Northeast casino developments - too good to be true?
When you think of a hot spot for casino gaming within the United States, chances are the Northeast is not the first area that springs to mind.
But the region from Pennsylvania to Maine has actually been the nexus of much casino development activity of late, thanks in large part to the voter approval of land-based resort development in Massachusetts, the decision by the New York legislature to add four upstate casinos, the recent approval of a second casino for Philadelphia and the desire of neighboring jurisdictions to keep gambling dollars from crossing their borders to these new properties.
Despite all this activity, there still remains one large pocket of untapped casino growth potential in the Northeast—New York City, with its billions of local population and millions of visiting tourists.
“I think there is still latent demand for casinos and casino gaming in the New York metropolitan area including Long Island, Suffolk and Queens,” said Steve Rittvo, founder and chairman of The Innovation Group, a Littleton, Colo.-based consulting and management services firm servicing the gaming industry, during a session at the recently-held Global Gaming Expo (G2E) in Las Vegas. “There is a chance for real market growth there.”
However, outside of New York City, gaming observers warn growth through new casino development may be close to its peak in the Northeast.
“Areas with unmet casino demand are few and far between in the U.S. these days,” said Bill Lerner, a principal with Union Gaming Group, a Las Vegas-based boutique investment bank and securities firm which focuses exclusively on the global casino and integrated resort industry. “New York City, Texas, Georgia, maybe parts of Florida, and that is it. Adding forms of wagering like table games to some established markets may lead to short-term growth, but otherwise the development of a new casino does not lead to overall market growth; it is taking dollars away from an existing in-state market or contiguous state.”
“New York City aside, after all the current casino development commitments are met in [the Northeast], I think we will be close to a zero-sum game,” Rittvo added. “Any gaming expansion beyond these projects in the region will lead to a market share shift, not real growth.”
Still, this potential oversaturation of the Northeast casino gaming market is years away, and resort developers are content to compete for some of the last remaining greenfield gaming development opportunities in the U.S.
NEW YORK STATE OF MIND
Nowhere is this push for resort development more evident than in New York, where no less than 16 projects are vying for the state’s four new casino licenses, which will be divided between three regions: the Albany/Saratoga area, the Southern Tier/Finger Lakes region and the Catskills/Mid-Hudson Valley corridor. As many as two licenses can be awarded to a single region.
The state’s Gaming Facility Location Board will decide which of these projects will be awarded the licenses, and having held several public hearings on the proposals. The board is expected to announce the winning projects sometime this month.
It will not be an easy decision. The chance to develop a New York State casino, and perhaps get an inside track on the gaming resort or resorts that may eventually be awarded licenses for the New York City metro area, has a number of casino development giants vying for a license, a list that includes Caesars Entertainment, Genting Group/Resorts World, Hard Rock and Mohegan Sun. A group of New York-based institutions with strong local ties are also attempting to win resort development rights. What all this competitive activity likely ensures is a lot of hurt feelings and potential legal action from the losing bidders, especially if they are locally-based businesses.
“Obviously there are going to be some unhappy people,” Jeff Gural, owner of the Tioga Downs harness track and racino and one of three applicants for a license in the Southern Tier-Finger Lakes told the Associated Press. “I just hope I’m not one of them.”
The primary target market for casino developers is the Catskills/Mid-Hudson valley area, not surprising given its proximity to the New York City metro region. Nine of the 16 bidders have based their projects there, and have actively been trying to one-up each other to sway the Location Board. For example, officials at Mohegan Sun and The Cappelli Organization, the backers of the Mohegan Sun at Concord proposed casino in Sullivan Country, recently announced that they have already devoted a $1 million mobilization of union labor to complete final site preparations for their resort, and the project could go from approval to completion in as short a timeframe as 14 months.
“With the site preparation we’ve done, Mohegan Sun at the Concord is more than just ‘shovel-ready’ at this point,” said Bryan Cappelli, lead developer of the proposed $500 million destination resort. “We’re actually ‘steel-ready,’ meaning we can have foundations completed and a steel frame of the casino and hotel in the ground in about a week’s time.”
Once licenses are awarded and the proposed resorts built, the projects face anything but a certain future. In-state competition for the gambler from established tribal casino facilities and racinos is likely to be fierce. In addition, neighboring states are also in the midst of casino expansion to try and capture a larger share of the Northeast gaming market. Case in point: The Pennsylvania Gaming Control Board recently awarded a license to Stadium Casino LLP, which will permit the operation of a second casino in Philadelphia. Stadium Casino is a joint venture between Greenwood Gaming & Entertainment, which currently operates the Parx Casino in Bucks County, Pa., and the Cordish Companies which operates both the Maryland LIVE Casino near Annapolis and the Xfinity LIVE entertainment complex in Philadelphia. The license clears the way for the development of a standalone casino with up to 5,000 slot machines and 250 table games.
Of more concern for potential New York gaming operators may be ongoing proposals to establish multi-billion dollar casino resorts in the Northern New Jersey areas of the Meadowlands sports and Liberty State Park, both right outside the New York City region. For this to happen, the state will have to pass a referendum allowing casino development outside of Atlantic City, which is not as much of a longshot as it was in the past, given the recent woes of Atlantic City gaming operations.
The other casino development hotbed in the Northeast is Massachusetts, but unlike New York, the gaming development players in this market have been largely settled. The Massachusetts Gaming Commission has already awarded two of its three allowed casino resort licenses: One to MGM Resorts International, which is developing MGM Springfield, an $800 million mixed-used development project and restaurant space to be located in the western Massachusetts city of Springfield; and the other to Wynn Resorts, which recently won the rights to develop a $1.6 billion resort in the community of Everett, which is located right outside of Boston.
The Massachusetts Gaming Commission has also given a license to Penn National gaming, which is in the process of developing Plainridge Park Casino, a 1,250 slot/pari-mutuel gaming facility located at a racetrack in Plainville, Mass. The Commission is also in the process of determining a winning bid for a casino resort license in the southeastern portion of the state, with special consideration to be given to a potential Mashpee Wampanoag tribal gaming facility.
The nascent Massachusetts casino gaming industry already survived a potential death knell when state voters defeated a referendum attempt to rescind casino legalization.
However, other threats to a healthy and prosperous Bay State casino marketplace loom on the horizon. Stringent responsible gaming policies mandated by the state may dramatically curtail casino profits. Of more pressing concern may be proposals to expand or establish casino gaming in the cross border states of New Hampshire, Maine and Connecticut. The expansion plans from Connecticut, which include developing a casino near Springfield, Mass., appear the most realistic, given the strength of the Mohegan Sun and Foxwoods tribal casinos in the state and their reliance on gamblers from Massachusetts.
“I think at this point, [casino expansion plans are] all preliminary,” Charles F. Bunnell, Mohegan chief of staff of external and governmental affairs, recently told the Hartford Courant newspaper. “The chairman of the Mohegan tribe, Kevin Brown, has said that he certainly is ready to have those discussions.”