As Slots Are Pulled From PA Casinos, The Question Of Skill Games Competition Arises

Mount Airy obtains approval to reduce its slots as regulators fret over unlicensed competition
mount airy casino resort
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The Pennsylvania Gaming Control Board on Wednesday approved additional slot machine reductions in the state — this time for Mount Airy Casino Resort — while raising concerns about how the proliferation of unregulated “skill games” may be hurting casinos.

Mount Airy won approval to reduce its authorized complement of slots by 130, from 1,817 to 1,687. Its officials said it would be removing a group of older, under-utilized machines from a third floor area detached from the main gaming floor, with the space to be reallocated to non-gaming purposes.

The machines have already been out of service on a temporary basis during the COVID era of operations, the casino said. No revenue loss is anticipated from permanently removing them, the casino maintains, as other slots on the main floor are expected to attract more play to compensate.

The approved reduction comes three months after Harrah’s Philadelphia obtained board approval to remove 563 slot machines. Penn National Gaming has its own request pending to get rid of more than 500 combined at its two biggest Pennsylvania venues: the Hollywood Casino in Dauphin County and Meadows Racetrack & Casino.

When Mount Airy presented a case at the board’s monthly meeting in seeking approval to reduce its slot machines by about 7%, it did not suggest it was caused by competitive pressures from the highly controversial, unauthorized skill games that attract gambling play in bars, restaurants, convenience stores, and other outlets around the state.

But in response to a question from board staff during Wednesday’s meeting about whether the spread of unregulated machines is the reason slot machine revenue has not grown in Pennsylvania in recent years, Mount Airy General Manager Frank Leone answered, “I would say it’s contributed to it.”

He said that with the competition from tens of thousands of the skill game devices, which are presently the subject of both litigation and legislative review, “there’s no question in my mind it’s having material impact on land-based slot revenue throughout the commonwealth over the last several years.”

Mount Airy is actually doing quite well, it seems

An interesting aspect of Mount Airy’s slot machine experience that did not come up for discussion: Its gaming floor has for the most part thrived recently, regardless of any unlicensed competition, effects of COVID-19 on operations and visitation, or anything else.

A new gaming board revenue report for August is to be issued this week, but the July report showed Mount Airy earned $15.4 million from 1,817 machines in operation. In July 2020, after the casino reopened from a COVID shutdown with just 1,024 machines due to capacity and social distancing restrictions, it made $15.1 million.

In both of those months, it fared far better than in the pre-COVID comparable month of July 2019, when revenue from 1,875 machines reached just $13.1 million.

Statewide, slots revenue stood at $222.9 million from 25,710 machines two months ago, compared to $199.6 million from 24,662 machines in July 2019. July 2021 included the addition of two casinos — the Live! properties in Philadelphia and Westmoreland County — which did not previously exist and now contribute to statewide revenue figures.

In general, slots revenue across the state was stagnant for many pre-COVID years, hovering between $2.3 billion and $2.4 billion earned from losing players annually from 2013-19, which covers a period well before any rampant skill games growth was reported. So it would seem hard to pinpoint that sector’s growth as the key reason for lack of growth in casino slots revenue, as opposed to perhaps the casinos having reached their maximum potential in the state.

Still, the skill games issue seemed to intrigue members of the seven-member gaming board in a manner they had not raised publicly at prior meetings.

Some operators prefer the unlicensed games

The issue of their competition came up a second time at the meeting when the board revoked the VGT gaming employee occupation permit of Snow Show Travel Plaza manager Kiran Grewal, who was reported to have removed the five state-licensed machines from her Centre County truck stop and replaced them with seven unlicensed machines, from which the state derives no revenue and through which she can thus earn more profit.

“It does appear we have another situation where revenue-generating machines for this commonwealth were being replaced by non-revenue-generating machines for the commonwealth,” observed board member Mark Mustio.

He and commission Chairwoman Denise Smyler both commented that the issue of skill games competition was something that could merit further review and discussion by the agency, even though it lacks any direct jurisdiction over what occurs outside of licensed casinos and VGT establishments.

The board has already petitioned Commonwealth Court to become party to a case before it that is expected to provide guidance on whether the skill games are legal or illegal in the state. A Beaver County judge previously ruled that they do not violate state law, but the Pennsylvania State Police and district attorneys have held otherwise.

The legislature, meanwhile, has been wrestling with whether to act on bills that would either ban the games explicitly or else regulate and tax them along the lines of casino slots, which is what bars and clubs across the state would like to see in order to continue hosting them as a key boost to their bottom line.

Photo: Shutterstock

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