How Pennsylvania's regional competition threatened Atlantic City's casinos
Melissa Cohn, who sometimes takes bus trips to Atlantic City, N.J., for day trips, said she prefers going to Atlantic City to gamble as opposed to Pennsylvania casinos.
“I can go the casinos, shop, then go to the casinos again,” said Cohn, 35, Leesport, adding that when it's warm, she can go to the beach.
Unfortunately for Atlantic City, not all gamblers are willing to make that daylong destination trip.
There are plenty of reasons casinos lose revenue, from bad weather conditions to younger people who aren't as willing to possibly lose $100 on a table game. But regional competition has dealt blows to casinos around the country as more states expand gaming. For Atlantic City gambling, Pennsylvania is becoming one of its biggest reasons for declining revenue, experts say, as more people opt for convenience when hitting the slots or tables.
On Monday, the seaside gambling resort will see the close of the Atlantic Club Casino Hotel. Employees will lose jobs, and New Jersey will see a drop in revenue and taxes. The Atlantic Club was sold in a bankruptcy sale last month to Tropicana Entertainment and Caesars Entertainment, which will divvy up the assets and shut it down.
The closure will take the number of casinos and racetracks in New Jersey to 11, one less than the number of casinos and racetracks in Pennsylvania, which surpassed New Jersey last year as the second-largest casino market, behind Nevada.
In 2006, gross gambling revenue for New Jersey hit a record $5.2 billion. Since then, as casinos started opening in Pennsylvania, the total has gone down every year. In 2012, it was a little more than $3 billion.
“I can go the casinos, shop, then go to the casinos again,” said Cohn, 35, Leesport, adding that when it's warm, she can go to the beach.
Unfortunately for Atlantic City, not all gamblers are willing to make that daylong destination trip.
There are plenty of reasons casinos lose revenue, from bad weather conditions to younger people who aren't as willing to possibly lose $100 on a table game. But regional competition has dealt blows to casinos around the country as more states expand gaming. For Atlantic City gambling, Pennsylvania is becoming one of its biggest reasons for declining revenue, experts say, as more people opt for convenience when hitting the slots or tables.
On Monday, the seaside gambling resort will see the close of the Atlantic Club Casino Hotel. Employees will lose jobs, and New Jersey will see a drop in revenue and taxes. The Atlantic Club was sold in a bankruptcy sale last month to Tropicana Entertainment and Caesars Entertainment, which will divvy up the assets and shut it down.
The closure will take the number of casinos and racetracks in New Jersey to 11, one less than the number of casinos and racetracks in Pennsylvania, which surpassed New Jersey last year as the second-largest casino market, behind Nevada.
In 2006, gross gambling revenue for New Jersey hit a record $5.2 billion. Since then, as casinos started opening in Pennsylvania, the total has gone down every year. In 2012, it was a little more than $3 billion.
Lawrence Klatzkin, a gaming industry expert and managing director at New York-based Rice Voelker, said there is still money to be made in Atlantic City.
“Atlantic City isn't going away, but it's lost a certain level of business, and it's not going to get that back,” Klatzkin said.
With more regional casinos, people have options of where to gamble, and they're sticking close to home, said Jay Snowden,
chief operating officer at Penn National Gaming Inc., Wyomissing.
“The No. 1 factor when you ask gamers why they play where they play and where they visit where they visit, it's location, location, location,” said Snowden, who served as senior vice president and general manager of both Caesars Atlantic City and Harrah's Resort Atlantic City prior to joining Penn National.
Pennsylvania went from no casinos in 2005 to a handful of areas becoming the top markets for casino and racetrack casinos. The dominant casino market in Pennsylvania is Philadelphia, with a 2012 annual revenue of $902 million.
In November 2006, Mohegan Sun at Pocono Downs, near Wilkes-Barre, opened as the first slots casino in the state, and brought in $219,667,892 in gross slot machine revenue for 2013. Penn National owned Pocono Downs from 1996 to 2004.
The Poconos is now a $900 million casino market. Nearby Mount Airy Resort in Monroe County opened in 2007 and is home to 2,000 slot machines and table games, restaurants, a nightclub and nearly 200 hotel rooms.
Included in the Poconos gambling market is Bethlehem's casino, Sands Casino Resort, constructed by Las Vegas Sands Corp. and opened in May 2009. Robert DeSalvio, president of Sands Resort Casino Bethlehem, said opening in the Lehigh Valley was a strategic decision.
“It was a great area with tremendous road accessibility via (Interstates) 78 and 476, so you could capture not only the local market, but you had access to New York and Philadelphia,” said DeSalvio, estimating that the casino has a reach of 75 miles around, with 17.5 million people.
The casino, next to Bethlehem's SteelStacks, has emulated the destination spot business model that began in the Las Vegas Strip and Atlantic City copied.
Besides more than 3,000 slot machines and more than 180 table games, the Sands offers retail outlets, numerous restaurants, including three owned by celebrity chef Emeril Lagasse, and a nearly 3,000-seat events center, which has hosted big-name entertainers, such as the Beach Boys and comedian Seth Meyers.
Among future projects the Sands will be a part of is the retail development of the No. 2 Machine Shop, next to the casino, that will be anchored by a Bass Pro Shops sporting goods store and a hospitality facility. The development is possible through the creation of a Community Revitalization Improvement Zone that will fund $350 million worth of projects that Bethlehem recently won from the state.
“You cannot just rely on the gaming,” DeSalvio said. “We've developed the surrounding area with complementary assets.”
Pennsylvania's casinos are by no means luxurious in the same way some in Las Vegas are, but they do offer one thing for Pennsylvania gamblers that Vegas and Atlantic City casinos can't compete with: convenience.
DeSalvio said 50 percent of guests are from in-state, while 50 percent of customers are from out-of-state, which can include people from New Jersey, who cross the state border because some of Pennsylvania's casinos are closer than making the drive to Atlantic City.
Among that group are Jim Calcutta, 66, and Pat Calcutta, 55, of Bedminster, N.J., a couple who said it only takes about an hour to travel to the Sands, as opposed to two hours to Atlantic City.
“We like the convenience,” Jim Calcutta said.
Snowden said Atlantic City could have saved itself had it tried more aggressively to become the Las Vegas of the Northeast.
“Atlantic City had the opportunity to do that, but it was shortsighted in the 1980s,” Snowden said, which was mostly due to the city focusing on gaming revenue, as opposed to drawing in revenue from other tourism sectors.
Penn National once had an interest in having a presence in Atlantic City, but the casino and racetrack operator isn't looking at the city now, Snowden said. Penn National looked at Atlantic City in the mid-2000s when there was a lot of development activity, but opportunities in two locations fell through.
“That turned out to be a blessing in disguise because no one truly grasped the impact Pennsylvania casinos would have on Atlantic City,” he said.
The same goes for the uncertainty of how much regional competition will impact Pennsylvania as more states expand gaming.
Pennsylvania is not immune to regional competition, which was evident in the recent slot machine revenues for 2013. Table revenues are expected to come out Friday.
Revenues fell 3.5 percent to $2.38 billion in 2013 from $2.47 billion in 2012, according to the state Gaming Control Board. Richard McGarvey, a spokesman for the Gaming Control Board, said the state generated $1.4 billion in tax revenue in gaming in 2012, which is more than any state in the country.
A significant portion of revenue generated from the play of slot machines is used to fund general school property tax reduction or wage tax reduction. Slots revenue has also been used to expand and supplement the Property Tax and Rent Rebate program for senior citizens, widows 50 and older and people with disabilities.
McGarvey attributed the expected decline to regional competition.
“Competition has come in and had some effect, but you can't estimate how much,” McGarvey said. “That's part of softening of the numbers.”
Last year, Ohio gained three new casinos, and the state is expected to open four more casinos this year, which McGarvey said can negatively affect revenues at western Pennsylvania casinos.
Maryland opened two new casinos last year and plans to open another one this year.
New Yorkers approved an amendment in November that will allow seven Las Vegas-like casinos to open in the state, including one to three in the New York City area within seven years.
Klatzkin said plans for New York casinos could hurt the Poconos casino market if a quality casino opens in New York City.
However, it could be years before the casinos open, and in the meantime, Snowden said he believes Pennsylvania's model is working for the state.
“Gamers are looking for latest and greatest slot products and entertainment, and I think most of Pennsylvania's casinos have been successful in delivering that,” he said.
“Atlantic City isn't going away, but it's lost a certain level of business, and it's not going to get that back,” Klatzkin said.
With more regional casinos, people have options of where to gamble, and they're sticking close to home, said Jay Snowden,
chief operating officer at Penn National Gaming Inc., Wyomissing.
“The No. 1 factor when you ask gamers why they play where they play and where they visit where they visit, it's location, location, location,” said Snowden, who served as senior vice president and general manager of both Caesars Atlantic City and Harrah's Resort Atlantic City prior to joining Penn National.
Pennsylvania went from no casinos in 2005 to a handful of areas becoming the top markets for casino and racetrack casinos. The dominant casino market in Pennsylvania is Philadelphia, with a 2012 annual revenue of $902 million.
In November 2006, Mohegan Sun at Pocono Downs, near Wilkes-Barre, opened as the first slots casino in the state, and brought in $219,667,892 in gross slot machine revenue for 2013. Penn National owned Pocono Downs from 1996 to 2004.
The Poconos is now a $900 million casino market. Nearby Mount Airy Resort in Monroe County opened in 2007 and is home to 2,000 slot machines and table games, restaurants, a nightclub and nearly 200 hotel rooms.
Included in the Poconos gambling market is Bethlehem's casino, Sands Casino Resort, constructed by Las Vegas Sands Corp. and opened in May 2009. Robert DeSalvio, president of Sands Resort Casino Bethlehem, said opening in the Lehigh Valley was a strategic decision.
“It was a great area with tremendous road accessibility via (Interstates) 78 and 476, so you could capture not only the local market, but you had access to New York and Philadelphia,” said DeSalvio, estimating that the casino has a reach of 75 miles around, with 17.5 million people.
The casino, next to Bethlehem's SteelStacks, has emulated the destination spot business model that began in the Las Vegas Strip and Atlantic City copied.
Besides more than 3,000 slot machines and more than 180 table games, the Sands offers retail outlets, numerous restaurants, including three owned by celebrity chef Emeril Lagasse, and a nearly 3,000-seat events center, which has hosted big-name entertainers, such as the Beach Boys and comedian Seth Meyers.
Among future projects the Sands will be a part of is the retail development of the No. 2 Machine Shop, next to the casino, that will be anchored by a Bass Pro Shops sporting goods store and a hospitality facility. The development is possible through the creation of a Community Revitalization Improvement Zone that will fund $350 million worth of projects that Bethlehem recently won from the state.
“You cannot just rely on the gaming,” DeSalvio said. “We've developed the surrounding area with complementary assets.”
Pennsylvania's casinos are by no means luxurious in the same way some in Las Vegas are, but they do offer one thing for Pennsylvania gamblers that Vegas and Atlantic City casinos can't compete with: convenience.
DeSalvio said 50 percent of guests are from in-state, while 50 percent of customers are from out-of-state, which can include people from New Jersey, who cross the state border because some of Pennsylvania's casinos are closer than making the drive to Atlantic City.
Among that group are Jim Calcutta, 66, and Pat Calcutta, 55, of Bedminster, N.J., a couple who said it only takes about an hour to travel to the Sands, as opposed to two hours to Atlantic City.
“We like the convenience,” Jim Calcutta said.
Snowden said Atlantic City could have saved itself had it tried more aggressively to become the Las Vegas of the Northeast.
“Atlantic City had the opportunity to do that, but it was shortsighted in the 1980s,” Snowden said, which was mostly due to the city focusing on gaming revenue, as opposed to drawing in revenue from other tourism sectors.
Penn National once had an interest in having a presence in Atlantic City, but the casino and racetrack operator isn't looking at the city now, Snowden said. Penn National looked at Atlantic City in the mid-2000s when there was a lot of development activity, but opportunities in two locations fell through.
“That turned out to be a blessing in disguise because no one truly grasped the impact Pennsylvania casinos would have on Atlantic City,” he said.
The same goes for the uncertainty of how much regional competition will impact Pennsylvania as more states expand gaming.
Pennsylvania is not immune to regional competition, which was evident in the recent slot machine revenues for 2013. Table revenues are expected to come out Friday.
Revenues fell 3.5 percent to $2.38 billion in 2013 from $2.47 billion in 2012, according to the state Gaming Control Board. Richard McGarvey, a spokesman for the Gaming Control Board, said the state generated $1.4 billion in tax revenue in gaming in 2012, which is more than any state in the country.
A significant portion of revenue generated from the play of slot machines is used to fund general school property tax reduction or wage tax reduction. Slots revenue has also been used to expand and supplement the Property Tax and Rent Rebate program for senior citizens, widows 50 and older and people with disabilities.
McGarvey attributed the expected decline to regional competition.
“Competition has come in and had some effect, but you can't estimate how much,” McGarvey said. “That's part of softening of the numbers.”
Last year, Ohio gained three new casinos, and the state is expected to open four more casinos this year, which McGarvey said can negatively affect revenues at western Pennsylvania casinos.
Maryland opened two new casinos last year and plans to open another one this year.
New Yorkers approved an amendment in November that will allow seven Las Vegas-like casinos to open in the state, including one to three in the New York City area within seven years.
Klatzkin said plans for New York casinos could hurt the Poconos casino market if a quality casino opens in New York City.
However, it could be years before the casinos open, and in the meantime, Snowden said he believes Pennsylvania's model is working for the state.
“Gamers are looking for latest and greatest slot products and entertainment, and I think most of Pennsylvania's casinos have been successful in delivering that,” he said.
