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Slots Add Revenue in Pennsylvania

February 11, 2008

What a difference a year makes for gamblers, who are giving casinos in the Pittsburgh, Pennsylvania region nearly a million dollars more a day in 2008.

In January 2007, the area's gamblers left behind about $35 million playing more than 5,000 slot machines in Wheeling and Chester, W.Va., the only casinos then available within a one- or two-hour drive.

Last month, with the addition of table games at those locations and nearly 4,000 slot machines at the Meadows Racetrack & Casino in Washington County and Presque Isle Downs & Casino in Erie County, gamblers dropped $63 million.

Even though January is typically one of the slower months in the casino industry, with winter weather a deterrent for older players, people found a way to spend $28 million more gambling nearby than they did a year ago.

If that level of wagering continues, gamblers' losses for the year would easily exceed $300 million, not even counting what's yet to come from the North Shore's Majestic Star casino in 2009 and another casino planned for Lawrence County.

There have been questions of whether additional gambling opportunities in the region would merely cannibalize one another, but the West Virginia operators who put in table games Dec. 20 to offset Pennsylvania competition maintain they've created a new market.

Their poker rooms, craps, roulette and blackjack tables have been filled on weekends (and plenty of business on weekdays) from a crowd that's younger than typical slot players, say officials of Mountaineer Casino, Racetrack & Resort and Wheeling Island Hotel-Casino-Racetrack.

The West Virginia racetrack casinos had experienced revenue decline of more than 10 percent after the two Pennsylvania slot parlors opened last year. While seven weeks as full-fledged casinos may be no long-term barometer, early indications are that Wheeling Island is making up that lost revenue, Mountaineer is doing even better than that and Pennsylvania's operators may yet thrive.

"The more facilities, especially given that they're spread out, are exposing more people to this activity," said Joe Weinert, an analyst for Spectrum Gaming Group, "which is going to promote tryout by new customers as well as increasing visits among existing customers. That, by definition, is extending the market."

Mountaineer generated $18.2 million from slots and an estimated $3.8 million from table games in January, compared to $19.4 million from slots alone the year before, according to West Virginia Lottery Commission figures. Wheeling Island earned $12.6 million from slots and an estimated $2.6 million from table games, which combined nearly matched its $15.4 million take from slots in January 2007.

Meanwhile, The Meadows made $17.3 million from slots and Presque Isle $10.7 million. In both cases, those were among the lowest monthly revenues since opening, but not necessarily worse than an expected winter slowdown.

There was no evidence of severe impact from West Virginia's table games, although officials at The Meadows say they are spending more on marketing -- and thus eroding their profit margin -- to offset the new competition.

Presque Isle has reduced the work week for hundreds of employees due to slower winter play, said Ted Arneault, president of MTR Gaming Group Inc., which owns both Mountaineer and Presque Isle.

"If you add them all up, you see total slots play is up," Arneault said of the four casinos. "We were saying we would increase the whole market by going to a new demographic [with table games], and that's what it appears has happened. We've been able to increase the entire pie rather than taking away."

The West Virginia casinos say the table games that help them resemble the full-service operators of Atlantic City and Las Vegas will attract people from longer distances. Pennsylvania's casino backers also counter economic arguments by asserting that fewer local residents now take their money out of the local economy to gamble elsewhere.

In addition, the casinos tout the economic benefit of the jobs they've created: at least 2,500 new ones in the past year from the two Pennsylvania casinos and the West Virginia expansions. Both West Virginia operators also indicated plans to add more tables and employees in coming months.

"We're not quite where we want [in terms of revenue], but absolutely headed in the right direction," Wheeling Island President Bob Marshall said. "What you're seeing now is people coming in to sight-see and people-watch. It's fun, a different crowd than before."

He acknowledged one difficulty of table games: higher labor costs that dictate the casino has to spend more if capturing the same revenue it received from machines alone. To help offset those expenses, West Virginia set a lower tax rate for table games than slots.

Mike Graninger, general manager of The Meadows, has visited both West Virginia casinos since they started table games. He's impressed by the revenues being generated.

"Their play seemed astronomical," Mr. Graninger said. "They're using $25 [minimum wager] crap games, which is like unheard of....There's a lot of pent-up demand, because table games are nowhere else around here."