January Suggests A Strong Rebound This Year For Pennsylvania Gaming, Which Could Reach $4 Billion

While there's uncertainty surrounding diminished COVID impact, the first revenue figures of 2021 offer optimism for PA gaming operators.

The start of 2020 suggested heady days ahead for Pennsylvania’s gaming industry, which was flush with cash streams.

The industry’s $302.8 million in January 2020 revenue was up 16.9% over January 2019. There was all this new gambling taking place online, whether through sports betting or casino games, and even the industry’s brick-and-mortar slots revenue — its longtime bread and butter — was up 5.8% from the year before.

The trend continued in February, which saw revenue spike 13.8% year over year to $304.3 million. It seemed a given that the state’s record $3.41 billion in collective gaming revenue from 2019 would be shattered by year’s end, with state and local governments far surpassing the $1.42 billion in tax revenue they received that prior year.

And then March brought the start of the COVID-19 pandemic with devastating results to what gaming operators collected — with a harsh side-effect on government budgets in a state that taxes the various forms of gambling at an unusually high rate.

Casinos were closed a collective 1,473 days in 2020, or one-third of the year. The sports calendar, and the betting industry tied to it, were upended. On a proportionally smaller scale, operators tied to fantasy sports contests and truck stop video gaming terminals similarly suffered.

Though increased iCasino sites, usage, and revenue helped compensate for the other losses, Pennsylvania’s gaming revenue of $2.65 billion in 2020 was the lowest total in a decade, down 22.2% from the year before.

A year that started with the rush of a gambler on a blackjack streak ended with the thud of a craps shooter rolling snake eyes.

And then the Pennsylvania Gaming Control Board on Wednesday released revenue numbers for the first month of 2021, and whaddya know: Looking at them, it’s fair to resuscitate all the optimism for the industry that surrounded it a year ago.

COVID uncertainties still loom, but …

No one truly knows what 2021 will bring for the coronavirus, economy, or anything else to which the fortune of gaming operators is tied, but the prospect of widespread vaccinations makes it seem unlikely that anything as devastating as months of casino shutdowns will occur.

And assuming that’s the case, January’s revenue figures suggest the first $4 billion year for the collective industry in Pennsylvania is well within reach.

A Penn Bets analysis found that to be the case if the various forms of gaming just more or less maintain their baseline in January for the rest of the year — not even accounting for the growth in land-based casino revenue that many operators are hoping for from an ease in COVID-19 concerns.

Here’s how 2021 revenue in each category might look compared to last year:

Gambling form2020 statewide revenuePenn Bets 2021 projection
Casino slots$1.36 billion$1.92 billion
Casino table games$504.3 million$720 million
iCasinos$565.8 million$960 million
Sports wagers$189.7 million$400 million
Fantasy sports contests$21.1 million$30 million
Truck stop VGTs$16.6 million$30 million
Total$2.65 billion$4.06 billion

Land-based casinos hoping for rebound

Land-based casinos still mean more to the industry and state than anything else, especially considering that’s where most of the employment and spin-off benefits from those jobs exist.

And it may take years for each Pennsylvania casino to return to pre-COVID levels of slots and table games activity, rather than it occurring in 2021. Our $4 billion analysis doesn’t rely on a quick turnaround, but on at the very least maintaining how they performed in January, which may be a conservative estimate.

The 14 casinos earned $140.7 million in slots revenue and $50.8 million from table games last month, which were off 26% and 30%, respectively, from January 2020.

The casinos were all closed the first three days of the month, however, by government order tied to COVID health concerns. If open the entire month, the revenue would have been more like $155 million for slots and $56 million for table games.

The January revenue figures also shortchange the level of future revenue that can be counted on from the new Live! Philadelphia casino, which opened Jan. 19 on a partial basis tied to a reservation system.

The new casino made about $6.5 million from slots and tables last month and will earn far more in the future, although it could also cut into revenue figures from competing casinos in southeastern Pennsylvania.

While a fuller picture of land-based visitation and business won’t be known for months, we have no problem projecting the monthly average will be at least $160 million for slots and $60 million for tables. That projection could be bolstered late in the year, as well, by Penn National Gaming’s anticipated opening of two mini-casinos in York and Berks counties.

More online sites await, with more revenue

The state now has 13 iCasinos, and the $565.8 million they combined to earn last year was more than the revenue from land-based casinos’ table games. And now they’re on a pace to produce far better numbers still, considering a number were only operating for part of 2020.

The January iCasino revenue of $80.4 million was a new record, but it could also be considered simply a baseline for the future. Yet more sites are expected to start this year, including one within a few months from Boyd Gaming and its Valley Forge Casino Resort. Multiple poker sites are anticipating launches to join PokerStars, the sole site now operating.

The biggest growth period for iCasinos in the state is undoubtedly over, as the monthly revenue of $14 million from January 2020 jumped exponentially to last month’s $80.4 million record. But considering December’s total was $71.6 million, and that number then grew in January, and more sites are coming, it’s easy to believe $80 million is a new minimum monthly revenue figure.

Annual growth assured in sports betting

Revenue from sports betting is a dicier thing to forecast on a monthly basis than other forms of gambling, in that it is subject to the variance of the sports calendar and bettors’ fluctuating success with their wagers.

But sportsbooks count on increasing volume to enhance their bottom line, as the customary 10% vig applied to sports wagers guarantees a revenue stream in the long run. And there’s no doubt that Pennsylvanians will bet more on sports in 2021 than they did in 2020, assuring increased revenue beyond last year’s $189.7 million.

The January sports handle was a record $615.3 million, with 94.3% of it from the dozen online operators. That handle won’t necessarily be matched in upcoming months, with football no longer available for betting, but it shows the sharp growth since the January 2020 statewide handle of $348.4 million.

The level of revenue by operators, meanwhile, has consistently been in the range of $33 million to $37 million in recent months. It could be lower in non-football months, but given the growth trend the industry has been experiencing, our $4 billion projection for 2021 is counting on at least $33 million in monthly revenue from sports betting.

Fantasy sports and VGTs should also do better

Daily fantasy sports contests and truck stop VGTs don’t count for the same level of revenue as other forms in Pennsylvania, but they together provided nearly $38 million last year, and that amount should increase substantially in 2021 considering last year’s troubles.

The fantasy contest revenue amounted to $2.9 million last month and VGTs $2.2 million. The number of truck stops offering VGTs will go up this year, as the state gaming board has continued approving more applicants on a monthly basis.

With a more normal sports calendar anticipated for fantasy players in 2021, in addition to having more VGT machines operating and without the kind of COVID interruptions experienced last year, we feel safe estimating $60 million from the two smaller forms of gambling this year.

Of course, if coronavirus fears fall into the rear-view mirror during 2021, anything extracted from fantasy contests and VGTs will simply be icing on top of a cake already worth $4 billion from the other major forms.

A $4 billion gaming industry is worth $1.6 billion in tax revenue, based on the varying tax rates the state applies to each form. For government officials planning their budgets, that’s no small piece of cake.


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