Satellite Casino Process Stalls in Pennsylvania

Pennsylvania

PennsylvaniaThe most recent auction for satellite casino licensing in Pennsylvania fails to draw any bids.

Since January, the Pennsylvania Gaming Control Board has been hosting auctions twice a month to provide licensing to existing gaming operators in the state who wish to create a satellite venue. Last year, a gaming package was approved that is allowing the state to expand their gambling industry, which includes as many as ten satellite casinos. The first few months of the auction process was a success, but recent auctions have failed to show much interest. On Wednesday, the board saw no action, as zero operators came forward with bids for licensing.

What Happens Next?

Because no one attended this week’s board meeting to bid for satellite casino licensing, the board will now have to decide how to move forward. Technically, the board will need to host a third and final round of bidding. This would allow groups located outside the existing casino license holders to begin placing bids for licensing.

If outside entities are allowed to bid, the board will have to create eligibility requirements for such applicants. Those applying would have to be reviewed before they would be allowed to submit a bid. The board can also decide to stop hosting auctions for satellite casinos and stop the process at the five that have already been awarded.

The process has already been fruitful for the state, so if the board decides to stop the licensing process, money has still been made. The auction requires a minimum bid of $7.5 million per license to be considered with the top bid earning the license. If all 10 licenses had been sold, it would have brought the state $75 million at the bottom dollar price.

However, the first few licenses were sold at $50m and $40m each and with the three other licenses sold, the total amount generated comes in at over $120m.

Slowing Down

As the process began, the bids came in at huge numbers. Towards the final auctions, bids came in at much lower price points. The most recent auction saw Penn National earn a second satellite casino license at just $3 over the minimum $7.5m bid. This is an extremely low amount considering that the first three bids came in in the 8-figure range.

There also may be little interest by outside entities to become involved in the satellite casino process, which would rule out any potential suitors in upcoming auctions. If the existing operators are not interested anymore and outside entities do not bid, the process is over, and no more satellite casinos will be in the mix.

Outside entities are already investing in casinos that already exist in the state and may not want to put down any more money to pay for additional gaming, at least until they get their feet wet in the existing gaming industry. Take for example Boyd Gaming of Las Vegas. The company is set to acquire Valley Forge Casino Resort for just over $280m. The company will have a vested interest in the state now but will most likely not be trying to get started in the satellite casino side of gaming.

Churchill Downs is buying Preque Isle Downs & Casino and the Sands Casino Resort Bethlehem recently sold to an Indian tribe from Alabama. With new entities coming in to the state to operate existing casinos, the focus is moving forward with operations as-is, instead of focusing on other elements as well.

For now, it seems satellite casinos will be stuck at five. It will be interesting to see what the board decides and how they plan to move forward in the coming weeks. Will they stop altogether? Or proceed by opening up the licensing process to outside entities?