Pennsylvania casino executives testified Wednesday they are optimistic gaming operations would eventually return to pre-pandemic levels.
But they warned lawmakers that expanding distributed gaming would threaten that recovery.
“Customers and revenues do not grow merely because we want them to or because there’s another form of gambling available,” Rivers Pittsburgh General Manager Bud Green told the state House Gaming Oversight Committee. “We’re at a saturation point in Pennsylvania, and other forms of distributed gaming will cannibalize your (tax) revenues.”
Top officials representing 13 of the state’s 14 casinos were among witnesses at a session addressing how the COVID-19 pandemic affected gaming operations and the financial prospects for an industry that has evolved into a major source of state and local tax revenue.
Pennsylvania collects more in gambling taxes than any other state: $1.1 billion for the state and municipalities in 2020, even with pandemic shutdowns and capacity limits; gambling taxes totaled $1.4 billion in 2019. State and local taxes take about 52% of gross slot machine revenue.
Kevin O’Toole, executive director of the state’s Gaming Control Board, said the pandemic broke a five-year string of gaming revenue increases in the state. He noted that two new casinos opened despite the pandemic. Pittsburgh Live!, which opened Nov. 17 about 45 minutes outside the city, is the first of five “mini-casinos” to be built under a 2017 gambling expansion that also allowed online gaming. Philadelphia Live!, featuring more than 2,100 slots, 150 table games, and a 12-story hotel, opened on Jan. 19.
Because each casino was closed for almost four months during 2020, table game and slot revenue were down about 55% from the year before, O’Toole said. Online gambling, which Pennsylvania casinos launched in 2019, offered a “life raft,” as many customers shifted their play there. But O’Toole said the bump wasn’t enough to make up for the closures.
The 2017 gambling expansion also allowed up to five slot machine-like video gaming terminals at a limited number of truck stops. Amid the pandemic last summer, Republican leaders in the state Senate suggested allowing VGTs in bars, taverns, social clubs, and other venues with liquor licenses. At the committee meeting, legislators and casino executives cited several examples of VGTs and slot-like skill games being found in restaurants, bars, and clubs.
Casino companies are spending tens of millions of dollars in Pennsylvania for ongoing improvements:
Joe Billhimer, executive vice president with Cordish Cos., said the two Live! properties were completed despite pandemic-related construction slowdowns. The mini-casino cost $150 million; the Philadelphia facility, $700 million.
Kathy McCracken, executive vice president and general manager of Wind Creek Bethlehem, said a groundbreaking is planned this year on a $155 million hotel.
Parx CEO Eric Hauser said the company will spend more than $70 million on developing a mini-casino in Shippensburg.
Dan Ihm, vice president and general manager for Hollywood Casino at Penn National Race Course, said the parent company, Penn National Gaming, will spend more than $170 million to build and equip two mini-casinos.
Attorney Adrian King, representing the gaming industry, said Pennsylvania casinos are already showing signs of recovering from the pandemic.
“It will return itself to the position that it has been since its inception, which is, quite frankly, a tax-generating machine. The best in the United States. A golden goose,” he said.
Approval of distributed gaming would have “a serious detrimental effect … perhaps almost as much as COVID,” he added, citing casino revenue and job losses in Illinois after VGTs became widely available.
Billhimer said Cordish “lived up to its commitments” based on current laws and completed its two projects despite numerous COVID-related obstacles,
“It would send a bad message to the business community and beyond if the legislators consider changing the rules on operators at this point,” he added.
Rep. Susan Helm, committee chairwoman, said the panel plans hearings in the future on VGTs and skill games.
Several casino executives asked for state officials to lift the ban on serving alcohol on gaming floors. The ban was put in place because of a mask mandate still in effect for customers and staff. However, nonalcoholic drinks are allowed on gaming floors.
Smoking also is banned on gaming floors because of the mask mandate. In response to a legislator’s question, Hauser said Parx customers have had mixed responses to the ban and the revenue effect is “very hard to quantify.” The casino has built a patio to accommodate smokers.
