The first round of the subsequent auction for mini-casino licenses got underway Wednesday morning. The proceedings featured a single bidder, Hollywood Casino at Penn National. The casino bid just $3 over the minimum licensing fee of $7.5 million to obtain the fifth satellite casino license.
Hollywood’s parent company Penn National selected a location in West Cocalico Township, which is just outside Reading, PA. The region was one of the few areas in the state actively lobbying for a satellite property prior to auctions getting underway.
This was the opening auction of the second round of bidding. All Category 1 and 2 casino license holders were eligible to participate, including the four properties who already have a Category 4 license. Category 3 casinos Valley Forge and Lady Luck Nemacolin were also part of the proceedings for the first time.
Hollywood now the only casino with two satellite licenses
Penn National won the first mini-casino license back in January with a massive bid of $50 million. The first casino site is in Yoe, Pennsylvania, around 20 miles north of the Maryland state line.
This second site in Cocalico is roughly 43 miles from the Yoe site. It is just off I-76, about halfway between Philadelphia and the state capital, Harrisburg. It is also around 43 miles from Hollywood Casino just outside Harrisburg.
Despite being the most vocal opponent of the mini-casino expansion, Penn National is now the only group to obtain two of the ten mini-casino licenses.
Of course, the activity at these auctions makes sense when you consider why Penn National had issues with the auctions in the first place. As the only casino in the central area of the state, the company felt these satellite properties were unduly unfair towards Hollywood Casino. While other casinos have buffer zones that often overlap, creating a bigger protected area around the property, Hollywood has to fend for itself.
The company is still participating in the auctions, but it is also fighting a legal battle in court trying to get the satellite casino law overturned.
The mini-casino chess pieces are surrounding the parent casino
The Yoe location is due south of Hollywood Casino, while Cocalico is southeast of the parent casino. The other satellite casino sites other casinos selected are on the western side of the state. The closest satellite competition is Parx Casino’s South Newtown Township location, which is 50 miles from Hollywood and 80 miles from Cocalico Township.
With this new location, Penn National has effectively created its own larger buffer zone around its property. With the Yoe and Cocalico locations, Hollywood strengthened the position of its flagship property. Take a look at the map of buffer zones prior to the start of the satellite auction process:
With the southern Yoe location and the location near Reading, Hollywood has essentially built the large buffer zone around the eastern Pennsylvania casinos out to reach them. Thanks to opt-out municipalities and location selection, the corridor between Hollywood and its eastern competitors is effectively gone as an option for mini-casino sites.
What next for the mini-casino process?
With half the licenses gone, it is looking more and more certain that the third and final round of satellite auctions will happen. This week, Hollywood obtained the fifth license for the base price of $7.5 million.
It certainly seems like the next auction on April 18 could wind up with no bidders. If that does happen, things start to get really interesting. Not only does Hollywood Casino get back in the action, we will find out which groups outside of Pennsylvania will try to get in.
The next subsequent casino date with no bidders triggers the additional auction protocol. At that point, the state will take applications from entities outside of PA interested in bidding. If approved, these groups, along with all of the Category 1-3 license holders will take part in a third and final round of auctions.
After a strong start, it is looking like the state may not sell all 10 of these licenses. There may be some outside interest to get a mini-casino site, but keep in mind that Category 4 licensees are not eligible to participate in online gambling, so this is not a backdoor into that process.