taken the date 476 A.D. and the deposition of Romulus Augustus, the last Roman emperor, as the “official” date of the fall of the Roman Empire, even though at the time most Western Europeans were too preoccupied with daily survival to take much notice of events in the far-off capital.

When historians look back at the history of casino gaming in Atlantic City, they may decide that 2010 marks the beginning of the end of that city's reign as one of the country's leading gaming destinations, and they might focus on a single event: The decision by MGM Mirage to abandon its holdings in the city after the New Jersey Division of Gaming Enforcement found Pansy Ho, the company's partner in its MGM Grand Macau casino, “unsuitable.”

via Las Vegas Business Press :: David G. Schwartz : The beginning of the end for Atlantic City?.

I don’t think this is hyperbole. The revenue trends are showing a decline that started slightly before the recession that is more due to competition than the economic slowdown, although the recession hasn’t helped. There are real problems in Atlantic City.

Are there solutions? Yes, and they go beyond making Pacific Avenue a one-way street. As I see it, the city has to be reinvented to appeal to two groups: investors, who will buy or build new casinos and attractions, and visitors, who will fill them. These groups aren’t mutually exclusive, but they require different approaches. The average gambler doesn’t really care about how many levels of scrutiny casino vendors go through before they are licensed, but this sort of thing makes a difference behind the scenes.

It’s not impossible. The city’s been through worse, and the right forward-thinking people can help get it on the right track. The time for action, however, is now. If AC just continues to coast for a few years, it may be too late, at least for this generation.

AC tabled by PA

Great news for Pennsylvanians who like to play table games, bad news for Atlantic City, as Pennsylvania has, to no one’s surprise, approved table gaming. Here’s the reaction from the AC Press:

Pennsylvania’s slot parlors won’t stop at table games as they prepare to evolve into Atlantic City-style resort casinos in a fierce battle with New Jersey for gambling customers.Blackjack, craps, poker and other games will help generate revenue for construction of new hotel towers, retail shops, restaurants, spas and nightclubs — which in turn will broaden the appeal of the Pennsylvania gaming market, casino executives say.

Previously, Atlantic City casino executives had mocked Pennsylvania’s slots-only gaming parlors as “one dimensional.”Much is at stake in the competition between Atlantic City and Pennsylvania. Table games generated $1.4 billion in revenue in 2008, about 30 percent of Atlantic City’s overall take of $4.5 billion. The remaining 70 percent, or $3.1 billion, came from slot machines.

Atlantic City’s revenue figures for 2009 will be announced Monday, though Atlantic City already is hurting from competition from Pennsylvania for slot customers and the weak economy. Through the first 11 months of 2009, the city’s gaming revenue fell 13.5 percent, to nearly $3.7 billion.

via Tables turn in Pennsylvania’s favor: Casinos hope to attract more players with better games – : Atlantic City.

You can find more details of the bill at Gaming Today. Basically, racinos and slot parlors will be able to add 250 games (for reference, the standard Strip casino has 80-100) and the resort casinos can have 50 tables, but can add more slot machines.

Atlantic City has until the summer, or maybe the fall, before the first cards are dealt. The clock is ticking. Unless the casinos can develop some kind of attraction that the Pennsylvania casinos don’t have, or can somehow deliver a customer experience that would justify the extra hour drive and expressway tolls, they can consider the Pennsylvania market–and maybe parts of New Jersey and New York–lost.

There’s a very real possibility that Atlantic City will become a local gaming hub for New Jersey and a few nostalgic Philadelphians.

For a while in the early 1980s, Atlantic City was out-earning the Las Vegas Strip in gaming revenue and visitation, and was being hailed as the up-and-comer. Then as the Strip pulled ahead, it settled into a position as “the casino capital of the East,” with pretty much everything east of the Mississippi potentially feeding it. Then the spread of Indian and riverboat casinos started cutting into that market–Delaware racinos and Connecticut Indian casinos most remarkably.

In the early 1990s a few innovations–24-hour gambling, poker, and keno were the biggest–gave the city’s casinos something new. In 2003 the opening of the Borgata proved that Vegas-style resorts could work. Still, revenue and visitation numbers have been declining. Here are some figures from UNLV’s Atlantic City casino page:

2005 34,924,000
2006 34,534,000
2007 33,300,000
2008 31,813,000
2009 ???

Total Resort Revenues (Gaming+Non-Gaming)

2005 6,264,017,000
2006 6,528,927,000
2007 6,256,038,000
2008 5,839,136,000
2009 ???

Gaming Revenues
Year Total win Slot win Table win
2001 4.3 billion 3.1 billion 1.2 billion
2002 4.2 billion 3.3 billion 1.1 billion
2003 4.5 billion 3.3 billion 1.2 billion
2004 4.8 billion 3.6 billion 1.3 billion
2005 5.0 billion 3.7 billion 1.3 billion
2006 5.2 billion 3.8 billion 1.4 billion
2007 4.9 billion 3.5 billion 1.5 billion
2008 4.5 billion 3.1 billion 1.4 billion
2009 about 4.0 billion? (rough mathematical projection based on 11 months at $3.7 billion)

You’ll notice that visitation has declined since 2005, and total revenues have declined since 2006, which makes this a pre-recession problem.

In the last table, you’ll see that slot machine win has fallen to 2001 levels, offset slightly by an increase since then in table game revenues, which is attributable to the competition from Pennsylvania slots after 2007. Pennsylvania tables will undoubtedly cut into the AC table game win in 2010, so it’s possible that the industry will fall well below 2000-era revenue levels. Nevada, by comparison, is back to 2004/05 gaming revenue levels right now.

At this rate, Atlantic City’s going to end up in the stone age in ten years.

Sunday afternoon in the Parx

Atlantic City has some new competition, or at least a refurbished version of old competition. From the AC Press:

While the atmosphere of the stylishly named Parx Casino may feature some European or Asian-inspired elegance, the crowd will have a distinctly Philly flavor. When this new $250 million slots parlor opens its doors Friday, it will replace the old Philadelphia Park Casino & Racetrack, better known to its legions of gamblers as Philly Park.Now that Pennsylvania lawmakers are on the verge of giving final approval for table games at the state’s slot parlors, Parx and its counterparts will be an even greater threat to the struggling Atlantic City market, industry officials predict.

“It just gets worse for Atlantic City. I truly believe Atlantic City is permanently disfigured,” said Justin T. Sebastiano, gaming analyst for Morgan Joseph & Co. Inc. “I certainly think table games will hurt Atlantic City.”

“Everyone is going to want to see what the little Philly Park casino has been transformed into,” spokeswoman Carrie Nork Minelli said during a tour of the new facility.Indeed, customers need only look across the parking lot to see the dramatic differences between Philly Park and Parx. Philadelphia Park’s temporary casino was a reincarnation of the warehouse-like horseracing grandstand from the 1970s.

The modernistic Parx represents the next generation of casinos in Pennsylvania’s fledgling gaming industry.Even the old Philly Park has been a formidable competitor for the Atlantic City casinos, about an hour’s drive away in good traffic. Located about 20 miles north of center-city Philadelphia, it is Pennsylvania’s top-grossing slots parlor and has been stealing customers from feeder markets once dominated by Atlantic City.

Parx lacks the soaring hotel towers that are a staple of the Atlantic City gaming resorts. But the casino floor itself is reminiscent of the glitzy Atlantic City properties. Parx also features new restaurants, bars and a nightclub to give customers more to do than just gamble.

via Pennsylvania’s Parx likely to steal Atlantic City’s gamblers – : Atlantic City.

Sebastiano might want to mix in a thesaurus. “Permanently disfigured” sounds way too graphic. It’s not like Philly Park came down and threw acid in the city’s face–the city just has more competition.

The thing is, everyone knew this was coming. Even if you continued to bank on slots not coming to Pennsylvania after it became a serious possibility in 2002/03, the legislation chartering slot gaming was signed in July 2004. Even the most skeptical Atlantic City casinos, then, have had five and a half years to get ready for “new competition.”

Las Vegas faced this same problem when California Class III Indian casinos became a reality on 2000. Las Vegas gets about a third of its visitors from California. But no one said Las Vegas was permanently disfigured: instead, most people realized if the city wanted to thrive, it had to give Californians a reason to drive past a half-dozen Indian casinos on their way to Nevada.

Can Atlantic City do the same? The city did a so-so job of reacting to the opening of Connecticut casinos in the early 1990s, but it doesn’t have a history of pro-active growth. The time to have this conversation was six years ago. Granted, some casinos–Harrah’s, Tropicana, Borgata, and the Trump Taj Mahal spring to mind–responded with expansions and adding other amenities, but the market as a whole should have stepped its game up by now.

At this point, the city’s in a position where two-thirds of its properties are playing catch-up with a slot parlor, despite a thirty-year head start.

Yes, the headline is a Fair Warning reference.

Gaming Expansion at G2E

I’ve finally gotten official word today: I’m moderating a panel at this year’s Global Gaming Expo. Here’s the session:

Gaming Expansion: Push and Pull Factors in 2008 and Beyond
Tuesday, November 11, 9:15 AM-10:15 AM
In recent years, gaming expansion has been inconsistent, with dramatic victories in Pennsylvania and Kansas, partial success in Florida, and rejection in Rhode Island. This panel will examine the factors that drive gaming expansion for suppliers, operators and states. In addition to handicapping the chances of continuing expansion, attendees will hear several viewpoints on the ongoing phenomenon.

Should be fun. Optimally, I’d like to have someone on the panel who’s opposed–or at least bearish–on continued expansion, but I’m not sure that someone against gambling expansion would go to a gambling industry conference. Still, I’m looking forward to it, and I encourage you to attend, if you’re going to G2E.

Spinning reels in Philly

There was a good piece on the coming of slot casinos to Philadelphia in USA Today:

Visitors come here to see just one bell — the Liberty Bell. Soon they’ll be looking for a row of them — on a slot machine.

Pennsylvania’s 2-year-old state gaming board is to award licenses Wednesday for two slot machine casinos to be built here. That will make Philadelphia the largest city in the country with casinos and put legalized gaming within 2 miles of Independence Hall, where the founding fathers gambled their fortunes on revolution.

The arrival of slots parlors here is part of the spread of gambling through the mid-Atlantic. New Jersey, New York and Connecticut have casinos. Pennsylvania and Delaware have slots at racetracks, and Maryland’s incoming governor wants to do the same.

In Philadelphia, founded by Quakers whose religious beliefs prohibit gambling, slots casinos are facing a cold welcome from the neighbors.

In Pennsport, the riverfront neighborhood where Rene Goodwin lives in a 19th-century brick row house, the elevated bulk of Interstate 95 separates narrow residential streets from big-box stores and the city’s container port. One of the casinos is proposed for a vacant site next to Wal-Mart.

“It isn’t this hinterland,” says Goodwin, who leads Riverfront Communities United, a group of seven neighborhood associations. Pennsport would be overwhelmed by traffic and crime if the slots parlor is built two blocks away, she says. “It’s a real place, where people know each other. … Is it worth destroying one of the best neighborhoods in the city for a casino?”

Five proposals are competing for the two licenses. The developers include Donald Trump; the Pequot tribe, which runs Foxwoods Casino in Connecticut; and the owner of Philadelphia’s two daily newspapers. Four of the proposed slots parlors would be built along the Delaware River, and the fifth would be across town, closer to wealthy suburbs.

Philly to be largest gambling city –

You’ve got to wonder what this will do to Atlantic City. Now, more than ever, is the time to broaden the appeal beyond slot machines. There’s been a great start with Borgata, but the ultimate fate of the city as destination may rest with the next generation of resorts–whatever replaces the Sands, and several other projects on the drawing board.

Big money at Pocono Downs

Slot machines are wonderful things, if only for their power to transform formerly obscure sites into hotly-debated centers of finance. Seriously. Five years ago, if you had said that the goings-on at a Wilkes-Barre, Pennsylvania racetrack were going to be front-page news anywhere, people would have said you were nuts. Well, thanks to the almighty Slot, Pocono Downs has its moment in the sun. From the The Citizens Voice:

Mohegan Sun at Pocono Downs officials can’t really say if the numbers they’re seeing out of Pennsylvania’s first slots parlor are better or worse than expected.

“We really didn’t know what to expect as the first casino in the Commonwealth,” said Robert Soper, president and CEO of the facility.

Still, financial figures coming out of the facility are eye-popping on a local level.

Gamblers pumped $39.3 million into slot machines at the Mohegan Sun at Pocono Downs in just the first week of operation. They won back $35.3 million, as the machines have been paying out an average of 90 cents on every dollar waged.

Of the $4.08 million left in the machines after all the winnings were paid out, the state has taken $1.4 million for property tax relief, $163,000 for local government, $204,000 for economic development and tourism, and roughly $490,000 for the state’s horse racing industry, according to figures provided by the state Department of Revenue. That left the casino with weekly slots revenues of $1.83 million, before operating expenses.

Few expect the casino to keep up that pace.

“We’re pleased with the first week, but we’re cautiously optimistic, as we know that the high volumes will smooth out over time as the novelty wears off,” Soper said.

The Citizens Voice – $39.3 million wagered at Mohegan Sun in first week

My very rough calculations show that the slots’ average win/day was around $529–better than casinos in Atlantic City and Connecticut. For that matter, it’s better than just about everywhere in the country.

By the way, if you want to see something moderately amusing, click over and keep reading the story–you’ll see that your humble blogging friend quoted.

A casino school?

In Australia, I’ve been told, collections of gamblers are called schools–a “two-up school,” for example, is a bunch of people playing the classic Oz game. (If you’re from Australia, let me know if this is true). In America, there are dealer schools, and even degrees in casino management, but Donald Trump wants to take it one step further. From the Inky:

Trump casinos has made an offer to the Philadelphia School District to buy a school that sits on land where it proposes to build a slots parlor in Nicetown.

Trump wants the Randolph Skills Center, a 400-student vocational-technical high school at Henry and Roberts Avenues, district spokesman Fernando Gallard said yesterday.

Gallard would not say how much Trump had offered for the school, but added that a decision would not be made for a while.

Trump Entertainment Resorts Inc. has proposed a $350 million casino for a portion of the approximately 80-acre site in Nicetown that once held the Budd Co. factory. The property, between Roosevelt Boulevard and Hunting Park Avenue, is owned by Preferred Real Estate Investments of Conshohocken.

Trump has encountered heavy community opposition to his casino plan. Community groups in Nicetown have held protests, and a number of residents have put up lawn signs opposing the casino. Opponents of a potential sale of the school are scheduled to speak at the School Reform Commission meeting today.

Philadelphia Inquirer | 02/08/2006 | Trump wants to buy city school for casino site

My thoughts? My high school was demolished to make way for a casino parking lot. Atlantic City High School was bought and torn down by Park Place Entertainment because the community was, apparently, crying out for more valet parking spaces for the Hilton (though it might have been called Bally’s Grand back then). So I don’t think it’s such a big deal.

Maybe he’ll build an education-themed casino…they could call the player loyalty program the “Valedictorians Club” and have cocktail waitresses in cheerleader outfits. And, of course, mystery meat in the student cafeteria-themed buffet.

Super Mario Slots?

If you live in Pittsburgh and want to keep the Penguins in town, your best hope might be a slot casino. Even though the team won’t directly run the proposed slot parlor, its profits may help pay for a new arena. From the Post-Gazette:

The Pittsburgh Penguins’ partner in a proposed $1 billion development at the site of Mellon Arena is willing to put up $290 million to pay for a new, 18,000-seat home for the National Hockey League team.

The Penguins’ development, which would secure the team’s future in Pittsburgh, is contingent on winning a license for the city’s slot machine casino.

Besides construction of a casino and a replacement for the aging arena, oldest in the NHL, the development would include a mix of offices, residential units and retail space.

The Penguins will team with a yet-unidentified gambling operator and with Nationwide Realty Investors of Columbus, Ohio., to handle development.

As part of its application for the Pittsburgh slots license, the gaming operator intends to pledge the money to build a new arena. It also would finance construction of the casino for 3,000 slot machines, with room to expand to 5,000.

The Penguins will not be the applicant for the state license, nor will the team take any profits from the slots casino. Once a new arena is built, it plans to turn ownership over to the city-county Sports & Exhibition Authority.

Penguins find arena funds

I think the team should go all out and have current players serving as casino hosts, welcoming players and the like.

As is usually the case, money trumps everything. If pro football didn’t have such lucrative TV revenues to fall back on, I’m sure that the NFL would be just as keen to use gambling to help pay for its stadiums.

There isn’t a word about connections between gambling and sports being inappropriate now, is there?