“Outhouse to the Penthouse”: Long Island’s Dark Horse Just Keeps Growing

Jake’s 58 Hotel & Casino didn’t exist 10 years ago. Now, it’s one of the biggest VLT operators in the country, and it just secured the licenses to double its inventory of machines. Suffolk County OTB CEO Anthony Pancella III has been there for the entire ride, from the humble beginnings to the Long Island casino’s promising future.

“Outhouse to the Penthouse”: Long Island’s Dark Horse Just Keeps Growing

If someone had told you five years ago that New York State would become the center of conversation for the gaming world, would you have believed them? Well, now that mobile sports betting has started to rake in hundreds of millions in revenue, and casino licenses appear to be coming on the horizon for NYC, the Empire State has taken center stage amongst gambling circles.

However, perhaps the most impressive success story in New York is not within the five boroughs, or on bettors’ mobile apps. It’s actually in Long Island—Jake’s 58 Hotel & Casino in Islandia has had an incredible rise from the ashes of bankruptcy in less than five years, and with a stock of nearly 2,000 video lottery terminals (VLTs), which accounts for 10 percent of the state’s total inventory—which includes the machines at Resorts World New York City at Aqueduct racetrack and Empire Casino at Yonkers Raceway—they are primed to continue that success moving forward.

Anthony Pancella (l.), CEO of Jake’s parent company Suffolk County OTB, says the last five years have been “challenging at times, yet certainly very fulfilling,” a true turnaround story in an industry that doesn’t have many. That said, a lot had to go right in order to get to this point.

Bumpy Beginnings

In March 2011, Suffolk County OTB filed the 300th Chapter 9 bankruptcy in the history of the U.S., according to Pancella. At the time, other prominent nearby institutions such as New York City OTB were “going out of business completely,” but Suffolk remained confident that they would endure, even if the future was still uncertain. “They disappeared,” said Pancella. “We filed after that, and we didn’t disappear. We’re still here.”

In 2013, then-New York governor Andrew Cuomo provided a pathway to a golden ticket by signing legislation that authorized VLTs at no more than two venues in Nassau or Suffolk counties.

Suffolk County OTB was still bleeding badly at the time, but managed to strike up a partnership with Buffalo-based hospitality company Delaware North to purchase an existing Marriott property in Islandia for $40.4 million and rebrand it as Jake’s 58, after being granted the requisite VLT licenses from the state. Delaware North then leased Jake’s gaming operations to Suffolk for an undisclosed amount.

In early 2021, Suffolk agreed to buy out Delaware North’s ownership stake for $120 million, making it the sole owner and operator of Jake’s, and completing a long and winding path back to sustainability.

Keys to Success

Jake’s may not have the Bellagio’s fountains, or the checkbook of a traditional operator such as Caesars or MGM, but it does have something that those operators would kill for—exclusivity.

The Las Vegas Valley has a local population of about 2.5 million, and there are over 140 casinos currently operating there; Atlantic City houses 31 casinos for its population of about 40,000; Jake’s, on the other hand, is the only game in town for its demographic of about 3 million between Nassau and Suffolk counties.

And that game is VLTs, which are pseudo-slots that are leased from the state and operated on a centralized lottery system, as opposed to traditional slots, which are operated and purchased independently.

“VLTs are just terminals,” explained Pancella. “All the terminals, all the VLTs in New York state are processed in Schenectady at the New York State Gaming Commission.”

Although they are operated differently, they look and play the same way as traditional slots, so much so that many wouldn’t even be able to distinguish between them.

The state ownership component makes VLTs a limited resource, so competition is fierce. The state only leases around 20,000 total machines, and Jake’s originally opened with 1,000, but Pancella said that the property recently acquired the licensing for an additional 1,000. That means that Jake’s now controls a whopping 10 percent of the state’s total machines—not bad for a property that didn’t even offer gaming 10 years ago.

“We were told by our consultants and our feasibility analysts that we were the only 3 million-person demographic in the United States that had no VLTs,” said Pancella. “So, a lot of the gaming industry has suffered from over development. We were underutilized.”

The revenue generated by each machine has been very favorable, especially when compared to the state as a whole. “We’re doing, I think about 11 or 12 percent of the state revenue,” said Pancella. “ And that’s on a win-per-unit basis. In total revenue, we’re doing twice as much as our representative sample of machines.”

What Lies Ahead

The first problem that Jake’s has to solve moving forward is one of the best problems a business can have: how do we make room for the increased demand? The additional machines will have to go somewhere, and Jake’s is confident that their expansion “will help the building trades” by using “all union labor” to complete the renovations.

Sports betting is also a possibility, although somewhat uncertain at present—Pancella said that Jake’s “would love to offer sports gaming in the future, but right now, the regulations don’t permit it as understood or interpreted.” Now that mobile operators are live, however, that could change in the near future.

In-state expansion, most notably from the Shinnecock Tribe who are trying to open a casino on tribal land in eastern Long Island, is somewhat of a concern. However, Pancella is confident that locals will stick with Jake’s out of convenience and familiarity, with 80 percent of the player base living within 20 to 30 miles of the property.

The company’s relationship with the state is also very good, which could bode well down the road as the market continues to grow. Overall, Jake’s will look to build off of the last few years and become a major player on the East Coast, especially among VLT operators.

“We sent $24 million to Suffolk County last year,” said Pancella. “We expect to send close to 30 this year. And when we get 2000 machines, it certainly will be between 40 and 50. We are doing great things ,as a public benefit corporation that’s generating tens of millions of dollars for their county, as well as providing host fees to the village of Islandia, which is really where we are. That’s where we’re located, in that small village. I think the mayor, with our host fee, he’s cut his village taxes 50% already. So from that perspective, you know, we say we went from the outhouse to the penthouse.”