Pennsylvania reported a record $432.5 million in gambling revenue in November, 48% more than pre-pandemic numbers two years ago and the eighth straight month of higher revenue after the widespread spread of COVID-19 vaccines.
Almost all of the growth over the past two years has been in new forms of online gaming, including casino games like slot machines and blackjack, as well as sports betting. Online gaming and sports betting are licensed under a 2017 expansion of the Pennsylvania Gaming Act.
Retail revenue from traditional casinos — slot machines, table games and inside betting books — is up just 3.6% since November 2019. Four new casinos have opened in the past two years, so the slightly larger revenue is now distributed among the 16 hotels, including three. Small, up from 12 casinos in 2019.
Opening last year of Live! The Casino & Hotel Philadelphia in the city’s stadium district appears to have funneled clients from Harrah’s Philadelphia Casino & Racetrack in Chester, Rivers Casino in Philadelphia and, to a lesser extent, Casino Parks in Bensalem.
Across Pennsylvania, slot machine yields are 2% lower than they were two years ago. But in Harrah, slots revenue is down 32% from November 2019, and at Rivers Philadelphia, slots revenue is down nearly 28%. At Parx, slots revenue is down 9% from November 2019.
Revenues from table games such as blackjack, roulette, poker and craps, which account for about half of the money generated by slot machines, are up 11% statewide since 2019. But they’re down 25% in Harrah. Rivers Philadelphia and Parks have reported increases in board game revenue in the past two years.
The scenario unfolding in Pennsylvania is not unlike that in New Jersey, where total gaming revenue is rising, but Atlantic City casino operators say the move to online gambling is mostly benefiting game operators and sportsbooks. They say the casino’s physical operations and employees are suffering.
This week, the New Jersey legislature rushed through the casino tax credits awaiting a signature from Governor Phil Murphy, who has signaled his support.
In Pennsylvania, in-person casino gaming made up 64% of all gaming revenue in November, down from 91% two years ago.
Roger Gross, publisher of Global Gaming Business Magazine in Nevada, said casino revenue appears to have been affected in several states where online gambling is legal – Pennsylvania, New Jersey, Delaware and West Virginia. Michigan also launched online games this year.
But Gross does not believe that online gaming is entirely responsible for the casino’s revenue. He said some casino customers may not be returning due to the coronavirus. And the younger gamblers that the casinos are trying to woo would prefer table games to slot machines.
“I don’t think it’s really bad news for casinos because they diversify the revenue they get,” he said. “If, God forbid, there was another pandemic shutdown, they would still have income through the online side.”
The November gaming numbers also do not reflect any impact the omicron variant might have on casino traffic. Gross said hotel reservations in Las Vegas for New Year’s Eve are going strong. “I don’t think it affects anyone yet,” he said. “People are tired of it, and who knows what an omicron thing does when it comes to how dangerous it can be.”
The addition of online gaming changed the ranking of Pennsylvania casinos by revenue source, which Parx Casino had led for years. Parx continues to generate the most revenue from its brick-and-mortar operations.
But when online revenue is included, Penn National’s Hollywood Casino tops the list, with the online gaming platform operated by DraftKings, followed by Valley Forge Casino Resort, which has formed a partnership with FanDuel. DraftKings and FanDuel are the dominant sports betting operators and also offer casino games.
Most of the growth in gaming activity in Pennsylvania can be traced back to the state’s sweeping gaming expansion legislation in 2017, which created small casinos and allowed sports betting and betting both online and at truck stops. Credit rating agency Moody’s Investors Service said at the time that new betting options were likely to cut into the casino business.
“While state finances may benefit from this law, it is not clear to what extent existing state operators will actually benefit,” Moody’s said in a 2017 report.
In fact, Pennsylvania’s coffers have seen strong tax revenue growth from gaming surges. Pennsylvania generated $171.9 million in tax revenue in November from gaming, up 44% from pre-COVID in November 2019.
In the past 12 months, Pennsylvania has taken in $1.8 billion in gaming taxes, some of which is going to local governments.