After paying millions in penalties, Hollywood Casino vows to build long-shelved KCK hotel
Business leaders in charge of the Hollywood Casino in Kansas City, Kansas, showcased a new plan Monday to build a hotel — more than 10 years after deadline — and at last deliver the long-awaited promise of a resort experience near the Kansas Speedway racetrack.
After Hollywood Casino welcomed its first gamblers in 2012, its owners had two years to start work on the complementary hotel. But that never happened. In 2015, owners cited proposed changes in casino taxation and gambling laws as reason to toss a $75 million, 250-room concept on the shelf.
Hollywood Casino has been content enough to pay millions of dollars in damages over the past decade rather than build the hotel, a required piece under its development agreement with the Unified Government. But the game has apparently now changed.
The asks concerning the hotel come as Penn National Gaming Inc. seeks a 15-year contract extension from the Kansas Lottery to keep running Hollywood Casino. The owners want a letter of support from the Unified Government before that evaluation progresses.
Aaron Rosenthal, Penn’s senior vice president of regional operations, said Monday “we think it is finally the right time” to bring a hotel into the operation.
“It’s something we’ve contemplated since before the casino opened and something we’ve gone back to every year to determine the feasibility of,” Rosenthal told the Unified Government’s Economic Development and Finance Committee during a hearing on a proposed amendment to its development agreement.
“And for a variety of reasons, the feasibility for us had not made sense. But it does now.”
Why the long wait?
Developers said earlier market studies showed little room for a new hotel in the area and feared building one next to the casino would harm other hospitality businesses.
Owners promised to build the hotel as part of the original agreement. But as the state lawmakers saw less-than-expected revenues in the early years of casinos, and mulled changes to gambling law and taxation, Hollywood Casino — which also notched revenues below projections — effectively dropped the plan in 2015.
Presenting to the committee Monday were representatives of Penn Gaming and the Kansas Speedway, which jointly own KCK’s Hollywood Casino through the business entity Kansas Entertainment LLC. They pitched a hotel with at least 125 guest rooms. Construction would start by the end of 2026.
The proposed hotel would be half the size of the one initially promised, though owners say there is room for expansion if the market supports that down the line. Developers pointed to decreasing vacancy rates at neighboring hotels as an indicator of a strong demand even as more hotel rooms are being built, including a Margaritaville resort that is part of the sprawling Homefield development in western Wyandotte County.
Other benefits of building the hotel, the owners say, are the temporary construction and permanent hotel jobs that will follow. A project plan is still incomplete, and the owners are working with a yet-to-be-named third-party hotel partner to move the ball forward.
At the same time as Penn Gaming seeks support from the Unified Government to bolster its case to extend its contract, Hollywood Casino is proposing an increase of its local charitable contributions from $500,000 to $850,000 annually.
During the first hearing on the matter Monday evening, a few committee members questioned one drafted provision of the agreement that would stop annual penalty payments to the Unified Government for two years.
Every year since the clock ran out on the promised hotel, the Unified Government’s coffers received a hefty fine — a 1% stake in annual casino revenue, calculated through Hollywood Casino’s state gaming contract — to cover the tab of unrealized tax growth.
In 2024, Hollywood Casino’s revenues topped $162 million, figures from the Kansas Racing and Gaming Commission show. Last year the Unified Government received $1.1 million from the penalty, according to budget documents.
In 2023, the Kansas City Business Journal reported that Kansas Entertainment had paid $12 million in penalties to the Unified Government since 2015.
Commissioner Chuck Stites, 7th District, voiced discomfort with the idea of giving Hollywood Casino a break on the penalty for the next two years before the hotel is built.
“Right now they’re paying it because they haven’t built a hotel,” Stites said, adding that he ultimately wants to see a hotel built instead of an annual penalty. “And if they still haven’t built a hotel, why would we shoot ourselves in the foot by letting them off the hook?”
At-Large Commissioner Tom Burroughs, 2nd District, recommended keeping the penalty phases intact moving forward. He noted the Unified Government’s tight spending plan for 2025 already depends on that money.
Jeff Morris, Penn’s vice president of public affairs, said Hollywood Casino may be agreeable to a continued payment of the penalty until there is material progress on the hotel.
The committee, by a 4-2 vote, advanced the proposed agreement with directions to its lawyers to draft language concerning the penalties and for the proposal to see broader discussion by all commissioners. It is scheduled to be up for consideration by the Unified Government Board of Commissioners in late October.
This story was originally published October 1, 2024 at 12:08 PM.
