Slot revenue continues along a negative trajectory, with April marking the seventh consecutive month that reel games suffered a setback. Although compared to past months, April’s year-on-year decline was more subdued.
Regardless, it appears that Pennsylvania’s 12 land-based casinos are happily investing more and more stock in their table games. This is likely a reflection of emergent table game technology and the sizeable tax differential between table games (16 percent tax) and slots (54 percent tax).
A tale of two gaming verticals
In April, Pennsylvania generated $79.55 million in table game revenue, representing an uptick of 10.16 percent over the year prior, and 3.34 percent normalized gains over March.
Seven out of 12 casinos posted table game revenue gains, with five registering double digit percentage upticks.
On the flip side, slot revenue slipped a bit, down -1.58 percent year-on-year to $205.7 million. For the month, slot revenue was down a shade (-2.04 percent), but up 1.23 percent when accounting for March’s slightly longer length.
In total, the industry reaped $285,25 million in April, representing a 1.44 percent uptick over last year, and a 1.81 percent normalized gain over March. Losing casinos outpaced winners, with five casinos showing revenue increases, versus seven losing ground.
Pennsylvania casino winners and losers
One of the biggest mover last month was Sands Bethlehem, which registered a 10.06 percent annual uptick ($48.29 million). Sands, which is in the running to be acquired by MGM Resorts International, is hot on the heels of industry leader Parx Casino. Meanwhile, Parx only posted a 0.97 percent year-on-year gain ($49 million).
However, there’s reason to suspect Parx Casino will soon reclaim a larger advantage. It recently announced a $50 million expansion project. Although the casino doesn’t plan to add new casino games, it does intend on moving its poker room. Parx will also add a swatch of non-gaming amenities — which could attract more overall foot traffic to the venue.
By contrast, Sands put the skids on its planned $90 million expansion project, presumably due to the sales talks between MGM and Sands.
But it was PA’s smaller casinos that inked the biggest increases:
- Mt. Airy notched 11.05 percent annual gains, and increased its table game revenue by a whopping 52.85 percent.
- Category III casino Valley Forge Casino Resort saw its revenue spike by 10.92 percent to $10.75 million. Like Mt. Airy, Valley Forge saw its table game revenue skyrocket, up 17.61 percent.
The state’s only other winner was The Meadows: +7.29 percent overall, +52.85 percent in table game revenue.
On the losing side, the struggles continued for both Harrah’s Philadelphia (-4.07 percent), and Mohegan Sun Pocono (-7.59 percent). Rivers Casino was the state’s second-biggest loser (-5.56 percent), while SugarHouse Casino and Hollywood Park posted very modest declines of under 0.5 percent.
Table game expansion on the mind
In April, table game revenue comprised 27.9 percent of the state’s total gaming revenue. That represents a serious increase over last April’s split, when table games accounted for just 25.7 percent.
Still, it doesn’t surprise. In the past year, the state’s land-based casinos have devoted significant real estate to table games and other amenities. Since April 2016, the number of table games present in the state has swelled modestly. At the same time, the amount of slot terminals dipped by 435 to 26,155.
This trend suggests a slow yet steady departure from the industry’s overreliance on slot terminals for gaming revenue.
Why focus on table games over slots?
But why the change in focus? There’s a few possible reasons:
- Tax rate: Put simply, PA casinos get charged through the nose on slot revenue (54 percent). This isn’t the case for table games, which are taxed at a much more reasonable 16 percent.
- Player frustration: This is pure speculation, but it’s plausible that players are redirecting their gambling dollars away from the state’s slots (which return just approximately 90 percent) to its significantly lower house edge table games.
- Emerging technologies: The rise of stadium gaming enables one or two dealers to service dozens, if not hundreds, of players simultaneously. Stadium games are taxed at the table game rate in Pennsylvania.
On a side note, should Pennsylvania pass online gambling legislation where the online tax rate mimics the land-based one — a real possibility — then online operators may also place the crux of their focus on table games.
Although even then, operators will be extremely hard–pressed to turn a profit. Online sites are even more reliant on slot revenue than live venues. One reason being, they’re unable to offer high margin, non-gaming amenities, such as food & drink, retail outlets, and hotel rooms.
Judging by the trajectory of Pennsylvania’s land-based industry, a 54 percent tax rate on online slots would eventually result in lower online gambling revenue, and grossly negative margins.