Lagging SugarHouse slots revenue casts doubt on need for second Philly casino

If SugarHouse's revenues during its first four months are a barometer for demand, then Philadelphia's waterfront can't support a second casino, gambling analysts say.

The city's first and only casino debuted Sept. 23, nearly four years after it was awarded a slots license by the Pennsylvania Gaming Control Board. It became the state's 10th casino.

Weekly slots revenue, which makes up nearly 70 percent of the casino's total revenue, has averaged $2.3 million - less than half of what was projected in May, and less than half the projections that SugarHouse's owner made to state regulators when seeking the license.

Under the 2004 state gaming law, 55 percent of casinos' gross slots revenue and 16 percent of table-games revenue go to the state. Slots revenue, therefore, is critical. Lower-than-expected gambling revenue means less tax revenue to be distributed to the cities and counties that approved the casinos.

So if a brand-spanking-new casino, on a lovely waterfront plot, in a high-traffic area, with the allure of freshness is clearly underperforming, why should the city need a second casino - on the waterfront or anywhere else?

"Given the operating trends so far, there may not be sufficient demand in the city of Philadelphia for an additional competing facility on the waterfront," Standard & Poor's analyst Michael Listner said in an interview this month.

"I think . . . the established customer base and competition from Parx and Harrah's Chester have hurt SugarHouse."

Wendy Hamilton, general manager for SugarHouse, acknowledged the fierce competition. She said it took time to establish player databases, marketing programs, and general awareness of a new property.

"We've got two established competitors - one 15 miles south and one 15 miles north - and 11 casinos 50 miles east of us in Atlantic City with great amenities and established databases," she said. "There's business to be had. Four months in, as an infant business, we're very pleased with the results."

Joseph Weinert of Spectrum Gaming Group L.L.C. in Linwood, N.J., said that casinos generally had a "three-year ramp-up" and that four months was too early to reach any conclusions.

"I will add this," he said. "There is no doubt that the Greater Philadelphia market - from suburban New York City to Atlantic City to northeastern Maryland - is intensely competitive." (Maryland's first casino opened in Perryville in September.)