SugarHouse success left board confident on 2d Phila. casino

In rejecting SugarHouse Casino's "impassioned argument" that the Philadelphia area cannot bear another casino, the Pennsylvania Gaming Control Board relied partially on SugarHouse's own performance.

The Gaming Board cited data showing that each of SugarHouse's 1,600 slot machines raked in an average of $299 per day in the year ended Sept. 30, or 25 percent more than the statewide average.

Furthermore, in a 174-page document explaining its reasons for awarding Philadelphia's second casino license to Live! Hotel & Casino in the stadium district, the board highlighted SugarHouse's revenues from table games that involve playing against the house.

At those 61 "banked" table games, SugarHouse won an average of $4,050 per day from gamblers, almost twice the statewide average of $2,136 per day.

"SugarHouse Casino has benefited from being the only casino in Philadelphia, has had the opportunity to build its customer base, and has produced revenues substantially higher than the statewide averages, indicating to the board that there is additional demand for the product in the Philadelphia marketplace," the filing said.

SugarHouse has stuck to its position that a second casino in the city spells disaster.

"The economic indicators are irrefutable. Philadelphia cannot sustain a second casino without potentially devastating effects on the other Pennsylvania licensees and the community," said Wendy Hamilton, SugarHouse's general manager.

Hamilton isn't the only one to bang the drum on market saturation.

Andrew Zarnett, a debt analyst at Deutsche Bank who covers the gaming industry, issued a report this week with the title, "This Town Ain't Big Enough for the Five of Us."

Live! will be the fifth casino in Southeastern Pennsylvania, joining Parx Casino in Bensalem, SugarHouse in the Fishtown section of Philadelphia, Harrah's Philadelphia in Chester, and Valley Forge Casino in King of Prussia.

"The addition of another casino in the greater Philadelphia market will be a significant negative for the current operators in the market," Zarnett said.

In the first year of operations at Valley Forge, gaming revenues at Parx fell by 3.7 percent and at Harrah's by 4.4 percent, Zarnett reported.

Live! plans to have 2,000 slot machines and 125 table games, far more than the 600 slot machines and 50 table games at Valley Forge. That means that the South Philadelphia casino "will have more of a deleterious impact on the market," Zarnett said.

Ultimately, the gaming regulators had to worry about whether a fifth casino would disrupt the market so badly that heavily indebted operators would fail because they could not make their debt payments. Failed casinos could lead to lower state and local tax revenues, as is evident in Atlantic City.

SugarHouse and Harrah's have big debt loads and low credit ratings.

But a tighter market could be good for competition, the board concluded:

"It does not mean that the board should not fulfill its statutory duty to issue the license because the profit margin of existing casinos may be narrowed."

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