EDITOR'S LETTER: A sharing problem
September 1, 2009
Things are going to get interesting in the populous Northeast over the next couple of years.
Buddy Rogow, director of the Maryland State Lottery, may have put it best:
“It’s time to share.”
At the end of 2007, with the ground giving out under the consumer economy and revenues sliding, Foxwoods Resort Casino ran a huge “free slot play” promotion that contributed to a 23 percent drop in the quarterly win at rival Mohegan Sun. Mitchell Etess was still peeved six months later, referring to it in an interview in the Norwich Bulletin as a “ridiculous” time. This was in May 2008. The new MGM Grand at Foxwoods was about to pile 1,300 machines, 60 table games and 825 rooms onto a saturated market, Etess was out defending cost cuts at Mohegan Sun that would do away with 600 jobs, and by the fall, Foxwoods would announce it was laying off 700 people.
But what a difference a recession makes. This summer the two made common cause, pooling their dollars to launch a Web site jointly promoting themselves and taking the offensive against Atlantic City with attack billboards on Interstate 80, the New Jersey Turnpike, the Long Island Expressway and the Atlantic City Expressway: “Two worlds beat one City” … “Way beyond the boredwalk” … “Escape the Jersey snore”.
Delaware’s racetrack casinos joined the fray with billboards on the side of the Atlantic City Expressway leaving the seaside resort that said: “NOW you’re headed in the right direction!”
All in good, clean, competitive fun, right?
And as serious as a heart attack.
Maryland is breathing down Delaware’s neck. Penn National Gaming has started site work on a $75 million casino it wants to open by the end of next year on I-95 only about 20 miles from Newark, Del. Plans are under review for a racino at Ocean Downs Racetrack in Berlin, Md. An investment group has its sights on a casino in Baltimore. Maryland’s voters have authorized five casinos in all. Pennsylvania, which is eating Atlantic City’s lunch, and portions of Delaware’s and West Virginia’s, is adding table games. Delaware is countering with table games and sports betting. Then there’s Yonkers Raceway and its 5,000-plus VLTs. And one of these days, New York City and Philadelphia and Massachusetts are going to get their respective acts together, and that is likely to happen sooner rather than later if the economy gets any worse.
The Casino Association of New Jersey says their team needs a $20 million marketing war chest to fight back properly. But Atlantic City is in the middle of its third year of declining revenues, Trump’s casinos are back in Chapter 11, Resorts is in foreclosure, and nobody’s got that kind of money.
According to research done for the state of Connecticut by Spectrum Gaming Group, Foxwoods and Mohegan Sun depend on out-of-state residents for about half their annual visits. Slot revenue was down a combined 16 percent in fiscal 2008. It’s down 15.8 percent through July. What does that tell you about the impact of competition when wedded to the effects of this nasty downturn? Between the two they’ve shed through layoffs and attrition about 2,000 jobs in the last year, roughly 18 percent of their combined workforce. That’s a big deal for those towns up there. It’s a big deal for Connecticut. Since 1992, Foxwoods and Mohegan Sun have been responsible for 12 percent of the state’s net job growth. They are its fifth-highest source of revenue, contributing to the state every year the equivalent of 60 percent of all corporate income tax collections. And the demands two businesses of such scale impose on their surrounding communities are severe in terms of housing, schools, roads and other critical services.
So they’re “sharing” in Connecticut, all right. Not quite what Rogow has in mind, of course. It does, however, bring the stakes into focus.