Making the News

Pittsburgh Tribune-Review

Originally Published:Sunday, August 9, 2009
http://www.pittsburghlive.com/x/pittsburghtrib/news/pittsburgh/s_637458.html

Stay-at-home chic may boost Rivers Casino

By Mike Wereschagin
Pittsburgh Tribune-Review

The $33 billion gambling industry is wondering what its future looks like, and the Rivers Casino opening today on the North Shore could help provide an answer.

Casino revenue in major gambling centers fell by hundreds of millions of dollars during the recession. Pennsylvania's growing market emerged as a bright spot that might illuminate a larger trend. Rather than flying to places such as Las Vegas and Atlantic City, gamblers stayed close to home, driving to new casinos such as The Meadows Racetrack & Casino in North Strabane.

Whether the trend toward local gambling continues is "one of the big questions out there," said Joseph Weinert, senior vice president of Spectrum Gaming Group, a casino consulting company in New Jersey.

Casinos in Las Vegas took in almost $1.3 billion less last year than in 2007. Atlantic City casinos were down $418 million in 2008, compared to 2007, according to the American Gaming Association, an industry group based in Washington.

"It's been a rough year," said Gregg Klein, an analyst at BNP Paribas bank in New York, who tracks the gaming industry.

Not in Pennsylvania. Here, seven casinos were open throughout the fiscal year that ended in June. Together, they beat expectations by a total of $351 million, according to state Gaming Control Board records.

Those expectations are based on a "stabilized year," generally three years after opening, when the casino has had time to build a base of patrons. No casino has been open that long.

The only casino to make less than expected was Mount Airy Casino Resort, 35 miles from Scranton in the Poconos, a resort destination. Mount Airy grossed $89.1 million less than predicted. It opened in October 2007.

Rivers Casino got final clearance by the Pennsylvania Gaming Control Board Saturday to open for business today, based on successful test runs Wednesday and Friday.

Hopes for Rivers Casino are high. The state expects the casino, which today becomes the first to open within a city's limits, to become the most lucrative in Pennsylvania. State regulators estimate it will gross $362 million its first year and $612 million during its fifth year.

Rivers Casino owners' estimates top out at $507 million after five years, but they've seen the same trends as Weinert.

"Local markets have not been hit, and have actually improved because people still want entertainment," but don't have the money to travel, said Dan Fee, spokesman for Rivers Casino.

Weinert expects that to continue.

"We feel this is going to have a lasting impact on the top tier of gamblers," he said.

A loose rule for casinos is 80 percent of revenue comes from 20 percent of their players the regulars and high-rollers who leave behind $1,000 or so every time they visit. People with that much disposable income are the ones who lost the most money when the stock market tumbled, Weinert said.

"A lot of these people have been hit hard and I don't think they're going to forget about that for a long time," he said.

The world's largest casino company offers an example of the shift.

Harrah's Entertainment reported its revenue fell 13 percent in the first quarter of 2009, compared to the same period last year. Casinos in Las Vegas and Atlantic City experienced the largest drops, according to the company's Securities and Exchange Commission filing.

Revenue at Harrah's eight Las Vegas casinos was down $77.4 million. Its five Atlantic City casinos took in $114.2 million less, according to the SEC filing.

During those same three months, its Pennsylvania casino, Harrah's Chester near Philadelphia, grossed $83.2 million. That's $22.4 million more than was expected, according to a study the Gaming Control Board commissioned in 2006 to estimate how much money casino applicants were likely to make.

"Pennsylvania has held up pretty well as a state," Klein said. "It's a newer market, a captive market (where) patrons have to drive past casinos to get to Atlantic City or West Virginia."

Perhaps the biggest surprise has been The Meadows. About an hour away from two casinos in West Virginia, where table games are legal, the casino was expected to gross $118 million, less than any other Pennsylvania casino. Last year, it grossed more than $231 million, and its permanent facility didn't open until April.

"Our guests don't have to buy a plane ticket and fly to far off places to play their favorite slots, enjoy a good show, dinner and the horse races," casino spokesman David La Torre said in an e-mail.

The Rivers likely will take some of those customers, Klein said.

"Pittsburgh is a good market. It will hit The Meadows a little bit," said Klein.

La Torre declined to discuss the casino's revenue projections. The Meadows opened its 350,000 square-foot permanent casino in April and by May, it had the second-highest gross terminal revenue in the state, behind Philadelphia Park in Bensalem.

 

Pennsylvania isn't immune from the recession. The credit market freeze last summer stopped construction on the Rivers Casino then known as Majestic Star and forced former owner Don Barden to transfer control to an investment group led by Chicago developer Neil Bluhm.

Around the same time, the financing package for Valley View Downs racetrack and casino in Lawrence County collapsed. The project remains on hold.

Rivers today becomes the ninth casino to open, out of 14 allowed by the 2004 slots law. The state's industry is still young, Weinert said.

"Typically we look at casinos as having a three-year ramp-up period. Pennsylvania is still in a natural growth mode. We'll see whether it can sustain that growth after (every casino) is three years old," Weinert said. "Though at that point, they might have table games to give them another shot in the arm."

 

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