Penn National Gaming

I think this is one of only five companies that does over $2 billion last year in casino revenue. They don't have any presence in Atlantic City or Vegas. The other four are well known (Harrah's, MGM-MIRAGE, Wynn Resorts, and Vegas Sands).
Has anyone been to one of the facilities? What makes them so successful?

I can only speak of Charles Town near DC - they have 5000 Vlt's and are the only close casino to DC. I know the overall payback here stays in the 88-89% range overall. My inlaws have won once in 10 years, yet still go because of the proximity. They are slated to get poker and tables in July. Supposedly the rake for poker will be set to $6 + 1 too. I think they take advantage of their lack of competition to make more for their bottom line.

Quote: toastcmu

I can only speak of Charles Town near DC - they have 5000 Vlt's and are the only close casino to DC. I know the overall payback here stays in the 88-89% range overall. My inlaws have won once in 10 years, yet still go because of the proximity. They are slated to get poker and tables in July. Supposedly the rake for poker will be set to $6 + 1 too. I think they take advantage of their lack of competition to make more for their bottom line.

Wow, 5000 slot machines. I understand that Foxwoods has over 7000 (the most in the world). I am wondering if this facility ranks #2. I see that they are installing 85 games, plus a 27-table poker room.

Usually the settings on the slot machines is inversely proportional to the competition. Most of the PA slot machines are much tighter than those in Vegas.

It makes me wonder why the company was trying to buy the Fountainbleau in Vegas. Why would they want to compete in this market if they have gold mines like this. I think it is possible that they think they can build loyalty points all over the country, and then send them to Vegas to stay in their resort their as well.

>Casino revenue.
Are they owners or managers of the casinos? I seem to recall they are managers of several Indian casinos.
>They don't have any presence in Atlantic City or Vegas.
I think they have been looking for one for quite some time.
Their bid for the Fountainbleau has been termed a Stalking Horse bid hasn't it?
>What makes them so successful?
Monopoly markets?
Corporate attitude towards debt?

Quote: pacomartin

What makes them so successful?

Volume?


I look at the map and the only thing I notice is that they have a lot of locations.

If most (all?) of those locations are without local competition, they not only get all the business, they have no market pressures to have a low house edge.

Quote: pacomartin

It makes me wonder why the company was trying to buy the Fountainbleau in Vegas. Why would they want to compete in this market if they have gold mines like this. I think it is possible that they think they can build loyalty points all over the country, and then send them to Vegas to stay in their resort their as well.

I think you hit the nail on the head. They are very successful regional gaming - but they see they lose out to the MGM/Harrah empire when it comes to Vegas, so if they buy a casino in Vegas, then they can keep their players "in-house" so to speak.

-B

I've been both to the Hollywood and Empress outside of Chicago and to Rama. There's nothing special about these properties. The player's card I think are separate. I don't think they have any national programs similar to MGM or Harrah's. Fontainebleau would be by far their best facility if they were to acquire it.

They were only interested in Fountainbleau if no one else was. They dropped out once they knew that they were going up against Carl Icahn.

They don't seem to have any experience running anything close to a 4 diamond property. Perhaps they would be good candidates to purchase the Rio. With all those properties feeding into their database of customers, they might do well with a property of that size.

Quote: pacomartin

They were only interested in Fountainbleau if no one else was. They dropped out once they knew that they were going up against Carl Icahn.

I thought it was more: Carl Icahn wanted to bid but asked Penn National to make an offer so as to "test the waters" and bring out any other bidders into the open before Carl Icahn made his offer.

I believe their 8K filing with the SEC refers to a formal Stalking Horse Agreement, but have not read it.

Quote: DJTeddyBear

without local competition, they not only get all the business, they have no market pressures to have a low house edge.

Precisely! As with many Indian casinos there is no real competition and in many places no competition at all. Just look at the Comp policies in any of the Seminole casinos in Florida! When there is no competition there is no market pressure to make disclosures and no market pressure to offer low house edge games. Without that market pressure to be competitive, slots don't have to be set high, Bingo can be just as bad as in most charity Bingo games and table games can be very selectively chosen to have rules that are good for the casino.
So profits are higher than might otherwise be attainable in a market where the players can vote with their feet.

One Bingo Hall in California calls out a number every four seconds ... that is a tremendously fast pace but the place rakes in money like crazy and its a legal monopoly in its city and an effective monopoly in its general driving area.

Penn has an Argosy property in Kansas City, alongside three other competitors. Also, they just broke ground about 10 miles west of their K.C. property on the state of Kansas's first full-blown, state-owned Casino (gambling just passed several years ago). The new property is co-owned with the NASCAR folks, and will be built along Turn 2 of the Kansas Speedway. It will be one of Penn's 'Hollywood-themed' properties. Cost is $380 millon, without a Hotel (to be added later). Penn has the Management contract with the State, and is not the actual 'owner' of the property - the State itself is.

My observation is Penn treats its employees decently, and they in turn treat their players well. They are the best of the 4 casinos in K.C. from this standpoint alone. Also, they are the only unionized casino of the 4 in K.C. In addition, in K.C. their Video Poker paytables are superior to the competition, from a player standpoint.

From reading the financial information re: Penn National Gaming on PacoMartin's blog, it isn't really clear to me if revenue derived from racing (both on track and off track) is considered gaming revenue or non-gaming revenue. My general impression is that Penn National historically viewed casino revenue as adjunct to their racing operations. Now, having recently enjoyed revenues from casino gaming they have had their their interest justifiably piqued leading to (or, at least, seriously considering) forays into the more conventional gaming locales such as Vegas.

Because of their racing background/venues, it seems they were able to have politically acceptable pre-exising locations into which they were able to insert conventional casino games. Barriers to market entry by other parties in areas proximate to Penn National's appear to be enormous and give them seemingly insurmountable advantage over potential competitive parties.

I think the best example of this is Penn National Raceway in Grantville, PA (located just outside of Hershey, PA). Who else, other than Penn National, could have succeeded in having a casino approved in this neck of the woods? They did, and they are there and there isn't anyone/body who is going to be able to open a casino next to them.

So when I read that they have interest in Vegas, etc., I wonder aloud if they have ever really dealt in a direct competitive environment? Sure, they competed for the entertainment dollar but not in direct competition with a neighbor in the exact same business.

And, I think the comment, "They don't seem to have any experience running anything close to a 4 diamond property" is probably very accurate.

So, wouldn't the more prudent course of action be to continue opening gold mines and leaving Vegas and Atlantic City to somebody else?