Georgia Gaming Market Assessment - Pennsylvania Treasury

HISTORICAL SLOTS TRENDS AND SATURATION
ANALYSIS
The following section will present the historical slot machine performance and trends for the
Pennsylvania casinos. The performance of the casinos is broken down into the regional markets
and presented on a property by property basis. For each market and property, we have presented
the total slot revenue and win per unit on a trailing 12 month basis for the first stabilized month
of operations. In some cases properties opened in the middle of the month. Also, we have
shown the inventory or number of machines compared to the win per unit. For each section The
Innovation Group highlighted any relevant trends and observations.
In the first few years of operation, gaming markets typically are highly elastic—that is, as new
gaming positions are added there is little impact on existing supply or on overall WPP.
However, as supply comes into balance with demand for gaming, adding new gaming positions
causes WPP in a market to decrease, as a portion of revenues generated by new positions comes
at the expense of the existing supply. The size of that portion (i.e., the ratio of cannibalization
versus new revenues) depends upon the level of saturation in any particular market.
The Pennsylvania markets have until recently been characterized as emerging markets with steep
growth trends. As the markets have ramped up, new supply has been readily absorbed by latent
demand. However, recent trends show greater market maturation, and the introduction of new
supply into markets has resulted in lower WPP and cannibalization of existing supply.
Statewide
The Commonwealth of Pennsylvania has demonstrated positive trailing 12 month slot revenue
growth since November 2007. This indicates that the market is still maturing and should
continue its growth as the casinos in the market begin to stabilize. The steeper slope of revenue
growth from November 2007 through November 2008 was fueled by the introduction of gaming
at Philadelphia Park (Parx) and Harrah’s Chester Downs. The continued growth from January
2009 through January 2011 was explained by new entrants into the market and the absorption of
latent demand in the market.
The slot machine Win per Unit (WPU) for the state peaked at $300 in November of 2007 and has
declined year-over-year through March 2010. From March 2010 to current, WPU has stabilized
at approximately $250, which indicates the start of a saturated market. Below is a chart showing
the trailing 12 months of total slot revenue and WPU over the same period for the State of
Pennsylvania
The Innovation Group Project #054-11 August 2011 Page 31