Penn National Becomes Latest Seeking To Reduce Slots At Pennsylvania Casinos

Company says it has 500 more machines than needed at main Hollywood, Meadows casinos
unhappy at slot machines
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(Note: This article has been updated to include a pending application from Mount Airy Casino Resort.)

Two months after Harrah’s Philadelphia won state approval to remove 563 slot machines from its gaming floor, Penn National Gaming wants to get rid of more than 500 combined at its two biggest Pennsylvania casinos.

Penn National, which just opened its Hollywood Casino York mini-casino Aug. 12, filed applications with the Pennsylvania Gaming Control Board this month to remove 317 slot machines from the Meadows Racetrack & Casino and 191 from its main Hollywood Casino in Dauphin County.

The gaming board also has a June application pending from Mount Airy Casino Resort to reduce its slots volume by 132, from 1,819 to 1,687 machines.

The Penn National applications state that the planned reductions have nothing to do with new mini-casino openings (Penn National plans to open another satellite casino later this year in Berks County), but with the realization during reduced COVID-19 operations that the casinos’ normal slots complement was more than enough. The company also said the slots reduction would provide more space for creation of its new retail Barstool Sportsbook at Hollywood Casino, and customers at both Hollywood and Meadows will benefit from more open space, comfort, and social distancing once hundreds of machines are removed.

Harrah’s Philadelphia made similar points in petitioning the gaming board in June for its own reduction. Regulations require formal board review and action on any slots reduction amounting to more than 2%, as the commonwealth shares an economic interest in maximizing gaming in the state due to the 54% tax on slots revenue. Slots historically have represented the vast majority of gaming revenue in the state, bringing in some $2.4 billion annually pre-COVID.

Fewer machines, similar revenue

Due to the economic law of supply and demand, Pennsylvania casinos as a group have never reached even half their fully allowed complement of slot machines. Prior to COVID, the number of machines generally numbered a little above 25,000 statewide, although that number was temporarily reduced by about 10,000 last year due to social distancing requirements. Casinos either put machines in storage or turned them off for months.

Once capacity limits were removed in the spring and casinos returned to their prior number of machines, some like Harrah’s and Penn National found they had been grossing similar revenue with the reduced supply as when they got back to normal. That recognition has sparked the interest, they say, in getting rid of some of their older product while opening more room for customers to navigate the gaming floor. They say they are not reducing staff, but will see some cost benefits from reduced machine maintenance and electrical expenses.

Penn National pointed out that its average monthly slots revenue of $13.3 million with 1,286 machines at Hollywood Casino from July 2020 to May 2021 was similar to the $13.7 million this June with 1,927 slots operating. Now it wants permanent approval for a 191-machine reduction to 1,736 there.

At Meadows, Penn National returned to its normal complement of 2,273 machines in May, compared to 1,697 during COVID reductions. But its average slots revenue of $13.1 million in May and June was only slightly above what the fewer machines earned in March and April. It is looking for approval of a gaming floor with 2,006 machines, which is 317 below the currently allowed 2,323.

The Meadows application, formally on behalf of Washington Trotting Association (WTA), states, “The proposed reduction of slot machines is not anticipated to negatively impact gross terminal revenues at Meadows or the generation of gaming tax revenues for the Commonwealth … because there is a substantial over-supply of slot machines at Meadows as evidenced by low occupancy rates. Prior to closing in March 2020 due to the COVID-19 pandemic, the slot machines that were available for play at Meadows were not being fully utilized by WTA’s customers.”

The application for Hollywood Casino, formally Mountainview Thoroughbred Racing Association (MTRA), was similar, stating, “Ultimately, this request to reduce the number of slot machines is a reflection of MTRA’s business judgment and that judgment is necessarily predicated upon its expertise in the industry and understanding of the market in which MTRA operates. MTRA submits that the reduction in the number of slot machines will not result in a reduction in gross terminal revenue. It is not in MTRA’s economic interest to jeopardize gross terminal revenue.”

No indication other casinos will follow

Penn National, the largest regional casino operator in the country, owns dozens more gaming properties across the country. It is possible some of those have faced similar issues and slot reduction plans, although if so, they have not been publicized. The company’s officials told Penn Bets they cannot comment on the matter while their Pennsylvania applications to the board are pending.

Doug Harbach, a spokesman for the state gaming board, said he is uncertain when the board will act on the requests from Penn National and Mount Airy. He did say, however, that there are no other similar requests for significant reductions that are pending.

There are frequently requests for removal or relocation of a few machines for which the board’s staff grants approval, and only changes affecting more than 2% of a casino’s slots complement require formal board review and action, Harbach said.

He said he would be surprised if there are other sizable slots reductions that follow, given the positive revenue report for July.

That report showed the 14 casinos operating last month (Hollywood Casino York became the 15th this month) generated $222.9 million in slots revenue from 25,710 machines. A year earlier, the July total was $165 million from 15,659 devices. In July 2019, an apt month for comparison of pre-COVID levels, statewide revenue was $199.6 million from 24,662 machines.

Unlike many of the state’s casinos (including Mount Airy) that increased slots revenue last month compared to two years earlier, Harrah’s, Hollywood, and Meadows all experienced reductions. Rivers Pittsburgh and Rivers Philadelphia also tailed off somewhat, although there is no indication that they have similar plans to reduce their number of machines.

Photo: Shutterstock

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