Revenue of land-based casinos remains low, after online gambling had gained traction during the pandemic

A lack of recovery of traditional brick-and-mortar casino revenue in New Jersey and Pennsylvania compared to other states is raising “concerns” that iCasinos are cannibalizing retail properties and further jeopardizing expansion to other states, a new analysis from a Wall Street firm shows. 

A new study released by Deutsche Bank analyst Carlo Santarelli notes that while an analyses on the return of customers to US casinos might be early, findings could be “evidence of some cannibalization” of brick and mortar revenue due to iCasinos. 

While surely pandemic restrictions vary from state to state and could be influencing the data, we think it should be considered that the presence of iCasino in both New Jersey and Pennsylvania could be stunting their respective recoveries, in light of the overwhelmingly strong performance in other drive-to-market states,

Santarelli insisted that these trends could affect whether states beyond New Jersey, Pennsylvania, Delaware, West Virginia and Michigan pursue iCasinos.  

Connecticut is expected to be the next to launch. 

“The bull case for iCasino has been one of a rolling wave of favorable legislation making iCasinos a driver of growth for years to come,” Santarelli said.  

Other than Michigan, no state has legalized iCasino in the aftermath of the pandemic. We find the theme of the pandemic making iCasino legalization a likely source of funds for states, far less likely now than perhaps was the case six to 12 months ago, especially given the lack of progress by front runner states, namely Indiana and Illinois. We think there’s some merit to cannibalization of traditional casino operations, which would thereby lessen the desire of certain casino operators, who haven’t had success in iCasino, or aren’t well positioned to succeed in the vertical, to push for legalization.

New Jersey iCasino gross gaming revenue surpassed $100 million for the first time in January and reached $113.7 million in March compared to $39.1 million in March 2019.  

Pennsylvania, which launched in July 2019, set an all-time record of $97.7 million in March compared to $24.9 million in March 2020 as the pandemic shut down the industry. 

Traditional casino gross gaming revenue in New Jersey fell 17 per cent in March and 9 per cent in April, which are softer months for the resort destination on the Atlantic Ocean, Santarelli said. 

In Pennsylvania, gross gaming revenue fell 22 per cent in March compared to 2019 and up 1 per cent in April but those numbers were skewed by two new casinos opening, Santarelli said. 

“On a stand-alone basis, given the pandemic, these results would appear reasonable in isolation,” Santarelli argued.  

“However, when compared with performance across a host of other states across the Northeast, Midwest, and Southeast, they stand out a bit.” 

By comparison in states without iGaming compared to 2019, Ohio rose 35 per cent in April; Iowa 30 per cent; Missouri 23 per cent; Louisiana 18 per cent and Maryland 12 per cent. 

The Deutsche Bank analyst warned that New Jersey is unique for a regional market in that the majority of the state’s population is a lengthy drive away. He added that iCasinos “came to the forefront” when casinos in Pennsylvania, New York and New Jersey were closed during the pandemic. 

The dominant iCasino market shares are “likely to skew towards operators whose land-based facility is closest to the largest population bases” within the legalized iCasino state, Santarelli said.  

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