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Scale will matter for success of New York casinos

Created: 08/31/2014 9:22 PM WHEC.com
By: Associated Press

Racino revenue is down. Casinos are closing in Atlantic City, while new ones are opening in Maryland and Massachusetts. Yet New York is just now getting into the game, with more than a dozen groups lining up to open upstate casinos.
 
The state's late arrival at the betting table is forcing developers to think smaller. Rather than behemoths like Foxwoods and Mohegan Sun in Connecticut or the gambling palaces in Las Vegas or Atlantic City, the contenders for the four available licenses are pushing more modest facilities designed to appeal to a local customer base within a few hours' drive.
 
They liken it to a Goldilocks zone: The facility must be grand enough to lure customers, with the glitz of amenities and the feel of a resort but not something so big and expensive that it doesn't break even in a competitive market.
 
"You might figure: Build a bigger casino, you might have a better chance of winning," said Mitchell Grossinger Etess, CEO of the Mohegan Tribal Gaming Authority, which is proposing a $550 million casino in Sullivan County. "But you have to look at the market size. You need the right-sized building that can operate efficiently. There will never be another Mohegan Sun. That's the way the market has shifted."
 
Gamblers are increasingly choosing smaller casinos closer to home over gargantuan resorts. Once, Atlantic City, Las Vegas and a scattering of tribal casinos dominated the market. Now, Atlantic City is losing four of its 12 casinos this year, and most Americans are within a few hours' drive of casinos in cities like Baltimore, Philadelphia, Pittsburgh, Kansas City, Detroit and Cleveland.
 
New York's casino expansion was sold on the idea that it would draw tourists and their money upstate. Yet the developers now acknowledge that they need local gamblers to succeed.
 
"Times have changed," said Bill Walsh, the developer behind the $212 million Traditions Casino and Resort proposal in the state's Southern Tier. "People are looking for convenience. They don't want to drive five hours to get to a casino now. You need a primary market."
 
When voters approved a plan to license up to four casinos in upstate New York, Gov. Andrew Cuomo said casinos held the promise of jobs, tourism and economic revitalization for struggling communities. More recently he's expressed trust in the developers, noting they're the ones investing money in the proposals.
 
"The private market ... will make a determination as to what scale and scope the market can support," he said in July. "And they will then build the buildings and employ people and run the business because they think it's a good business to run. I'm sure they will propose what they believe will be successful."
 
Gary Greenberg is a minority owner of the Vernon Downs racino and hotel near Syracuse. He said that with racino revenue continuing to slump he doesn't believe the state can support the addition of four casinos.
 
"They'll be new the first year and people will go, but what about the next year?" he said. "I don't see the casinos doing as well as they're saying. There's a saturation right now."
 
A state board is now reviewing the 16 casino proposals. Up to four licenses are to be awarded this fall in three regions: the Southern Tier-Finger Lakes, the Albany-Saratoga region and the mid-Hudson River-Catskills area. The last region, with its proximity to New York City, has attracted more than half the applications.
 
Jan Jones Blackhurst, vice president at Caesars Entertainment, said they have "tremendous faith in the market" and have not scaled back plans to build a $880 million casino resort about 50 miles north of New York City in Orange County.
 
Blackhurst said their resort would hold true to Cuomo's vision of creating destination resorts, with the Caesars casino taking advantage of its proximity to the city and the neighboring Woodbury Common Premium Outlets, which draws 13 million visitors annually.
 
"We firmly believe that our project is more of a destination project, that you're really bringing new people into New York," she said.
 
Casino opponents, however, point to Atlantic City's crumbling gambling market, plans for new casinos in Massachusetts and struggles at New York's nine racinos as evidence that the market is saturated and that additional casinos aren't going to be the boon some believed. The state estimates the casinos will generate hundreds of millions of dollars annually for local governments and public schools.
 
"The politicians seem to buy it, but I think people intuitively know this is baloney," said Dwight Jenkins, a resident of East Greenbush who is fighting a proposal to open a casino near his home, across the Hudson River from Albany. "Four casinos are closing this summer in Atlantic City. Yet New York for some reason is thinking we're somehow going to be different."





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