Analysts View Fifth Philadelphia Casino as Unnecessary, Detrimental

Pennsylvania gambling regulators recently awarded a casino license to a joint venture between Cordish Cos. and Greenwood Gaming for the construction of a major new casino in Philadelphia.

Some analysts however, believe that the city’s gambling market is already oversaturated, and that adding another casino to the mix will be detrimental to established local and out-of-state competitors.

The $425 million Live! was the winning project chosen by the Pennsylvania Gaming Control Board and will be built in the South Philadelphia Stadium complex, hoping to capitalize on the area’s 8.5 million annual visitors. The casino will house as many as 5,000 slot machines and up to 250 table games, and will be connected to a 240-room hotel.

Andrew Zarnett, gaming analyst for Deutsche Bank, has conducted extensive research on the viability of adding new casinos to already saturated markets and sees the new project as a bad bet. “The addition of another casino in the greater Philadelphia market will be a significant negative for the current operators,” he told investors.

Zarnett believes that SugarHouse and Harrah’s, two competing casinos located close to the proposed Live! site, will be hit hardest by the new project. Both lobbied hard to convince the gaming board that the market couldn’t sustain a fifth casino in the city, but to no avail.

According to Zarnett, things will only get worse when the four casinos planned for construction in New York open up shop. He also cites the fact that gamblers in Philadelphia have historically been less profitable on average compared with other major cities.

Bart Blatstein’s firm, Blatstein and Isle of Capri Casinos, was one of the companies which lost out to Live! He thinks that the gaming board was extremely shortsighted in choosing the Cordish/Greenwood venture and feels that the project will do nothing to increase tourism in Philadelphia.

“All they’ve done is created a monopoly for Parx, with one in Bucks County and one in South Philly, which will squeeze out SugarHouse,” he said. “It’ll kill Harrah’s. It’s just unbelievable. It’s shocking that they would choose another crappy slots-in-a-box project.”

Another kick in the pants for Atlantic City

Analysts believe that Atlantic City will also suffer with the addition of a fifth casino in Philadelphia. Just this year, four Boardwalk casinos were forced to shut down, with another set to close its doors next month. With 25% of Atlantic City’s visitors coming from the Philadelphia area, casinos there will certainly feel the pinch even more.

One more property in Philly is incrementally bad for Atlantic City casinos, which still derive a significant amount of business from Pennsylvania,” said Macquarie Securities gaming analyst Chad Beynon.

In total, Pennsylvania’s 12 casinos generate $3 billion in gaming revenue annually, making it the second largest gambling market in the US after Nevada.