Will The Ten Satellite Casinos In Pennsylvania Cannibalize Gaming Revenue?

Pennsylvania Gov. Tom Wolf signed a new gaming law into existence last weeks which brings about a number of changes to the state’s gaming laws. There are currently twelve land based casinos in Pennsylvania which generated close to $3.2 billion in the last fiscal, making it the second highest commercial state in terms of casino revenue. Legislators approved the new gaming bill as the changes were expected to generate an additional $200 million for the state in the form of gaming licenses and taxes.
One of those changes in the new gaming law, allows as many as ten satellite casinos to be developed across Pennsylvania. The competitive bidding process for these gaming licenses will start early next year and there are concerns from a number of parties that these mini casinos could cannibalize the gaming industry in the state and hurt the revenues of existing casinos. We take a look a deeper look at these satellite casinos and whether it is indeed possible for them to negatively impact the revenues of Pennsylvania’s gaming industry.
Satellite Casinos
These satellite casinos or mini casinos will fall under a category four facility which requires them to have a minimum of 300 slot machines with a cap set at 750. They will also be able to offer up to 30 table games and apply for an additional 10 table games to the Pennsylvania Gaming Control Board after 12 months of operation. Satellite casino operators will have to pay a $7.5 million licensing fee for running slot machines and an additional $2.5 million for running table games.
The new gaming laws are quite specific when it comes to where these satellite casinos can be developed. These new mini casinos must be developed with a minimum 25 mile distance from existing casinos and cannot be hosted in the following counties – Pike, Carbon, Wayne, and Fayette which is home to the Lady Luck Casino and Montgomery county which is home to Valley Forge Casino Resort.
However there are exceptions to the rule. If a casino operator wins a satellite casino license and already owns and runs an existing casino in the state, it has the freedom to develop a satellite casino within a 25 mile radius of its premises. An example of this would be if the Parx Casino applies and wins a satellite license, then it has the freedom to develop a mini casino within a 25 mile radius of its Parx Casino.
Satellite Casino Licensing Process
The licensing process will commence from Jan 15, 2018 and is expected to be completed by July 31. The gaming regulator will provide casino operators with a three week notice period to prepare after confirming the date, time and location of the initial auction process. Category 1 and 2 casinos barring Lady Luck Casino and Valley Forge Casino Resort will have exclusive rights to apply for a satellite license during the initial auction process. The minimum bid is $7.5 million and the final bid amount must be submitted within a 48 hour deadline.
The operator that wins the satellite casino license must select a location and submit its license application to the gaming board within a six month period – there will be a 2 month grace period subject to the board’s approval. These satellite casinos will have to pay a 50 percent tax on slot machines, 34 percent tax on electronic table games and 14 percent tax on traditional table games.
Cannibalization Concerns
Is Pennsylvania’s gaming industry strong enough to welcome 10 satellite casinos? There are many who are concerned that these 10 new mini casinos will cannibalize the industry but only time will tell whether the 10 satellite casinos hurt or boost Pennsylvania’s gaming revenue.
Penn National Gaming which operates the Hollywood Casino is one of the operators that are concerned about possible cannibalization. The casino is located in the center of Pennsylvania and is concerned that it will lose revenue from all four corners. However the General Assembly has played down concerns over possible cannibalization by stating that it had considered the matter and put in place a number of stipulations that will ensure that existing casinos do not suffer a negative impact by the introduction of these 10 new satellite casinos.