At Finger Lakes Gaming & Racetrack, a customer with a complaint about something at the buffet may wind up hitting the service jackpot with a call from no less than the racino’s president, Chris Riegle. After all, he says, the Indian casino is just a half-hour’s drive away.



“There are only so many people in my market,” notes Riegle, whose racino with its 1,200 video lottery terminals has kept increasing its revenue despite the economic downturn. “If I lose them, I lose them forever.”

New York state is shaping up to be one of the gaming industry’s relatively quiet success stories, with a bevy of racinos that have turned hard times into good times by providing a convenient outlet for local gamblers.

The success of Pennsylvania’s new and fast-growing network of racinos and casinos is now an increasingly well-known story in the industry. But armed with some 12,500 VLTs, the eight racinos scattered between Yonkers and Buffalo have defied the Great Recession, posting healthy revenue gains by focusing intensely on servicing locals.

Still, rising competition from Pennsylvania’s gaming industry, which is now rolling out table games, is of growing concern. One of the highest tax rates in the industry does not help either.

However, help may be on the way. A budding state initiative that could lead to a dramatic expansion of promotional free slot play is in the works in New York. And by year’s end the industry may be rolling out electronic table games as well.

“The best way to look at them is that they are not much different from the facilities in Pennsylvania,” says Bennett Liebman, coordinator of the Racing and Gaming Law Program at Albany Law School. “They are local, and people are traveling to them instead of going to bigger facilities.”

New York may be a gaming success story, but you wouldn’t know it from reading the headlines. News coverage has been dominated by the political battles surrounding nearly a decade of failed efforts to transform the aging Aqueduct racetrack into a racino. But this picture is skewed, ignoring the steady growth that has made New York’s VLT industry one of the most successful in the country. Statewide, machine handle, which is measured by the New York Lottery as credits played through the system, was up 5.6 percent to $12.32 billion in fiscal 2010. Revenue was up a robust 7.4 percent, topping $1 billion for the first time.

By contrast, Atlantic City saw revenue drop 13.2 percent in 2009 while profits fell 21 percent.

Saratoga Gaming and Raceway, the state’s second-largest racino in terms of revenue, was one of only two venues that did not see an increase in credits played in fiscal 2010. (The other was Monticello Casino & Raceway in the Catskills.) Even so, Saratoga’s win was up almost 10 percent to $136.6 million.

“New York has been pretty resilient as it relates to the economy,” says Jamie Hartman, chief operating officer at Saratoga. “We are happy to see some growth in a terrible year for the gaming industry.”

Just north of New York City can be found the flagship of New York gaming, Empire City Casino at Yonkers Raceway. Since opening four years ago, Empire City has quietly established itself as the largest racino in the country and plans to expand its reach regionally and even nationwide. More than $6.5 billion was churned through Empire’s 5,300 VLTs in fiscal 2010, an 8 percent increase year over year. Win soared 11 percent to $554.1 million.

“We have been able to steal a lot of market share from Atlantic City and certainly from Connecticut,” says Ryan Murphy, the racino’s executive director of marketing. “Even in a weak economy we were able to have a wonderful year last year.”

They’ve had an impact as well on Monticello, which was the only racino to see declines in both handle and win (down 8.7 percent and 5.5 percent, respectively) in the last year.

As for the other upstate racinos, while they may be far from the bright lights of the lucrative metropolitan New York City market, they are reporting gains similar to Empire’s on a percentage basis - Batavia Downs Casino, Fairgrounds Gaming & Raceway, Finger Lakes, Tioga Downs Casino and Vernon Downs Casino and Hotel all turned in impressive performances in the last fiscal year.

Batavia Downs saw gaming revenue jump 9.5 percent year over year to almost $37 million. Fairgrounds, in Hamburg, boosted revenue almost 8 percent to $55.6 million. Finger Lakes, in Farmington, saw a 7.6 percent increase in win to $111.5 million. Tioga Downs, in Nichols, posted $50.1 million in win, a 4.3 percent increase. The racino at Vernon Downs posted a 3 percent increase to $38.2 million.

Overall, New York’s hinterlands have enjoyed relative economic stability as much of the rest of country has gone on a roller coaster ride.

“In Western New York we didn’t get hit bad by the economy,” Riegle observes. “We didn’t get the run-up in housing prices.”

Still, it is success that has come out of hard work, with racino executives across the state citing a devotion to local gamblers, rather than dreams of tapping any regional or national clientele, as key.

A good example being Riegle, who makes it a point of keeping a close watch on customer complaints. “If there is a negative comment on our property, in 24 hours the manager will call you and track you down,” he says.

Delaware North, the Buffalo, N.Y.-based company that operates Finger Lakes’ racino, also closely monitors service levels, sending in “undercover” customers four times a year.

As they hustle to keep gamblers rolling through their doors, New York’s racinos are using a mix of old-fashioned salesmanship and the latest 21st century marketing techniques.

Finger Lakes issues a steady stream of promotions to keep customers coming, some of which would not have been out of place in the 1950s.They give away a car a month and a small appliance each week - and it works. The promotions, even when the prize is a humble toaster, can make a huge difference, driving up customer traffic by 25 percent some nights, Riegle says.

Down in Yonkers, Empire City celebrated St. Patrick’s Day with a March giveaway of three green Chevrolet Camaros. It proved to be a popular promotion, says Murphy.

Batavia Downs Casino put money into a new restaurant two years ago, helping give it a broader appeal, with live music in the evenings and weekends. “It has changed it from a gaming facility to a place to go for the day,” says Martin Basinait, president and chief executive.

BUILDING CLIENTELE



And borrowing a page from the top operators in the big casino markets, New York racino executives are studying their clientele, building extensive data bases filled with a range of valuable customer information. Empire City has compiled a data base with half a million names. The addresses are heavily clustered in the metro New York and Northern New Jersey markets, but some are as far afield as Arizona and California. Last fall, the racino launched a players club and is lavishing preferred customers with attention, throwing dinner parties and staging giveaways. The aim is to woo high rollers who would otherwise go to Atlantic City or Foxwoods and Mohegan Sun in Connecticut.

“We know that the locals are really our core audience,” Murphy says. But, he adds, “We certainly have plans to do more on a regional and even national basis.”

While the gains of the past few years have been impressive, rising regional competition has made elevating their game a necessity for New York’s racinos. Pennsylvania legalized slot machine gambling in 2004, the same year New York racetracks began to roll out VLTs. The Keystone State has since gone on to become a national gambling powerhouse, with plans to eventually license 14 racinos and casinos. In a landmark move, Pennsylvania lawmakers earlier this year also approved full-fledged table games, which should go into action this summer. This is expected to further heighten an already intense cross-border competition between Pennsylvania and New York for gambling dollars.

There’s also the prospect of added competition even closer to home.

It’s not clear how soon the current political log jam over an Aqueduct racino will resolve itself, with the potential for years more of delays. But there is always the possibility that at some point plans will finally move forward for redeveloping the Queens track into a racino with 4,500 VLTs. That would bring new competition practically to the doorstep of Empire City.

“It’s much closer to the airport,” says industry expert Joe Kelly, a professor of business law at SUNY College Buffalo. “It’s right in the middle of the city in Queens.”

In response, racino executives are lobbying for regulatory and tax changes they contend will give them a needed competitive boost. The New York Lottery, which oversees the thousands of VLTs, is weighing an initiative that could dramatically expand the use of free-slot-play promotions. Currently, racinos can offer free play, but the dollars they give to players are counted as revenue that can be later taxed by the state. At Tioga Downs and Monticello, lottery officials are monitoring a pilot program where untaxed free slot play is being allowed. Executives like Riegle are hoping they let the program go statewide later this year, matching a perk Pennsylvania gambling operators have enjoyed for years.

“That is the next stop for New York,” he says. “We need to get tax-free play. It really does drive additional visits by customers.”

Lottery officials also are pushing ahead with plans to let the racinos add electronic table games, a move that could happen later this year. Longer opening hours are also being considered.

Overall, it’s been encouraging.

Says Saratoga’s Hartman, “There are some things happening in the New York market that could be game-changers.”