Why Casinos Will Still Draw Crowds After PA Online Gambling Launch

Martin Derbyshire November 3, 2018
crowd of people

People in Pennsylvania may be wondering if the pending launch of PA online casinos is about to turn their favorite local brick and mortar casinos into ghost towns.

After all, in the lead up to PA lawmakers passing online gambling legislation in October 2017, a number of PA casino executives suggested it might.

The question is:

Will PA gamblers still get in their cars and drive to casinos across the state once they’re able to enjoy a similar experience online from the privacy of their own home.

The answer is yes, based on what’s happened in neighboring New Jersey, and what researchers in the know say.

Cannibalization and the casino industry

The casino industry calls it cannibalization, a rather large and quite scary word.

Total gaming revenue at the state’s twelve brick and mortar casinos tops $3 billion annually. Obviously,  the casinos don’t want anything to eat away at that.

Parx is Pennsylvania’s top-grossing casino. When PA lawmakers started seriously considering passing online gambling legislation last year, Parx CEO Tony Ricci said he feared cannibalization could become a reality with some of its customers migrating away from the property to online casinos.

Ricci’s argument was that online casinos will eat away at existing land-based casino revenues. Particularly if the state decided to charge lower taxes on online operations, that would mean eating away at tax revenues as well:

“We believe that many of the proposals currently under consideration will actually lower the tax revenue generated by our industry and effectively kill the golden goose.”

The state ultimately caved in somewhat and will charge a 54 percent tax rate on online slots and 16 percent on table games, similar numbers to what PA land-based casinos are paying now.

Parx is jumping headfirst into the PA online casino business. Does that mean the tax rate solution put Ricci’s fears to rest? Moreover, were those fears ever even realistic?

New Jersey dispells the myth

According to the numbers coming out of New Jersey the past few years, the answer is probably not.

New Jersey dispelled the online casino/casino cannibalization myth in 2016 when $196.7 million in NJ online gaming revenues actually helped turn around a decade of declines in the Atlantic City casino business.

In fact, Atlantic City casino revenue went up 1.5 percent from $2.563 billion in 2015 to $2.602 billion in 2016. These numbers proved people were still traveling to AC casinos and online gambling was only helping the industry prosper.

NJ online gambling revenue jumped another 24.9 percent to $245.6 million in 2017. And once again, that helped the Atlantic City casino revenue numbers rise another 2.2 percent to $2.66 billion.

Cannibalization isn’t happening in NJ and it’s not likely to occur in PA either.

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The Innovation Group convinces lawmakers

Still not convinced people are going to continue to gamble at PA casinos when the first PA online casinos launch? Perhaps The Innovation Group can convince you, the same way it did for PA lawmakers.

The Innovation Group has conducted surveys and researched and reported on online gambling related issues for years. Innovation Group researchers appeared at PA legislative committee hearings prior to the state passing online gambling legislation and claimed the research it conducted inside states with a legal and regulated online gambling suggests cannibalization isn’t an issue.

In fact, what they found suggests gamblers turning up at casinos and those playing online are really different people.

Researchers found that 90 percent of online sign-ups at Caesars Casino NJ were not previously in Caesars database. That suggests many of them had never even visited a Caesars property in Atlantic City previously.

Additionally, Innovation Group researchers discovered many of these players did visit a Caesars property after playing online. This suggests online casinos might actually do more to help the land-based business than hurt it.

Innovation Group researchers claim that’s certainly been the experience at Golden Nugget Atlantic City. There, researchers found online and live players are two different breeds. In fact, almost 85 percent of those online are not regular customers at live casinos. However, Golden Nugget has also had success convincing online players to visit the brick and mortar casino through a variety of cross-promotions.

The bottom line

The bottom line regarding The Innovation Group’s research really comes down to one series of survey questions. It asked if people would actually spend as much money as they have been at land-based casinos. Plus, whether they would visit the same amount of times if they could play online.

Close to 90 percent said they would spend as much money or more. Another 85 percent said they would visit as much or more.

Research that suggests there’s only one true answer to the question of whether PA casinos will stay busy. It is a resounding yes.