Tue | Aug 22, 2017

Northeast's casino landscape growing crowded

Published:Friday | August 19, 2016 | 8:00 AM

Felix Rappaport doesn't even like to say it. "I try not to use the word," Foxwoods Resort Casino's top executive admitted in an interview this past week. "No sense cursing the darkness."

Nevertheless, most discussions of the state of gaming in the Northeast centre on 'saturation', the point, theoretically, where supply equals demand.

Rappaport prefers the term "competitive landscape".

In New England alone, seven facilities operate in four states.

Foxwoods and Mohegan Sun are the reigning heavyweights. Rhode Island's Twin River Casino in Lincoln and Maine's Hollywood Casino & Raceway in Bangor and Oxford Casino in Oxford also qualify as full-fledged casinos, offering table games as well as slot machines.

Two of the facilities - Newport Grand in Newport, Rhode Island, and Plainridge Park Casino in Plainville, Massachusetts - offer only slots and electronic versions of table games. Plainridge additionally offers harness racing.

Four more casinos have been licensed or proposed in the region, while Newport Grand could be shuttered in favour of a full-fledged casino in Tiverton, Rhode Island, depending on the outcome of an election day referendum in November.

If everything that's been proposed materialises - and that's a sizeable 'if' - New England's four gaming states could be home to 10 casinos and a slots parlour by, say, 2020.

West of New England, two upstate New York casinos are scheduled to open next year in Schenectady and Thompson.

To the south, slots-only racetrack casinos in and near New York City already cut into the Connecticut casinos' share of the slots market.

One of them, Resorts World Casino at the Aqueduct track in Queens, has been talking about expansion.

And then there's the prospect of a casino or two in northern New Jersey, if that state's voters approve gaming outside Atlantic City in another election day referendum.

"Overall, the market in New England is continuing to grow," Clyde Barrow, a gaming expert, said in an interview. "But there will be a saturation point."

Barrow, a professor and chairman of the Political Science Department at the University of Texas Rio Grande Valley in Edinburg, Texas, previously served as director of the Center for Policy Analysis at UMass Dartmouth.

He has studied Northeast gaming for decades and continues to do so.

Hired by the casino-owning Mashantucket Pequot and Mohegan tribes, Barrow analysed the impact that the casinos proposed in Massachusetts and New York would have on jobs and revenues at Foxwoods and Mohegan Sun.

His 2015 report fuelled the tribes' campaign to win state authorisation for up to three commercial casinos in Connecticut.

Eventually, the legislature approved a bill that allowed the tribes to form a partnership and jointly seek site proposals from Hartford-area municipalities willing to host a single 'satellite' casino.

The facility would target MGM Springfield, the US$950-million resort casino now under construction in Massachusetts.

Is there a balance?

So, how do you know when supply and demand are in balance?

Barrow and two colleagues, David Borges and Alan Meister, recently published a paper on the subject, calling attention to a metric involving slot-machine revenues.

Fitch Ratings, a credit-rating agency, considers a 'win' per machine per day of US$200 to be an important threshold, Barrow said, with win being the amount of slots wagers a casino keeps after paying out prizes.

When the average daily win per machine in a market sinks below US$200, it becomes difficult for casinos to cover their overhead, Barrow said.

In June, Mohegan Sun's average win per machine per day was nearly US$300. Foxwoods' was about US$260.

If MGM Springfield and Wynn Boston Harbor, a US$2.1-billion project under way in Everett, Massachusetts, open as projected in 2018 and 2019, respectively, and Rivers Casino and Montreign Resort Casino open next year in Schenectady and Thompson, New York, the saturation point might be reached, Barrow said.

And that would be before any resolution of the Mashpee Wampanoag Tribe's US$1 billion project in Taunton, Massachusetts - halted weeks ago by a court ruling that overturned a federal land-into-trust decision - or the Mashantucket-Mohegan partnership's bid to win the Connecticut legislature's approval of a Hartford-area casino.

The Mashpees, who broke ground on their First Light project in April, have had to secure US$8.2 million worth of steel that had been delivered to the Taunton construction site.

They are expected to appeal the court ruling.

"I could easily envision that if things go well with MGM Springfield and Wynn, and Taunton's not happening, they could make the decision to expand Plainridge by simply allowing table games there," Barrow said, referring to the Massachusetts Gaming Commission.

None of the possibilities bodes well for Foxwoods and Mohegan Sun.

"When you add a facility, you get some overall growth (in the market), but some cannibalisation of existing facilities occurs," Barrow said. "Of course, if 50 per cent of Massachusetts' revenue comes from Connecticut and Rhode Island, it (Massachusetts) doesn't care because it's all new to Massachusetts."

In a region flirting with saturation, the stakes are high. The ongoing back and forth between MGM and the parties involved in the third Connecticut casino effort demonstrate just how high.

MGM Resorts International has pulled out all the stops in attempts to derail the Mashantucket-Mohegan partnership, filing suit in federal court, lobbying Congress and releasing documents related to a Connecticut Airport Authority proposal to host a casino at Bradley International Airport in Windsor Locks.

"The magnitude and aggressiveness of their response is beyond anything I've seen, but it's understandable," Barrow said of MGM. "I thought from the start that they were overbuilding in Springfield. Based on the gross gaming revenue they can expect there, I thought a US$300-million to US$400-million project made more sense. Maybe US$500 million."

Not surprisingly, Bobby Soper, president and chief executive officer of the Mohegan Tribal Gaming Authority, which operates Mohegan Sun, offered a similar assessment.

"With two new properties coming in Massachusetts, we're certainly reaching the point where there's risk of over-investment," he said. "In western Massachusetts, based on our understanding of the market, it's hard to see how a reasonable return can be generated by the kind of investment MGM says it's making."

Mohegan Sun, which vied for the western Massachusetts licence that MGM won, originally proposed a US$600-million project for the town of Palmer, then enhanced it by adding a water park, a second hotel and a retail component, pushing its price tag to the US$1-billion mark.

Voters rejected the plan in a 2013 referendum.

Soper said the casino projects in Taunton and upstate New York are not expected to have a significant impact on Mohegan Sun since facilities that are closer - Twin River in Rhode Island, Resorts World in New York City and Empire City Casino in Yonkers, New York - already exist.

Responding to growing competition

A big northern New Jersey casino, such as one at the Meadowlands Sports Complex in East Rutherford, would be more of a concern, he said.

Rappaport, the Foxwoods president and chief executive officer, said the Mashantuckets' gaming enterprise has to respond to the growing competition it faces by focusing on its own property - and diversifying.

"MGM is moving ahead, Steve Wynn's moving ahead and I suspect there's a good chance the Mashpees will go forward in Taunton," he said. "The best we can do is take care of our customers."

A veteran of the Las Vegas gaming scene, Rappaport notes that America's original casino market repeatedly has had to reinvent itself.

Non-gaming amenities now generate 65 per cent of the Las Vegas casinos' revenues, a model Foxwoods intends to emulate.

"MGM, Wynn, the Mashpees - they'll all build beautiful properties, but I don't think they'll ever be able to offer everything that we do," Rappaport said. "We're trying to build on that competitive advantage. If we do our job in the next couple of years, we'll have the best chance. If we stick to what worked three, five, 10 years ago, we won't."

In June, Foxwoods announced plans to unveil four new celebrity-themed restaurants this fall.

Rappaport said plans for a zip line linking The Fox Tower and the Mashantucket Pequot Museum and Research Center are proceeding and that a water park is still being contemplated.

An outdoor rock festival will take place next month on the Mashantucket reservation.

Rappaport said the Mashantuckets also will continue to pursue opportunities elsewhere.

They're partnering on a Biloxi, Mississippi, casino project that will bear the Foxwoods name and, he said, "We're certainly interested in other jurisdictions."

He said he believes Atlantic City, where four casinos closed in 2014 and a fifth, the Trump Taj Mahal, announced it will shut down in October, eventually will be ripe for reinvestment.

"We're open to anything that makes sense," Rappaport said. "We have a huge database, 6.4 million to 6.5 million people. If you buy a shuttered property and you walk in without a database, it's like trying to play tennis without a racket. If someone partners with Foxwoods, it gets our database."

Mohegan Sun also is focused on its Connecticut property, where it expects to open a second hotel this fall. It's spending US$50 million renovating its existing hotel and adding retail, spa, dining and gaming options.

Soper said other "potential developments" are under consideration, none of which he was at liberty to discuss.

The Mohegan Tribal Gaming Authority operates a casino in Wilkes-Barre, Pennsylvania, and manages an Atlantic City casino that has increased profits in three consecutive years.

It's also partnering on the development and management of a tribal casino in La Center, Washington manages a tribal casino in Louisiana and has secured a licence to develop a huge resort at the Incheon International Airport in South Korea.

"We're a company, so it's not just about growing the destination in Connecticut," Soper said. "It's about generating other streams of cash flow. When one market's impacted, we have the diversification to offset it."

- AP