Gaming Atlantic's 2009 Top Ten Mid-Atlantic Gaming Stories

Here are GA's top ten stories in mid-Atlantic for 2009:

1. Atlantic City’s decline: as the mainstay in the regional gaming industry, this was a big deal.  Overall,revenues continued to plummet – double-digit declines in revenue from 2008, major investors gone, the huge Pinnacle site in the middle of the Boardwalk still a vacant lot.   Despite a surge of optimism that the decline had abated earlier in the year, things just got worse as the year progressed.

A silver lining?  Revel Entertainment found financing from China to finish the $2 billion mega-casino on the Boardwalk’s east end, but will it be enough to revive AC gaming when it finally opens?  There’s a lot to revive – thousands of jobs, a town’s worth and future prospects.  AC probably needs more than that.  Here’s a casino gross revenue  snapshot for the past three Novembers in AC gaming, from the New Jersey Casino Control Commission:

•   Nov. 2009 - total gross revenue = $299.3 million (13.4% decrease from 2008)
•    Nov. 2008 - total gross revenue = $345.5 million (7.8% decrease from 2007)
•   Nov. 2007 – total gross revenue = $374.7 million (7.7% decrease from 2006

**Nov. 2007 to Nov 2009: 20.1% decrease in gross revenue for AC casinos

  2.       Pennsylvania power: since 2006, the pattern has become clear: Atlantic City’s loss is Pennsylvania’s gain, when it comes to gaming.  Pennsylvania revenues in November 2009 were up from Nov. 2009, and December’s numbers should be just as good or better with the grand opening of the new, upscale ‘Parx’ casino on Dec. 18 to replace the old Philadelphia Park.  Sands Bethlehem opened to great success and fanfare in June, and cut into the Poconos and Philadelphia revenue streams, but not enough to slow the momentum.  And there was a major revenue upswing in the Fall in those regions that positively impacted all but Mt. Airy, which has been hit hardest by Sands’ opening.

Sands Bethlehem apparently attracted new players from New Jersey and New York.  Meanwhile, the Rivers casino opened in Pittsburgh in August with 3,000 slot machines and has held steady at approximately $16 million in revenue per month since then.   Finally, the state moved ever-so-close to adding table games through a mind-numbing legislative budget process that appears to be almost resolved, thus paving the way for table games in 2010. 

Here’s a revenue snapshot for the past three Novembers in PA gaming, courtesy of the Pennsylvania Gaming Control Board:

•   Nov. 2009 - total gross revenue = $166.3 million  (26.8% increase from 2008) 
•   Nov. 2008 - total gross revenue = $131.2 million (29.1% increase from 2007)
•  Nov. 2007 – total gross revenue = $101.6 million

** Nov. 2007 to Nov 2009:  63.6% increase in gross revenue for Pennsylvania casinos

 3.       Delaware sports betting: this was a big story that received no small amount of national attention.  Sports people everywhere paid close attention - ESPN covered it, USA Today, etc. – but the federal courts dealt the initiative a major blow by disallowing single game, straight-up betting and limited the betting to 3-game parlay bets on NFL games.  That decision cut sports lottery revenues, but still made some money for the state and generated some buzz surrounding the Delaware racinos.   Though, it was not nearly enough to alleviate pressure for table games in the state (see #6), industry and political pressure for more casinos.

Just the fact of legal sports betting outside Nevada is big news and has helped to generate efforts (particularly from New Jersey legislators), to overturn the 1992 law that banned sports betting outside the four grand-fathered states.  Over-turning the federal restrictions on online gambling is currently facing mounting pressure on Congress, thanks especially to organized online poker players.  The Delaware sports betting debate also exposed a certain hypocrisy of professional sports leagues, which benefit from lottery tie-ins and casino advertising while officially opposing legalized sports betting.

One day, that will probably end when financial types realize the tremendous money to be made from promotions involving pro teams and slot machines (for example) and a willingness to embrace to the natural connection between sport and gambling that has existed for ages.  This connection need not be limited to horse racing.  NASCAR’s recent embrace of Dover Downs racino’s close proximity to its Dover racetrack is a positive example that other sport leaders should look towards.

4.       Maryland’s mixed beginning: with lots of hype, Maryland gaming got off to a mixed start in 2009.  The original bidding for the five site licenses was disappointing, with only four valid applications for the five sites.  This made the state’s approval process easier due to the lack of site competition, but then local zoning and property transaction problems arose at the two biggest sites (Baltimore & Anne Arundel).  As well, two of the three successfully-bid sites came in with significantly lower numbers of VLTs then allowed, thus decreasing potential revenue.  On the upside, Maryland did attract two strong industry players- the Cordish Company & Penn National – and in December, finally resolved the local zoning controversy  that bedeviled the Arundel Mills application for most of the year.  

 Meanwhile, the original Baltimore application went down due to numerous application fee delays and the overall shakiness of the investor group that formed to apply for the casino (Baltimore City Entertainment Group).   But, the upside to that is the potential for another major player with solid finances and a gaming track record to come in to Maryland when the site is re-bid in early 2010.  Maryland needs a relatively quick and positive process for the Baltimore site as its neighboring states push ahead quickly in the now highly-competitive mid-Atlantic gaming marketplace.  

Maryland’s high gaming tax (67%) remains a problem that will impact the development of Maryland gaming by way of limiting destination resort investment until it is addressed.  This probably won't take place until at least 2011 -  maybe earlier for the still un-bid Rocky Gap site in western Allegheny county.  As well, the constitutional process required to expand Maryland gaming may prove difficult, if and when legislators decide to move in the direction of table games.

  5.       Aqueduct VLTs: Yes, this has been difficult, with the state rejecting Delaware North’s bid in March. There’s been all sorts of frustrating political delays involved in this process and Delaware North’s lost bid was a severe setback.  But it is moving forward and promising to shake up New York’s gaming market, currently dominated by Empire Resorts (Yonkers’ raceway). 

Aqueduct gaming has bidders that include partnerships involving MGM Mirage, Penn National, Hard Rock International and Delaware North (again), in an improved financial situation from 2008, though one that’s certainly still dicey.  Wynn Resorts pulled its bid, but the others are still in.  It’s a little out-of-the way for some in New York, but Aqueduct’s myriad public transport connections and easy access for Long Islander’s gives it a very lucrative potential. 

 6.       Delaware table games:  Delaware’s state legislature pushed forward on table games, with likely approval pending and the games set to come to Delaware’s three racinos by mid-2010.  And, the state-industry split should be favorable to the industry to actually make some revenue for both the racinos and the state.   Of all the new mid-Atlantic gaming states, Delaware’s political dynamics are most favorably disposed to a prosperous gaming industry.

  7.       Table games at Charles Town: West Virginia’s Jefferson County voted to approve table games in early December, thus allowing Penn National to implement them at Charles Town Races and Slots.  They should be in place by mid-2010, bringing hundreds of new, good jobs to the region and increasing Charles Town’s traffic from the Baltimore-Washington region.   As well, this well help Charles Town in its competition with Pittsburgh’s Rivers casino, opened in August 2009 (and likely to add table games soon as well).   Like Delaware’s expansion, Maryland’s foray into gaming partially spurred this move—with 30-35% of Charles Town’s players coming from Maryland.

 8.       Magna Entertainment’s bankruptcy:  Mainly this impacted Maryland gaming via the botched VLT  application for Magna’s Laurel racetrack.   Magna went to court to have the application reviewed, to no avail, and meanwhile pursued bankruptcy.  This meant court-supervised auctions for its Maryland tracks: Laurel & Pimlico.

Maryland politicians feared losing the Preakness and stepped in by enabling the governor to utilize eminent domain, if necessary, to acquire and operate Pimlico to preserve the Preakness in Maryland (with no small controversy involved).   Fortunately for them, this didn't come to pass, and likely won’t, with the tracks soon to be auctioned off with a judge-approved stipulation that the winning bidder for Pimlico agrees to keep the Preakness in Maryland.

  9.       Shinnecock tribe moves closer towards federal recognition: After years of bureaucratic delays and hedging by the Bush administration, the Obama administration recently announced that eastern Long Island’s Shinnecock tribe met the criteria for federal recognition, thus paving the way for a long-planned Class II casino on the tribe’s 800 acres in the Hamptons, or a full-fledged Class III casino on other land—if that can be negotiated by the state and via the National Indian Gaming Commission, without potential objection in the wake of the Carcieri vs. Salazar ruling. (see #10)

 The Shinnecocks would prefer an off-reservation site with its lucrative Class III potential.  The tribe faces a friendlier political climate than before with the more pro-Indian Obama administration and Gov. Patterson’s office.   From a revenue perspective, this might pay off via the type of deal that the state of Florida struck with the Seminoles (finally) this year, or Connecticut’s lucrative tribal deals.  Expect plenty of industry opposition to such a prospect, however.   

10. Carcieri vs. Salazar: Last February, the United States Supreme Court ruled that only tribes federally recognized in a 1934 law had a right to federal land-in-trust gaming (off reservation).  This instantly put the kibosh on the Massachusetts’ Mashpee Wampanoag plans for a Cape Cod/Boston-area casino, and may yet stall Shinnecock ambitions in New York.  

However, the Obama administration and many members of Congress vehemently disagreed with the decision, and a process to get past the ruling has already begun with a Senate sub-committee recently approving a so-called “Carcieri Fix” bill.  This could be an interesting showdown to come in the Senate, with majority leader Harry Ried (D-Nevada) opposed to land-in-trust gaming.  He’s apparently just fine with the Carcieri decision.