Las Vegas-based Casino Operators Effectively Compete in Crowded Northeast Market

When no gambling operators put in a bid for Pennsylvania’s sixth mini-casino licenses, it’s simply confirmation of the North East’s saturated market.

The signal has been clear for the past few years as several Northeast casinos reported disappointing revenues.

The number of tribal and commercial casinos operating from Maryland to Maine has increased by nearly 50% since 2010, as states authorize huge gaming properties to boost job growth and local tax revenue. 

Gaming revenue lags behind growth

The Northeast’s gross gaming revenue increased around 35% between 2010 and 2018, despite the number of tribal and commercial and tribal casinos increasing by more than 50% for a total of 67 in the region. 

However, gross gaming revenue for the Northeast region only increased by 35% between 2010-2018; that’s according to data provided by the American Gaming Association and UNLV. Data has not yet been compiled for 2019. Even though the employment rates have surged and wages are higher, disappointing gaming revenue indicates that casino expansion has simply led to cannibalization.

“The Northeast gaming industry has reached maturity, and the only thing that will lead to higher revenue is population and income growth,” observed Clyde Barrow, who teaches at the University of Texas Rio Grande Valley and studies the gaming industry.

Las Vegas-based gaming operators in the Northeast are experiencing the impact of market saturation. They are depending on their loyalty programs as well as creating new marketing strategies to stay competitive.

However, market saturation may not stop states in the Northeast from issuing more casino licenses in a never-ending desire for more tax revenue; Professor Barrow calls this downward spiral the casino “arms race.”

Too many casinos?

MGM Resort International’s $960 million MGM Springfield, in Massachusetts, has had disappointing gaming revenue since it opened in August 2018.

The Springfield property’s revenue fell nearly 9% in the fourth quarter of 2019, compared to the same period in 2018. The MGM property faced even more competition with the opening of Wynn Resorts Ltd.’s $2.6 billion Boston casino, which opened in June.

“Admittedly, MGM Springfield has performed below expectations, and we’ve recently made some changes to better position the property,” MGM Resorts CEO Jim Murren said, during the company’s fourth-quarter earnings call.

MGM Springfield is just one of four casinos the company operates in the Northeast. The others are Borgata in Atlantic City, MGM National Harbor in Maryland, and Empire City in Yonkers, New York. Fortunately, those three MGM properties are among the top six casinos by gaming revenue outside of Nevada, according to data provided by the American Gaming Association. That further underscores the importance of the Northeast to MGM Resort International.

Likewise, Wynn Resorts CEO Matt Maddox reported that Encore Boston Harbor had a softer launch softer than anticipated, due to weak slot revenue.

Upstate New York casinos also had disappointing revenue

The four Upstate New York commercial casinos that opened between 2016 and 2018, Rivers Casino, Resorts World Catskills, Tioga Downs, and del Lago, have all struggled, but are beginning to show improvements.

Last year, Moody’s Investors Service downgraded del Lago’s debt after the casino’s revenue fell below expectations. That downgrade was due, in part, to the highly competitive nature of the local gaming market. Four racinos and one tribal casino are within 100 miles of del Lago, dampening the local market.

The $1.2 billion Resorts World Catskills was close to bankruptcy last year before the holding company, Genting Group, bought out investors last August.

Atlantic City and Connecticut have been the biggest losers of the “casino arms race” in the Northeast.

Atlantic City table and slot revenue have fallen by 25% over the same period, tumbling from a high of $3.6 billion to $2.7 billion. That’s according to data from the AGA and UNLV. Five of the 12 Atlantic City casinos closed between 2014 and 2016.

Connecticut slot revenue at its two tribal casinos, Mohegan Sun and Foxwoods, fell to $982 million in 2019 from 2010’s high of $1.39 billion; that’s a drop of nearly 30%, according to UNLV’s Center for Gaming Research.

While two new Atlantic City casinos opened in 2018, they mostly cannibalized revenue from the existing casinos in the resort town, according to MGM Resort’s Regional Portfolio President Jorge Perez.

Atlantic City could experience a revenue drop later this year when The Cordish Companies opens the $800 million Live! Hotel and Casino Philadelphia. That casino features 2,200 slots, sports betting, live table games and a hotel with over 200 rooms. The fact is, Philadelphia, which is just 62 miles away, is an important feeder market for Atlantic City.

NYC licensing

MGM executives believe there are still areas of growth in the Northeast, and the apple of the gaming industry’s eye is the country’s largest city, New York.

Last year, MGM finalized the $850 million acquisition of Empire City, just one of two casinos in the greater New York City area. The other one, which is in Queens, is operated by Genting Group.

However, the two casinos only offer electronic table games and slot machines, limiting their desirability to gamblers who want table games or sports betting.

However, that could change soon. 

New York State has a ban on issuing new casino licenses until 2023, but can issue up to three full casino licenses for the greater New York City area. A full casino license gives an operator the right to offer sports betting and table games. Both MGM and Genting Group are seeking such a license for their properties.

“I think the greater New York City market can easily handle two full casino properties,” observed Bob DeSalvio, president of Genting’s New York properties. “There will always be some competition, but at the end of the day, New York City is a very large market.”

Las Vegas Sands Corp. also wants one of the three potential New York City licenses for a new casino. In fact, tSands Corp. hired former New York Governor David Paterson to spearhead its effort to obtain that license. Last year, Sands Corp. finalized the sale of its casino in Bethlehem, Pennsylvania, which is just 80 miles from the Big Apple.

Professor Barrow thinks that a third full-service casino in or around New York City would hurt the revenues at two other local properties but also potentially hurt those in Atlantic City, Connecticut, and Pennsylvania. Such a move could also drive the upstate casinos into bankruptcy. 

Marketing strategy

To win over East Coast customers, the Las Vegas operators are gambling on their huge customer databases and ability to offer a huge selection of promotions and events, such as free stays at all of their properties nationwide.

“The power of the database” enables some casinos to be “more insulated” from cannibalization, said Perez, senior vice president of MGM International’s northeast region. Perez highlighted MGM’s Borgata property in Atlantic City; Borgata’s total table game and slot revenue remained virtually unchanged in 2019, even though two new casinos opened the previous year. In contrast, five of the other casinos in Atlantic City experienced a decline in total table game and slot revenue by $10 million last year. That’s according to the New Jersey Division of Gaming Enforcement.

“Our customers are more loyal and more sticky because they have more ways within the MGM network to play”, Perez said. Last year, MGM Resorts included Empire City into its MLife rewards program.

Perez further pointed out that MGM Resorts is crafting a marketing push to drive even more revenue growth, especially at its poorly performing Massachusetts property. The company sees a big opportunity to attract new customers, especially from central Massachusetts.

However, Perez also pointed out that it can take a long time for slot players to change their loyalty to a particular casino. And the more competition there is, the longer that will take.

Wynn Resorts CEO Matt Maddox reported during the company’s recent earnings call that they had recently launched its first tiered loyalty card program in the U.S. and that it’s already helping to drive more revenue to its Boston property.

Genting Group, which is opening a $4 billion casino on the Las Vegas Strip next year, also recently launched an incentives program to lure New York City customers to its new Catskills property.

“It’s something that I wanted to focus on right away when I joined the company,” said DeSalvio, who joined Genting in December.

The Genting Group Catskills property is less than 100 miles away from New York City and is a great alternative to Pennsylvania or Atlantic City for NYC residents wanting a weekend gambling getaway, DeSalvio said. DeSalvio also wants his city customers to realize that Resorts World Catskills is “much closer than they think.” 

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