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Philadelphia’s SugarHouse Casino Fails to Sweeten the Pot

Posted on January 27th, 2011

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During SugarHouse Casino’s presentation to Philadelphia, grand plans were announced. The casino not only boasts an increase in revenues for the state, but also promises to be an aesthetical asset for the area. This 1,300,000 square foot casino complex encompassed within a 22-acre site which is the former Jack Frost Sugar Refinery at Delaware and Frankford avenues is estimated to collect a total gaming revenue of over a billion dollars for the state of Pennsylvania and the city of Philadelphia, within the first five years of operation. Weekly reports on the casino’s earnings however, tell a different story. Figures show that the casino fails to own up to its promises and if the trend continues, the casino will be unable to deliver their billion dollar promise.

Philadelphia’s waterfront has been reported in having plans of opening up a second casino in the same area, but developers for such a project have been getting bad reviews regarding this course of action, mainly due to the SugarHouse Casino’s performance. In the first four months of the said casino’s operations, it has failed to meet the expected earnings and visitorship A huge question that remains unanswered concerns the reasons why such a multi-million casino complex complete with attractive interior and exterior designs, conveniently situated in a lovely waterfront plot and in a high traffic area, still underperforms. The first phase of SugarHouse Casino alone amounted to $550 million in costs which was comprised of the construction of its state of the art casino floors, three thousand slot machines, gaming tables, a diverse selection of dining and retail outlets, and a three thousand car garage with free parking. It is distinct in its dissimilarity with typical towering resort-style casinos in most gambling capitals, with its low-slung building that its planning personnel mockingly called “a dressed-up Walmart or Home Depot.” Other proposed supplementary amenities include a 500-room hotel with a health spa, a 30,000 square foot event center, and dining and retail facilities’ expansion.

An measly $2.3 million, less than half of what was projected in May, was the average gaming revenue of the casino in its weekly statistics, that make up seventy percent of its total revenues. It is also less than half of what SugarHouse owners estimated and announced to state regulators during the licesne application process. Slots revenue is crucial for a state, owing to the fact that the 2004 gaming law specifically states that 55 percent of casinos’ gross slots revenue rightfully belong to the state. This is a rather huge figure compared to the sixteen percent that table-games are required to shell out. With low averaged revenues, just as with the case of SugarHouse, the budget allotted for cities and counties that approved the casinos are greatly diminished as well.

With SugarHouse Casino’s poor performance ratings by gaming experts, plans for a second casino in the area are put on hold. Michael Listner, an analyst for Standard & Poor’s, a United States based financial services company, stated in an interview the prior month regarding constructions of an additional casino, “Given the operating trends so far, there may not be sufficient demand on the city of Philadelphia for an additional competing facility on the waterfront. I think the established customer base and competition from Parx and Harrah’s Chester have hurt SugarHouse.” SugarHouse Casino’s general manager, Wendy Hamilton, made known to the public the difficulties the company encountered in the lengthy time it took to establish regular player databases, marketing strategies, and getting to familiarize one’s self in a new property. She had these to say in answer and in acknowledgment of the fierceness of their direct competitors, “We’ve got two established competitors, one fifteen miles south and one fifteen miles north, and eleven casinos fifty miles east of us in Atlantic City with great amenities and established databases. There’s business to be had. Four months in, as an infant business, we’re very pleased with the results.”

The Sugarhouse Casino had been experiencing complications even before it had started conducting its operations.. It was one of five stand-alone casinos awarded a gaming license by the Pennsylvania Gaming Control Board in December of 2006. It underwent obstacles such as having its license revoked and re-approved, public demonstrations against quality of life issues numerous believed it may bring, and finally became operational in the fourth quarter of 2010.