PA Casinos Will Get A Major Boost To The Bottom Line In 2019 Thanks To Online Gambling, Other Expansions
Online Poker Report

Online Gambling Will Propel PA Casinos To Another Revenue Record In 2018

online gambling PA revenue projection

Pennsylvania’s casino industry is riding a revenue upswing after the state’s casinos set a new revenue record in 2017, breaking the previous record set the year before.

After passing a wide-ranging gaming expansion package in the fall, record-setting gaming revenues in 2018 and beyond are a pretty safe bet.

The future additions of online gambling, VGTs, and satellite casinos will bolster what is an already-strong gaming industry for years to come. Pennsylvania is the second-largest casino market in the United States behind only Nevada, but the bulk of the impact won’t be felt until 2019.

VGTs and satellite casinos still a long way off

Considering the first auction for a Category 4 casino went for $50.1 million, the state is going to receive some serious coin from the licensing of Category 4 casinos and VGTs. But the rollout of VGTs and the erection of Category 4 casinos is not apt to occur until 2019.

Category 4 casinos and VGTs are unlikely to have an effct on gaming revenue in 2018.

What kind of impact will PA online gaming provide in 2018?

Pennsylvania casinos would be ecstatic to have online gaming up and running by the start of the fiscal year in July, but a more realistic launch timeline would be in September or October.

That means online gambling would provide the state with just three or four months of revenue from online gaming in this calendar year.

That revenue will be significant, but not the game changer 12 months of online gambling would be.

The best way to calculate Pennsylvania online casino revenue is to look east to New Jersey, and what the Garden State was able to generate over the course of the first five months of online gaming.

  • December 2013: $7.8 million
  • January 2014: $9.5 million
  • February 2014: $10.3 million
  • March 2014: $11.9 million
  • April 2014: $11.4 million

New Jersey provides a good starting point, but Pennsylvania should see even bigger returns for the following reasons:

  • Drawing on New Jersey’s experience and the US online gaming market’s maturity, Pennsylvania will have fewer technical issues than New Jersey, giving it a better start. As such, I expect Pennsylvania online gaming revenue to be a month ahead of New Jersey.
  • Pennsylvania has a built-in advantage as the state’s population is 30 percent larger than New Jersey. The population advantage should provide Pennsylvania with at least a 25 percent edge over New Jersey’s early numbers.

Based on New Jersey’s early months, and accounting for the factors outlined above, here’s what I expect from Pennsylvania’s online gaming industry (assuming a September launch):

  • Month 1: $11.9 million
  • Month 2: $12.9 million
  • Month 3: $14.9 million
  • Month 4: $14.3 million
  • Total: $54 million

How would four months of online gambling in PA have changed 2017’s numbers?

Pennsylvania’s casino industry saw growth of .5 percent in 2017.

  • 2016: $3,213,422,178
  • 2017: $3,226,910,816

$54 million of online gambling would have provided an additional 1.5 percent growth in 2017.

A full year of online gambling in Pennsylvania (perhaps $225-$250 million) would have provided around six percent of additional growth.

Bottom line: Four months of online gambling should be enough to ensure Pennsylvania casinos set a new revenue record next year. But it won’t be until 2019, when Pennsylvania’s online gaming industry is up and running for 12 months, that it makes its presence felt.

Don’t sleep on the impact of Category 3 reforms

In addition to the major changes, the gaming reform law contained a couple of beneficial provisions for Category 3 casinos.

  • Category 3 casinos can remove the amenity fee requirement for a one-time payment of $1 million. The amenity fee provision required all casino players to either be guests at the hotel or pay a fee to use the property’s amenities.
  • Category 3 casinos can add more slots and table games for a one-time payment: $1 million to add an additional 15 table games and/or a $2.5 million to add up to 250 slot machines.

These provisions might seem minor, but they will have a bigger impact on casino revenue than most people realize, and it will be immediate.

Valley Forge was the first casino to take advantage of the new law. The Category 3 casino jumped at the chance to make a one-time payment to remove the amenity-fee in November, and its revenue has been up about 10 percent. In November, slot revenue at Valley Forge was up four percent, and table game revenue was up over 32 percent.

Valley Forge’s slot revenue jumped over eight percent in December, with table game revenue up by 16 percent.

If Valley Forge maintains a 10 percent growth rate, it will result in additional $10-$12 million of gaming revenue in 2018. Should the casino add more tables and slots, or if Lady Luck follows suit, the increase industrywide will be even larger.

Upshot

On the back of Category 3 changes and the first months of online gambling, 2018 is shaping up to be a solid year of growth for casino revenue.

2019 will blow doors.

  • Online gambling will be up and running and generate revenue for 12 full months.
  • The first Category 4 casinos will open their doors.
  • VGTs should be installed in select truck stops.
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Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.