Making the News

Pittsburgh Post Gazette

Originally Published:Sunday, August 2, 2009

Casino expects take of $400M in 1st year
North Shore slots facility opening next Sunday with 3,000 machines

By Gary Rotstein
Pittsburgh Post Gazette

The Rivers Casino opens its doors a week from today perhaps never to close them again to a vanguard of slots players who eventually could make the facility the No. 1 gambling den in Pennsylvania.

Though more opulent than the back-room joints that some Western Pennsylvanians have frequented for years in hopes of beating the odds, the new 24/7 facility on the North Shore has the same mission: getting gamblers to leave behind more money than they walk in with.

Rivers Casino officials hope for unrivaled success in that regard. They are opening with 3,000 slot machines, the maximum immediately allowable by law. In six months, they can seek state permission to add more machines, and they expect to be up to 4,000 by next summer.

If their own projections are true, the casino will take in more than $400 million the equivalent of what players lose during its first 12 months of operation. There are just seven commercial casinos in the Eastern United States making that kind of money from slots, according to the Gaming Industry Observer publication.

The Pennsylvania Gaming Control Board uses a more conservative estimate of $362.4 million for revenue in Rivers Casino's first year. Even so, that's more than any other casino in the state earned in the fiscal year that ended June 30, when the seven fully operational during that span averaged $246.2 million.

Rivers Casino officials are not daunted by the sour economy, hardships for some parts of the national casino industry or competition from the thriving Meadows Racetrack & Casino and two nearby West Virginia casinos that have the advantage of offering table games.

"If you look across the country at different markets, the local markets have actually performed a lot better than the destination markets" such as Las Vegas and Atlantic City, said Greg Carlin, chief executive officer of Holdings Acquisition Co., which owns the casino. "People have smaller budgets but they still want to do fun things."

"We believe the market is underserved, actually," added casino President Ed Fasulo. "There are 2.4 million people of gambling age within a 50-mile radius."

Although Pennsylvania's casinos are permitted to have as many as 5,000 machines, The Meadows is the only slots parlor presently above 3,000, with 3,747 in the expanded facility it opened in Washington County in April. The machines themselves typically cost $15,000 or more, so casino operators try to find the right number to match demand.

Don Barden, who had the initial license for the casino before running into financial problems and selling to Holdings Acquisition, expressed confidence to the gaming board that slots interest in the Pittsburgh area would justify the 5,000-machine maximum.

The new operators are more cautious, saying they'll assess what demand is like over the next year. Both the gaming board and Holdings Acquisition have projections that show the possibility of the Rivers Casino holding 5,000 machines and generating $500 million in revenue within five years.

"I wouldn't call that an unreasonable projection," said Joe Weinert, a gaming industry analyst for Spectrum Gaming Group. "But right now, a lot of that is going to depend on how the economy recovers, what happens in Ohio [with legalization of slots], what's the response of The Meadows and the West Virginia Panhandle properties. There are a lot of moving parts."

The decision about slots numbers could also be affected by whether table games are approved as part of present budget discussions in Harrisburg and are up and running in Pennsylvania a year from now.

Either way, other operators in the region already are bracing for the impact of a new competitor smack in the heart of Pittsburgh. Mountaineer Casino Racetrack & Resort, an hour's drive west in Chester, W.Va., has a billboard adjacent to the Rivers Casino proclaiming "Blackjack, baby!" to try to tempt motorists driving on Route 65.

Officials of The Meadows, just a half-hour to the south, have said it's possible their patronage could decline by 15 percent initially. That would offset some of the gains they made from moving to a bigger facility in the spring.

"There's no question there's an impact, but we feel there's plenty of room for both," said Bill Paulos, a co-owner of The Meadows. "We want them to do well we don't want to see anybody fail."

Jim Simms, president of Wheeling Island Hotel-Casino-Racetrack, said that in the long run, it's possible the opening of the North Shore attraction could be beneficial to existing facilities.

The West Virginia casinos have avoided revenue losses since Pennsylvania began opening slots parlors only by adding table games to attract new customers interested in different kinds of wagers. Mr. Simms said he's optimistic that people who enjoy the Rivers Casino will want to try the broader range of gambling, concerts and other entertainment provided in Wheeling.

"There will be a curiosity factor at first to experience the [new] facility," he said. "But after that I think what will happen ... is to grow the entire market."

Pennsylvania officials who drew up the state's original casino legislation sought to spread the facilities around the state so they would not cannibalize one another's revenue. Only two other casinos are open in Western Pennsylvania, The Meadows and Presque Isle Downs near Erie. Financing problems have prevented a proposed Lawrence County racetrack-casino from progressing.

Six casinos have opened in Eastern Pennsylvania, with two more planned within Philadelphia. Although that side of the state has a much larger population base, the extent of competition could prevent any of those casinos from matching the number of machines and amount of revenue of the Rivers Casino.

Together, the state's casinos tallied more than $1.7 billion in revenue in the last fiscal year. Casinos retain 45 percent of that money to cover their operating costs and any profit. The state divides the other 55 percent among tax relief for homeowners, support for the horse racing industry, economic development projects and contributions to cities and counties where casinos are located.

The better the Rivers Casino does, the more money is available for those purposes. It is similar in that sense to the Pennsylvania Lottery, in which the more gambling Pennsylvanians do, the better off the state's seniors programs are.

The Rendell administration reports that more than 2.6 million property owners will receive school-tax reductions averaging $190 this year as a result of casino revenue. That amount will rise in 2010-11, as a result of additional revenue from the Rivers and another slots parlor that opened in Bethlehem in May.

Allegheny County will receive 2 percent of the local casino's revenue, and Pittsburgh will receive 2 percent or $10 million, whichever is greater. That money goes into the general operating budgets of the local governments.

Such financial rewards, in addition to the 1,000-plus jobs created, are a big reason government officials have been major boosters of the casino project despite the social problems that can accompany gambling.

Rivers Casino officials maintain that they don't need problem gamblers in order to be successful. Among those 2.4 million adults within an easy drive, they believe there are plenty who will visit occasionally, leave behind an average of $60 or so in the machines, enjoy a meal or other amenity and find enough entertainment in that to return.

Mr. Fasulo said 35,000 people have gone to the casino's Web site to pre-enroll in the casino's slots players-rewards club. That's just the start of what officials are counting on, beginning at noon next Sunday as the machines power up and beep, whir and sparkle every minute of every day thereafter.


Gary Rotstein can be reached at or 412-263-1255.


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