Analyst: Philly doesn’t need another casino By Howard Stutz, Las Vegas Review-Journal November 30, 2014 at 10:01 am Pennsylvania gaming regulators this month drove another nail into the coffin containing Atlantic City’s gaming market. At the same time, they unwittingly damaged their own state’s casino industry. Stadium Casino, a joint venture of the Cordish Cos. of Baltimore and Greenwood Gaming, was awarded the rights to build the $425 million Live! Casino &Hotel in South Philadelphia. Analysts, however, don’t believe a fifth Philadelphia-area casino can thrive in what’s becoming an over-saturated market. As for Atlantic City, which has seen four casinos cease operations this year and a fifth scheduled to close in December, more competition in Philadelphia means fewer customers on the Boardwalk. Atlantic City draws 25 percent of its business from the Philadelphia area. “One more property in Philly is incrementally bad for Atlantic City casinos, which still derive a significant amount of business from Pennsylvania,” Macquarie Securities gaming analyst Chad Beynon told investors. He said the mid-Atlantic gaming region, which includes Maryland, Delaware, Pennsylvania, Atlantic City and New York, generates almost $10 billion a year in gaming revenue. But the market is crowded. Atlantic City gaming revenue has declined more than 60 percent since 2008 because of competition. Pennsylvania has 12 casinos that generate more than $3 billion in annual gaming revenue. Philadelphia’s four casinos contribute more than $1 billion to the state’s total. Both Philadelphia’s SugarHouse Casino and Harrah’s Philadelphia asked the Pennsylvania Gaming Control Board to shelve the idea of awarding the state’s last gaming license — designated for the greater Philadelphia area — even after 18 months of debate. The words fell on deaf ears. The casino project will be in the South Philadelphia stadium complex that houses the ballparks and sports arena for the city’s professional sports franchises. The casino is just a short walk from Citizens Bank Park, home of Major League Baseball’s Philadelphia Phillies. The Live! site has direct access to and from busy Interstate 76, which connects Philadelphia with southern New Jersey via the Walt Whitman Bridge. Live!’s initial plans call for 2,000 slot machines, 125 table games and a 240-room hotel with an opening in about 24 months. The license allows Live! to increase to 5,000 slot machines and 250 table games. Deutsche Bank gaming analyst Andrew Zarnett often has commented on the problems with building casinos in saturated markets. After the latest license was awarded, he titled his research note, “This Town Ain’t Big Enough for the Five of Us.” Zarnett told investors Philadelphia would welcome another cheesesteak shop. But the city can’t handle a fifth casino. “The addition of another casino in the greater Philadelphia market will be a significant negative for the current operators,” Zarnett said. The state’s most lucrative gaming facility is the Parx Casino and Racetrack, 22 miles north of the Philadelphia stadium complex. The facility produced a state-high $487.7 million in gaming revenue in 2013. It has the most slot machines — 3,387 — of any Pennsylvania casino. It is also owned by Live! partner Greenwood Gaming. SugarHouse opened in Philadelphia’s Fishtown district in 2012 and is adding amenities and increasing the size of its gaming floor by 70 percent through a $164 million expansion. It is 8 miles from the Live! site. Caesars Entertainment-owned Harrah’s Philadelphia in suburban Chester is also home to a 5/8-mile harness racing track. It’s 13 miles from Live! “We anticipate that gaming revenues at SugarHouse and Harrah’s will be hurt the most,” Zarnett said. Longer term, Zarnett expects New York, which is looking to add four casinos to its upstate region, will hurt Philadelphia. Also, the city generates lower gaming revenue per adult compared with other major cities that house casinos or have them nearby, such as Chicago, St. Louis and Detroit. “In our view, the addition of the Live! casino will have more of a deleterious impact on the market,” Zarnett said. The Live! folks might differ. Cordish operates Maryland Live! near the Arundel Mills Mall about 10 miles outside Baltimore, which is the state’s dominant casino. In 2013, Maryland Live! accounted for 78 percent of the state’s $746.9 million in gaming revenue. “Our strategy was to build the best in the market,” Cordish President Joe Weinberg told the Las Vegas Review-Journal during a tour of Maryland Live! in May. There is no reason to believe the company won’t accomplish the same task in Philadelphia. Cordish already operates the XFinity Live! entertainment complex on the other side of the baseball stadium and will incorporate the casino into the complex. He said the area — between the stadiums and XFinity Live! — already attracts 8.5 million annual visitors. Bart Blatstein, a Philadelphia businessman, doesn’t believe the stadium complex was a good location for the casino. Blatstein and Isle of Capri Casinos had one of the three losing bids. He proposed the $700 million Provence in the city’s downtown area. He said the integrated resort was designed to draw visitors to increase tourism to the Philadelphia region. “I think the board is very shortsighted,” Blatstein told the Philadelphia Inquirer after the vote. He was critical of Greenwood. “All they’ve done is created a monopoly for Parx, with one in Bucks County and one in South Philly, which will squeeze out SugarHouse,” Blatstein said. “It’ll kill Harrah’s. It’s just unbelievable. It’s shocking that they would choose another crappy slots-in-a-box project.” Howard Stutz’s Inside Gaming column appears Wednesdays and Sundays. He can be reached at firstname.lastname@example.org or 702-477-3871. Follow @howardstutz on Twitter.