Northeast casino saturation looms in the background of MGM Springfield opening

Northeast casino saturation looms in the background of MGM Springfield opening

  • Howard Stutz
August 22, 2018 3:14 AM

See if this sounds familiar. At a gaming conference in Atlantic City, a panel debated the casino saturation point for the Northeast U.S. gaming market.

“There’s a finite amount of gaming revenue out there,” said one panelist. “We are in a very volatile time and we’re in a frenzy of gaming expansion. It needs to stop.”

Those comments were made three years ago.

This Friday, MGM Resorts International unveils the $960 million MGM Springfield, giving the commonwealth its first full-scale gaming resort since lawmakers approved the development of three Las Vegas-style casinos and a slot machine-only property in 2011.

While excitement understandably brews in Springfield, where city leaders are hopeful the investment will spur an economic turnaround in a community that has some of the state’s highest poverty and unemployment rates, there is trepidation across the state line in Connecticut.

MGM expects to draw business from Massachusetts communities – Springfield is 90 miles west of Boston. At the same time, the property will try and poach business from Connecticut’s two large Indian casinos, Foxwoods and Mohegan Sun. Springfield is just 26 miles north of Hartford, Connecticut, and roughly 70 miles from the two casinos.

The $960 million MGM Springfield

Watching Massachusetts residents head across the border to get their gambling fix in Connecticut was a primary reason then-Gov Deval Patrick spent more than three years pushing state lawmakers to approve casino gaming.

This same occurrence has happened in states across the U.S.

That’s what I told New England Public Radio on Monday: Massachusetts wanted to keep gaming revenue tax dollars at home.

MGM Springfield is small by Las Vegas standards – a 250-room hotel with a 125,000-square-foot casino, as well as multiple restaurants and additional entertainment features. But the property encompasses a revitalized 14 acres over three city blocks and pays homage to Springfield’s history. It is already being celebrated throughout the region.

MGM Springfield also getting a head start on the $2.4 billion Encore Boston Harbor, currently under construction near Boston across the Mystic River in Everett.

The whole Northeast has been on a casino development streak since long before Massachusetts passed its gaming legalization plan, with casinos opening in Pennsylvania, Delaware, Maryland, New York, and Rhode Island.

Atlantic City has, to its detriment, received the brunt of the Northeast casino growth. Gaming revenues declined more than 50 percent between 2006 and 2015, and five Boardwalk casinos closed over a two-year period.

There has been a small revival – two properties reopened in June under new ownership – but adding two full-scale resorts in populous Massachusetts could slow the renewal.

Since the saturation concerns were raised in 2015, MGM National Harbor opened in Maryland across the Potomac River from Washington D.C., and Resorts World Catskills opened 80 miles northwest of New York City.

Plainridge Park Racetrack, located roughly 36 miles south of Boston in Plainville, is the slots-only facility that was included in the 2011 legislation. It opened as the state’s first casino in 2015.

The casino has 1,200 slot machines and electronic table games and three dining areas, including a sports bar dedicated to New England football legend Doug Flutie. In the 38 months the casino has been opened, the property has averaged $13.4 million a month in gaming revenue.

MGM Springfield and Encore Boston Harbor, though, with table games and other expanded amenities, are considered the game changers.

That may have Connecticut worried. According to published reports, taxes from the two Indian casinos – 25 percent of slot revenues – has declined from $430 million in fiscal 2007 down to $274 million in fiscal 2018. State officials expect the number to decline further in 2019.

Casino saturation in the Northeast is considered a major reason for the fall.

Michael Pollock, managing director of casino industry consultant Spectrum Gaming Group doesn’t believe Foxwoods and Mohegan Sun will succumb to the new competition.

“The existing properties are not without their arsenal,” Pollock told the Hartford Courant. “Both … have made significant capital investments in their properties. They have their own databases covering a huge swath of New England. They are going to be leveraging that.”

MGM Resorts has its own way of dealing with consolidation: by placing casinos in multiple Northeast markets and creating a network. In addition to Massachusetts and Maryland, MGM owns the Borgata in Atlantic City.

A sea change could take place early next year when MGM completes its acquisition of Empire Casino and Yonkers Raceway in New York – just 15 miles north of Times Square and the heart of Manhattan.

“MGM, by definition, is a formidable brand and a formidable operator and competitor,” Pollock told the Hartford Courant. “They’ve got a very robust, attractive loyalty program that they will leverage to the hilt.”

I would guess Northeast casino saturation will again be discussed at next year’s Atlantic City gaming conference.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.