Regulator: New Philadelphia casino needs to offer more

PHILADELPHIA - January 28, 2014

"I don't believe we have the capacity to open just another casino. We need something that's more than just a casino," said Pennsylvania Gaming Control Board member Gregory Fajt, addressing what he called the "elephant in the room."

Pennsylvania's casino industry suffered its first overall revenue decline last year since casino play began in 2006, dipping 1.4 percent to $3.1 billion. The state's southeastern corner already has four casinos, including the SugarHouse Casino along the Delaware River in Philadelphia.

State law allows the city a second casino, and the five applicants are making their final pitches this week to state regulators. SugarHouse contends the market is already saturated and has asked the board to sit on the license.

Tuesday's session in Philadelphia opened with Penn National Gaming Inc.'s Hollywood Casino proposal. The Wyomissing-based gambling giant wants to build a $480 million casino near the sports stadiums in south Philadelphia.

Fajt questioned whether the project is distinctive enough, asking Penn National executives "what you think will separate you from the myriad of other casinos within a 150-mile radius." The company pointed to the casino's location near Interstates 76 and 95 and said it would attract gamblers from southern New Jersey.

Penn National projects that 60 percent of the casino's patrons would be new, with 40 percent cannibalized from existing casinos, Chief Operating Officer Jay Snowden told the board.

Board members also asked about Penn National's plan to split the project into development phases, questioning why the company wouldn't build it all at once.

"When I hear different phases for projects, I get a little skittish because we've been burned before," Fajt said.

Tim Wilmott, president and chief executive officer, replied the company does not want to overspend on a casino project, pointing to the troubled $2.4 billion Revel Casino Hotel in Atlantic City, N.J., which filed for bankruptcy less than a year after its April 2012 opening

"We don't want to end up like Revel, where it's overcapitalized in a market that can't support that level of investment," he said.

Wilmott acknowledged the project's second development phase - which contemplates a 500-room hotel, an event space and 1,000 additional slot machines - might never materialize if the market doesn't grow sufficiently.

Regulators are hearing later Tuesday from a developer who wants to convert the former home of The Philadelphia Inquirer and Daily News into the $700 million Provence casino.

Three other applicants will get their chance Wednesday and Thursday. The gambling board expects to make a decision within a few months.

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