William H Ryan Became Chairman in 2011 in Order to Restore Confidence in the Gaming Control Board
William H. Ryan Jr. says the peak years of growth for Pennsylvania’s land-based casinos are likely a thing of the past. William Ryan is the chairman of the Pennsylvania Gaming Control Board, so he oversees the gaming industry in the state.
Mr. Ryan notes that none of the casinos in the state are losing money. In fact, the casino industry remains profitable enough that additional casinos are being licensed: one in South Philadelphia and one north of Pittsburgh. The Gaming Control Board chairman warns that the regional market is saturated and the expanded profits of yesteryear are no longer realistic.
“Surrounded by Alligators”
Harold “Hal” Vogel, a New York financial experts who specializes in the casino and entertainment industries, said this week, “They [Pennsylvania casinos] are surrounded by alligators. Everybody is competing for the same thing, and no new money is coming in. The growth will be minimal for all the states at this point. I doubt it can even grow 5 percent because the U.S. market is saturated.”
What Mr. Vogel said of the Pennsylvania casino industry could be said of the entire region, which has seen an explosion of new developments in the past 10 to 15 years. The proliferation of casino sites is a sign that gambling has gone mainstream in America. In an age with 40+ state lotteries, multi-state lotto companies, online gambling, and mobile casinos on smartphones, the resistance to casino gambling has faded.
That means more states are dipping into the gaming industry for tax revenues, but a certain amount of saturation is bound to take place. Vogel, like Chairman Ryan, says that has already taken place.
Expansion of US Casino Industry
In 1988, two U.S. states had brick-and-mortar casinos. In 2015, 43 US states have land casinos. The inception of tribal casinos has seen a proliferation of gambling across the United States.
After the tribal gaming enterprises came, private non-tribal casino companies began to proliferate, as officials and electorates saw no reason to restrict the practice. Then the traditional horse and dog racing industries began to fail, so politicians pushed for racetracks to have either video lottery terminals or casino-style slot machines, creating “racinos”. These days, gambling is virtually everywhere.
William Ryan on Regional Growth
Chairman Ryan referred to the expanding gaming industries of New York and Maryland, along with the drive to place casinos in North Jersey in New Jersey. Ryan said, “The boom times for casino revenues we saw in years past are probably history. Those were caused by the opening of new properties. And a lot of the novelty has worn off. But I think what you see is stability and an industry that is in good health.”
In their first year of operations, the seven Pennsylvania casinos opened in 2007 brought in $1.4 billion. By 2012, that number had risen to $3.14 billion. 2012 was the year Pennsylvania surpassed New Jersey as the number two US state in terms of land-based gaming revenues.
Pennsylvania’s Revenues
Growth not only flattened, but ended altogether, though. In 2014, the revenues shrank to $3.05 billion. William Ryan is suggesting that the revenues might never reach the peak 2012 numbers again, or at least for the foreseeable future. He suggests the newness of the industry has worn off. While that might indicate people wanted to see the new sites, it also might indicate that some customers made the healthy decision of no longer gambling, after they lost significant sums in years past.
Despite the reference to “alligators”, Pennsylvania’s neighbors would say Pennsylvania is the biggest alligator in the region. From 2006 to 2014, New Jersey’s revenues shrank from $5.4 billion to $2.4 billion. The revenues lost is almost directly proportional to the revenues gained by Pennsylvania in that time span: 3 billion dollars. Those wondering why Atlantic City had four casinos close in 2014 need look no further than Pennsylvania, so gaming executives in other states are not likely to have much sympathy with William Ryan’s concerns.
Larry Klatzkin on US Casinos
Larry Klatzkin, who is the managing director at the investment banking firm Rice, Voelker LLC. and a veteran casino industry analyst, said “At this point, the market has hit its stride. It’s not a bad thing. It’s what happens.”
Much of what’s being said is meant to manage expectations, but it comes with a warning. If public officials and gaming executives do not notice the signs and heed the warning, they might over-saturate the market. If that were to happen, Pennsylvanians might see casino closings in their state, the way Atlantic City saw them last year. Failed economic analysis produces failed businesses.
