Penn protecting its turf with mini-casinos
Penn National won its second license for a Pennsylvania mini-casino last week, after its $7,500,003 bid—$3 over the minimum $7.5 million bid set by November’s casino expansion law—was the only bid submitted in the sixth license auction. It was the fifth satellite casino license awarded by the Pennsylvania Gaming Control Board.
A successful bid on a mini-casino, a Category 4 casino under the law, gets the applicant a license to operate up to 750 slot machines. Another $2.5 million fee authorizes up to 30 table games. No mini-casino can be located within a 25-mile radius of an operating casino, and no new casinos can be placed within a 15-mile radius of a satellite casino.
Last week’s auction was conducted under expanded rules after the previous auction for the fifth satellite casino license drew no bidders. Under the rules set up by the gaming law, initial auctions are open only to current land-based Category 1 (racetrack) and Category 2 (stand-alone) licensees with no mini-casino licenses. With no bidders, the auction was opened up to include current satellite-casino licensees, and to the two Category 3 resort casinos, Lady Luck and Valley Forge. Any future no-bid auctions will result in a new auction including operators from outside the current Pennsylvania gaming industry.
Penn National identified the Reading area of Berks County—near its corporate headquarters—as the location of its new mini-casino. While the license fee was required to be submitted by Friday, Penn has six months in which to prepare a formal application including the precise location of its new casino.
It will be an industry-topping fourth Pennsylvania casino license for Penn National. In addition to its flagship Hollywood Casino at Penn National Race Course outside Harrisburg, Penn is in the process of acquiring Pinnacle Gaming, and its Meadows racino outside of Pittsburgh. Penn secured the first mini-casino license, for a casino within a radius centered in Yoe, York County.
“We’re very pleased to have won our second Category 4 casino license at the minimum required bid of $7.5 million,” said Eric Schippers, Penn National’s senior vice president for public affairs and governmental relations in a press statement. “The coordinates we’ve chosen for our 15-mile radius encompasses a portion of Reading, as well as Lancaster and as far east as Morgantown. While we have not settled on a specific site yet we have a number of viable options to explore in the weeks ahead.”
At $3 over the minimum $7.5 million bid, the new license is a bargain for Penn National, which won the state’s first Category 4 casino for a staggering $50 million bid. Auction bids went down from there until the no-bid auction, after which Penn saw an opportunity to increase its presence in east-central Pennsylvania as a defensive move against potential competitors.
The license for Berks County joins the York County license in Penn’s effort to create a buffer zone to prevent cannibalization of revenues from its flagship Hollywood Casino. Penn, in fact, has a lawsuit pending in the Pennsylvania courts challenging the entire mini-casino provision of the gaming law, on the basis that it creates an unfair competitive environment for its Hollywood property, which sits in an isolated location and draws most of its business from beyond the 25-mile limit specified in the law.
“As in choosing the coordinates for our first Cat 4 license in the York area, we had an eye on defense, as well as offense,” Schippers said. “We draw a lot of business to Hollywood Casino from the Reading and Lancaster areas, and this location will allow us to better protect our market while allowing us to penetrate further into the more populous areas in the western Philadelphia environs.”
The next Category 4 license auction is slated for Wednesday, April 18. If no licensees submit bids for that one, the subsequent auction will be open to bidders outside the state. While the biweekly auctions had been scheduled to end on May 16, more may be required to unload all 10 of the available mini-casino licenses.
Meanwhile, many municipalities are still actively lobbying operators to bid for a Category 4 casino in their areas—none more so than Mercer County, which was left in the cold after a $9.9 million bid from Sands Bethlehem was disqualified because its Mercer County location overlapped the zone of a mini-casino previously won by Mount Airy Resort.
Penn-Northwest Development Corp CEO Randy Seitz, who oversees Mercer County’s economic development agency, told the Sharon Herald the fact Sands (in the process of being sold to the Poarch Tribe of Creek Indians) did not submit a new bid for the area was “not surprising, but it’s disappointing. We’ve been sending letters out to casino license holders and doing everything we can to let folks know that Mercer County has an interest in casinos.”
