Who will build new casinos in Pennsylvania, Illinois and Indiana? By Ken Adams, CDC Gaming Reports July 13, 2019 at 6:51 pm Pennsylvania passed a massive gaming expansion bill in 2017. The bill authorized ten mini casinos, slot machines in truck stops and online gambling. The legislation required a separate auction for each of the ten mini casinos. Lawmakers envisioned a lively competition, resulting in a windfall for the state. The auctions began as the lawmakers had hoped, but with each successive auction the interest waned and the value of the bids declined. After the fifth auction, the state stopped the process. There did not seem to be any interest in the additional licenses. Two years after the legislation passed there are still no mini casinos. The winning bidders already operate casinos in the state and do not seem eager to get the new mini casinos built and open for business. The Pennsylvania Gaming Commission has just reopened the bidding process with the first auction scheduled for September. The commission did not decide to restart the bidding; the state’s budget bill included a requirement for the mini casino process to begin again. The lawmakers felt the gaming commission wasn’t doing its job and needed a poke in the ribs to get it moving again. However, in fact, the commission was being realistic not reluctant, there was no interest in the other five licenses. How could that be when there is plenty of interest in truck stop licenses and in implementing sports betting and online gambling? It is an interesting question and one that deserves some thought by the lawmakers.The answer is obvious to most industry observers; the marketplace is too crowded already. That excess of competitors is not just in Pennsylvania, but the entire region. It is also visible in Illinois, Indiana and New York. New York authorized seven casinos and granted four licenses. Even those four are underperforming producing 50 to 60 percent of the income originally projected. For the casino operators it is a two-edged sword, the casinos cost more to build than expected and produce less revenue. Short of bankruptcy, the casinos are removing slot machines and cutting staff to attempt to balance expenses with revenues. That is exactly what casino operators in Pennsylvania are trying to avoid. They do not want to add to the competition, spend too much on a license and building a casino for a small return on investment. It is not good business. It is too soon to tell, but Illinois is very likely to face the same problem. In 2019, the legislature authorized six new casinos, an additional VLT for every VLT licensee, sports betting and VLTs in truck stops. The legislation authorized casinos in Chicago, Danville, Waukegan and Rockford, Williamson County; and one license in a suburban Cook County township. Danville, Waukegan and Rockford actively campaigned for a license and are eager to get going. They are busy hiring consultants and preparing to put out RFPs, but to date no casino company has declared its interest. Chicago is the plumb. The nearest casino in Illinois to Chicago does about one third of the total gaming revenue in the state. There is certain to be interest by the major gaming corporations in Chicago. Wynn Resorts’ CEO Matt Maddox hinted his company’s interest immediately after opening the $2.6 billion Encore Boston Harbor in June. He said that Wynn Resorts was very interested in major cities and he felt the company had demonstrated with Encore its ability to meet the highest standards. Wynn is used to a long and convoluted process. It took eight years from the time the Massachusetts Expanded Gaming Act passed and the opening of Encore Boston Harbor. That kind of patience is going to be needed. Chicago has already missed its first deadline; the legislation called for Chicago to hire a consultant by July 8th. It will be a challenge to find a casino company willing to invest hundreds of millions of dollars in a casino outside of Chicago. Although, Hard Rock has just announced that it is interested in operating a casino in Rockford. The casino industry in Illinois is challenged, revenue has been falling for six years due to the growth of VLTs. The VLTs are set to take another jump due to the same legislation that authorized the additional casinos. Indiana also passed legislation for one new casino and one casino license to be moved to a better location. With the expansion in Illinois, it is uncertain if there will be much interest in building a casino in Indiana either. For certain, there will be casino companies interested in some of those opportunities. It is equally certain that there will be much less interest than there was when casinos were first authorized in Illinois, Indiana and Pennsylvania. Casino operators have adjusted their thinking to the saturated markets, but lawmakers have not. However, over the next couple of years an awareness of the market saturation should eventually reach the halls of government. In contrast to the interest shown in opening new casinos in crowded markets, casinos in Illinois, Indiana and Pennsylvania have demonstrated a very strong interest in sports and online gambling. The success of online and sports betting in Atlantic City is attracting the attention of the entire region. Sports betting may prove to be sufficient inducement for operators to line up to seek a casino license in Pennsylvania, Illinois and Indiana.