The summer sports slowdown is upon us, as is the highest US inflation rate in 40 years, but Pennsylvania gaming revenue charges on.
In May, overall PA gambling revenue totaled $447.8 million, a 3.0% decrease month over month (MoM) and an increase of 8.4% year over year (YoY) compared to May 2021, according to numbers released by the PGCB.
All gambling verticals except for daily fantasy sports saw year-over-year increases, but that doesn’t tell the whole story.
For one, this May’s numbers were skewed by the addition of two casinos that were not yet open last May. Hollywood Casino York (opened Aug. 12, 2021) and Hollywood Morgantown (opened Dec. 22, 2021) provide revenue streams Penn National didn’t have a year ago.
And although revenue is up YoY across the board, growth has not been evenly distributed. While PA online gaming revenue continues a hot pace of YoY growth, retail casinos are facing a number of challenges outside of their control. And some are faring much better than others in the current economic downturn.
Year over year gains driven by sports betting, online slots
Only three gaming verticals saw double-digit YoY growth in May. They were:
- Sports betting (up 26.2%)
- Online slots (up 16.3%)
- Retail table games (14.7%)
Another critical factor for sustained YoY growth is stability from the largest gaming revenue driver in PA, retail slots. Slot machine revenue rose 2.1% YoY, from $201.4 million in May 2021 to $205.7 million this May.
With 15.6% more slots in action (number of slots increased from 22,496 to 26,004), one might expect the revenue jump to be higher.
However, eight of PA’s retail casinos saw YoY declines in slot revenue, with two casinos (Hollywood at Penn National and Mount Airy Casino) seeing double-digit drops.
| PA Casino | May 2022 Slot Revenue | May 2021 Slot Revenue | % Change |
|---|---|---|---|
| Parx Casino | $34.3 million | $37.8 million | -9.2% |
| Wind Creek Bethlehem | $25.0 million | $22.8 million | 9.3% |
| Rivers Casino Pittsburgh | $22.2 million | $21.8 million | 2.0 % |
| Mohegan Sun Pocono | $15.7 million | $15.1 million | 4.2% |
| Hollywood Casino at the Meadows | $13.5 million | $13.9 million | -2.9% |
| Hollywood Casino at Penn National | $13.2 million | $16.5 million | -19.9% |
| Harrah's Philadelphia | $12.3 million | $12.6 million | -2.1% |
| Mount Airy Casino Resort | $12.0 million | $13.6 million | -11.8% |
| Rivers Casino Philadelphia | $10.5 million | $10.8 million | -2.0% |
| Live! Casino Philadelphia | $10.5 million | $11.5 million | -9.0% |
| Presque Isle Downs and Casino | $8.2 million | $8.5 million | -2.9% |
| Valley Forge Casino Resort | $8.9 million | $7.6 million | 17.4% |
| Live! Casino Pittsburgh | $8.2 million | $7.2 million | 13.0% |
| Hollywood Casino York | $5.6 million | n/a | n/a |
| Hollywood Casino Morgantown | $3.7 million | n/a | n/a |
What’s behind the slot revenue drop at some PA casinos?
Many PA casinos have opted to reconfigure the gaming floor to include fewer slots in recent years. Wind Creek Casino is the latest to propose a slot reduction. Their representatives requested a cut from 2,973 to 2,318 slot machines at this month’s PGCB meeting. The plan also includes investing $7 million in newer slots to replace older, underperforming games.
Wind Creek cited low occupancy rates as the main reason for reducing the total number of slots. Other trends leading to slot reductions include:
- Average size of slot machines drastically increasing.
- Patrons opting to avoid sitting in the “middle seat” where there are three or more slots side by side.
Online gambling revenue spurs growth, supports retail
While retail slots will remain the dominant source of revenue for the foreseeable future, online verticals including slots, table games and sports betting are becoming more important for gaming company revenue growth. With the omni-channel approach that modern gaming companies are following, all these verticals work together to lift each other.
Cross-sell is strong across sports betting, poker and table games (live and online). Sports and poker players also cross-sell to iGaming verticals like online slots and table games.
Recently, operators have discussed the trend of cross-sell from retail sportsbooks to retail table games. Retail sportsbooks bring in a younger demographic that helps boost table games revenue and food and beverage spend.
While these other verticals continue to show strong growth, retail slot revenue remains steady. This is not all that surprising considering the demographics of the different games.
Sports betting, iGaming and online poker tends to attract a younger demographic than that of the traditional retail slot customer base. And while the retail slot industry continues to innovate with new games (themes, graphics, features) and the machines grow in physical size, the demographic is unlikely to drastically change.
Customer spend, however, has already taken a turn.
Economic downturn leads to less casino customer spend
With inflation and gas prices at record highs, casinos are finding that their customers are spending less. Gambling is a popular form of entertainment, especially in PA, but that also means it requires discretionary income. When all the bills are paid and the tank is filled, Americans are finding less left over for the gambles.
Less spend per slot player brings us to the expected result of slower YoY growth in retail slot revenue, despite two additional casinos and more machines in operation.
It’s also possible that gas prices are leading more slot players to consider online play. Logically, this would have a greater impact on more remote casinos that depend on a customer base that has to driver longer distances to game.
Big losers, big winners in PA revenue for May 2022
As already mentioned, gaming revenue growth in PA is not evenly distributed. These were the big winners for May, followed by operators who took YoY hits.
Top 5 casino operators for YoY growth in May 2022
- Wind Creek Bethlehem: 31.5%
- Valley Forge Casino: 25.3%
- Hollywood Casino at the Meadows 14.5%
- Live! Casino Philadelphia: 13.6%
- Live! Casino Pittsburgh: 11.9%
Casino operators with YoY revenue drop for May 2022
- Mount Airy Casino Resort (-15.5%)
- Parx Casino (-7.0%)
- Rivers Casino Philadelphia (-1.4%)
- Harrah’s Philadelphia (-1.2%)
- Presque Isle Downs (-.3%)
- Hollywood Casino at Penn National (-.2%)
PA online casinos and poker revenue breakdown May 2022
| Licensee | Total Revenue | Slots | Tables | Poker | Promos | Taxes |
|---|---|---|---|---|---|---|
| Hollywood Penn National | $55,769,727 | $40,464,056 | $15,050,552 | $255,120 | $10,293,833 | $16,623,134 |
| Rivers Philadelphia | $33,156,169 | $29,567,430 | $3,505,438 | $83,300 | $6,208,358 | $11,550,577 |
| Valley Forge | $22,430,606 | $12,766,738 | $9,663,869 | $0 | $1,249,447 | $6,959,345 |
| Mount Airy | $6,968,593 | $4,020,482 | $1,213,442 | $1,734,668 | $1,758,754 | $1,526,952 |
| Parx | $6,361,433 | $5,520,141 | $841,291 | $0 | $2,276,161 | $1,659,277 |
| Live Philadelphia | $3,496,342 | $2,823,837 | $672,506 | $0 | $316,584 | $1,286,010 |
| Harrah's Philadelphia | $3,193,092 | $2,038,137 | $416,377 | $738,578 | $334,278 | $970,240 |
| Mohegan Sun Pocono | $2,529,975 | $1,970,481 | $559,495 | $0 | $328,812 | $861,103 |
| Wind Creek | $1,953,255 | $1,843,409 | $109,846 | $0 | $675,512 | $566,487 |
| Presque Isle Downs | $893,613 | $643,679 | $249,934 | $0 | $5,128 | $340,108 |
| Total | $136,752,806 | $101,658,388 | $32,282,751 | $2,811,666 | $23,446,867 | $42,343,233 |
