Penn National Gaming’s CEO speculated on the future of sports betting in the US for his company’s properties during its Q4 earnings call on Thursday.
The takeaway from Timothy Wilmott was that investors should not expect a huge revenue influx directly from sports wagering, if it is legalized in the states Penn National serves. Instead, Wilmott said his company and investors should be excited about the prospect of the ancillary benefits that sports gambling can provide for facilities.
Penn National earnings call, at glance
PN’s call broached a wide variety of subjects, including the acquisition of Pinnacle and the company’s $50 million bid for a satellite casino in Pennsylvania.
But the topic of sports betting came up more than once during the question-and-answer period of the call. The prospect of a victory for New Jersey in its effort to end the federal ban on sports wagering outside of Nevada looms in the US Supreme Court. That could open up sports wagering around the country, potentially.
States around the country have been looking at legalizing sports wagering to start 2018.
Penn National already owns a property in PA — Hollywood Casino at Penn National. The state legalized sports wagering — if there’s a change in federal law — late last year. It also owns Hollywood Casino at Charles Town Races in West Virginia, a state that is moving fast on the issue of sports wagering.
Penn National on sports betting
Wilmott was asked about the opportunity for sports wagering for PN. He emphasized that both investors and states need to downplay the amount of revenue they expect from wagering, and they need to keep tax rates low to make it work.
“We also recognize that it is a low margin business and that’s our message back to the states as well who don’t understand the business as well as we do that you have to have a tax rate that is more like we’re seeing in West Virginia, New Jersey, or Nevada and not think of it as a traditional slot revenue or table games revenue operation,” Wilmott said.
More from the call
Q: I was hoping to get maybe a little more color on sports betting legalization; namely like how meaningful you think this could be for Penn depending on how it plays out. And maybe just thoughts on the direct sports book revenue impact versus say indirect upside from more visitations to your properties?
Willmott: I know you’re aware of the Nevada experience is that the actual revenues and EBITDA from sportsbook operations are certainly de minimuis relative to the other areas of gaming and in Las Vegas case, non-gaming. But we think the big advantage for us is the increased visitation that we’ll see by having sportsbook operations at our regional properties where we can take advantage of that visitation with higher room rates, higher volumes of food and beverage revenues.
I think we certainly see higher volumes in Nevada of table game business when we have large sporting event in the Las Vegas market. So, I think the bigger benefit will be from the indirect areas that sports betting brings in just due to increased visitation. We’re very encouraged by it and we’re very supportive of it.
Penn National has also been supportive of an expansion of online gambling in the US.
A potential problem is sports betting tax rates
President and COO Jay Snowden added his two cents on sports betting as well, calling the proposed tax rate of 36 percent of sports betting revenue in PA “ridiculous.”
More from Snowden:
And as Tim said I mean our main focus right now is on tamping down the irrational exuberance that some of them have in terms of what the revenue potential might be ….
So, we’re trying to hold firm to the Nevada model, try to keep [the tax rate] it around 7 percent. West Virginia is a little high, but we at least like that they recognize that there are some pretty thin margins. …
It’s not a cash cow and we’ve just got to continue to impress upon the states. Let’s not get greedy on this subject.
West Virginia’s tax rate in legislation that started advancing on Wednesday is 10 percent of gross gaming revenue.