Treasurer McCord: Market Analysis Finds Gaming Industry Generally Performing as Expected; Identifies Competitive Threats, New Potential Markets
Harrisburg – State Treasurer Rob McCord – an ex officio member of the Gaming Control Board and legal custodian of the Commonwealth’s gaming revenues – today released a detailed analysis of Pennsylvania’s gaming market, saying the study marks the first comprehensive examination of the industry since the legalization of slot gaming in 2004.
Treasurer McCord made his remarks today as he presented the analysis to members of the Senate Community, Economic, and Recreational Development Committee. Treasury retained the Innovation Group through a competitive bid process to prepare the analysis, which is intended to serve as a data-driven tool for legislators, policymakers, and the general public as they consider gaming issues in the future.
“The study is the first comprehensive analysis of Pennsylvania’s gaming market performance since the industry’s inception seven years ago,” said Treasurer McCord. “As Treasurer, I have an interest in ensuring the future viability and growth of state gaming revenues for the benefit of property tax relief, economic development, and local government support throughout the Commonwealth.”
With an approximate tax rate of 54% on slot gross terminal revenues, Treasurer McCord said the Commonwealth and its citizens are majority shareholders in Pennsylvania’s 10 operating casinos. The state’s gaming industry has generated more than $5 billion in taxes and license fee revenue since the first casino opened in late 2006.
“The Commonwealth has a vested interest in this industry,” said McCord. “As investors, we should better understand the financial performance of our investments, recognize emerging competitive challenges, and identify new market opportunities. This analysis accomplishes these important objectives.”
Overall, the Innovation Group found revenues increased steadily since November 2007 and, although some indicators point to the beginning of a saturated market, revenues are expected to continue growing as the market matures. The analysis also illustrates slot proceeds constitute the bulk of Pennsylvania’s gaming revenues.
In western Pennsylvania, the study showed slot machine supply is greater in relation to the gaming population than in eastern Pennsylvania. The Treasurer noted, “At the moment, demand has not caught up to supply in western Pennsylvania. While there may be room for growth, the market may be saturated.”
In the East, the region has both a higher overall supply of slot machines and a higher win-per-unit, which reflects the greater population density.
“There are clear differences between the sizes of Pennsylvania’s eastern and western markets,” said Treasurer McCord. “In the East, it is clear demand has absorbed supply, which suggests future growth opportunities will be more modest.
“Overall, this study shows the state’s gaming market is maturing. The days of double-digit growth from month-to-month are likely behind us. We can expect future revenue growth that is more modest or that simply plateaus, but that is not a cue for casino operators to become complacent, as was the case in New Jersey. There are emerging challenges – particularly from Ohio and Maryland – but if we fail to react appropriately, we risk losing market share and hurting state revenues.”
The Treasurer explained in addition to Pennsylvania’s 10 operating casinos, each neighboring state has either legalized or expanded new gaming offerings. The Innovation Group’s report found future casinos in Cleveland and Youngstown, Ohio, and nearby points in Maryland, will impact Pennsylvania’s slot performance.
Despite those emerging competitive pressures, the market analysis showed growth opportunities still exist in Pennsylvania. The Innovation Group identified 11 new markets that could support a gaming facility.
“There are a number of factors to consider when deciding where to locate a casino,” said Treasurer McCord. “While nothing in the report is intended to serve as an endorsement of a particular site or property, I believe it is important to remember the reason gaming was first legalized in Pennsylvania: to generate new revenues for the Commonwealth and aid its citizens. I hope this analysis, which we are making fully available to the public for inspection, is a useful resource in achieving that goal.”
To view a full version and an executive summary of the Innovation Group’s Pennsylvania Gaming Market Assessment and Competitive Analysis, as well as a PowerPoint of Treasurer McCord’s presentation today, visit www.patreasury.org.
Media contact: Michael Smith, 717-787-2991 or