Looks Like The Satellite Casino Fad Has Run Its Course

Posted on April 18, 2018

The mini-casino situation in Pennsylvania just got a lot murkier. After one successful round of subsequent auctioning, the second auction came and went without a bidder.

Is it time to open up the satellite process?

Now the Pennsylvania Gaming Control Board (PGCB) will need to evaluate how to proceed. Technically, the next step is a third and final round of bidding. This round would open up the process to groups outside of existing casino license holders. If that process happens, the PGCB would predetermine eligibility requirements. Any outside applicants would need to be vetted by PGCB before they would be approved to submit a bid.

Of course, PGCB could also decide to call it a day when it comes to satellite casinos. There are currently five of the 10 licenses still available. However, thanks to some very large bids early on, the proceeds from the five auctions already generated well over the minimum expected.

Had all 10 licenses sold for the base cost of $7.5 million, it would’ve generated $75 million in revenue. Thanks to opening bids of $50 million and $40 million dollars, the five licenses generated over $120 million.

Or is it time for PA to shut down the auctions?

Early revenue numbers had industry insiders very enthusiastic about how much these satellite casinos could raise for the state. However, once the choice locations were gone, so was the interest.

The most recent auction awarded a second satellite casino license to Penn National for just $3 above the minimum bid. That location was arguably more a defensive move to protect the centrally located Hollywood Casino than the company eagerly thinking it could develop a profitable new property in central PA.

The Morning Call spoke with Joseph Weinert, executive vice president of the consulting firm Spectrum Gaming Group regarding possible sites. He said College Station is a real possibility. However, besides that, the choice locations are really gone.

Keep in mind that over 1,000 municipalities in the state opted out of hosting a mini-casino. Between the opt-outs and the buffer zones around existing Pennsylvania casinos and satellite locations, there truly are a finite number of options.

If PGCB decides to establish criteria for those outside of the Keystone State, it is unclear if anyone would bother with the vetting process.

Why outside entities might not want a Category 4 casino

Outside entities are plunking down big bucks to buy out existing Pennsylvania casinos. The opportunity to get in the market before all of the new gambling expansion elements launch is too lucrative to miss out.

However, buying a Category 4 license won’t afford them the same kind of opportunity. While the presumption is existing casinos with higher-category licenses can offer things like sports betting at mini-casinos, a mini-casino flying solo would not be able to do the same thing.

Moreover, a Category 4 casino would not have access to any of the available interactive gaming licenses.

To sum things up, if an outside group decided to invest in a satellite casino property, that is all they would really be investing in. The opportunities new groups like Churchill Downs and Wind River can take advantage of are not on the table.

Photo by omeus / Shutterstock

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Jessica Welman

Jessica Welman is a contributor to PlayPennsylvania and managing editor of PlayIndiana and PlayTenn. A longtime poker media presence, Jess has worked as a tournament reporter for the World Poker Tour, co-hosted a podcast for Poker Road, and served as the managing editor for WSOP.com.

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