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Have Encore, MGM, and other casinos saturated the market?

The Boston Globe

Jon Chesto

August 30, 2019

Here’s the last word that casino executives in Southern New England want to hear right now: saturation.

They had better get used to it.

As of Thursday, all the public numbers for July are in for the region’s casinos. The prevailing trend? Minus signs. July, of course, was the first full month of operations for the $2.6 billion Encore Boston Harbor that Wynn Resorts built on the Mystic River in Everett. Experts say Encore grew the market a bit, but also took gamblers from existing casinos.

Clyde Barrow, a political science professor at the University of Texas-Rio Grande Valley, says Fitch Ratings considers a market to be saturated when slot machine revenue falls below $200 per machine a day. While several casinos remain well above that mark, take a moment to review everyone’s numbers for July. The “S word” quickly comes to mind.

Encore Boston Harbor: Nearly 60 percent of Encore’s $48.6 million in gross gaming revenue for July came from table games, compared with slot machines — an unusually high percentage. That’s the good news for Wynn. Table-game play is seen as a proxy for big spenders. The bad news? Wynn is falling short of the first-year outlook that the company gave Massachusetts regulators in 2014 when it vied for the Boston-area casino license. A Wynn consultant had projected more than $800 million in gross gaming revenue in the casino’s first year. At this rate, Wynn will be lucky to clear $600 million. And that $200-per-slot machine threshold? Lasell University professor Paul DeBole estimates Encore was precariously close, reaping only $216 per machine a day in July.

Richard McGowan, a gaming expert at Boston College, offers this caveat: July is a tough month. Wait until the September numbers are in, after everyone returns from vacation, he says, before making a full assessment.

CEO Matt Maddox just told investors that battling for slot-machine players in this region is like guerrilla warfare. He wasn’t kidding.

MGM Springfield: It’s been open a year now, and MGM chief executive Jim Murren readily admits MGM Springfield is falling behind projections. Hard to argue with the numbers: MGM once estimated more than $400 million in gaming revenue in year one. But it only received $253 million from its opening in late August of 2018 through the end of July. One bright spot: Monthly gaming revenue actually rose in July from June, indicating that Encore’s arrival didn’t take much business away. By DeBole’s calculations, MGM Springfield’s slots take has been below that $200 threshold for the past two months.

Plainridge Park: Massachusetts’ oldest casino – it opened at the harness track in Plainville in 2015 – has shown signs of suffering lately. Its slot machine revenue fell 17 percent in July from the same time a year ago. (Plainridge doesn’t offer table games, though state lawmakers in that area would like to change that.)

Twin River: The Providence-based company’s year-old Tiverton, R.I., casino took a modest hit in July, when compared with June: a roughly 4 percent decline in gambling revenue, mostly at the tables. But Wynn’s arrival took a serious bite out of Twin River’s flagship casino in Lincoln, R.I. Executives there said the new competition had a greater-than-expected impact: Table game revenue fell 34 percent in July, year over year, while slots revenue dropped 17 percent from the same time in 2018. The company unveiled plans this month to lay off nearly 100 employees as it prepares for a harsh new reality.

The Connecticut tribes: Foxwoods and Mohegan Sun only report slot machine revenue, not table games. But it was an unlucky month for the two tribal casinos at the slot machines. Slots revenue fell 11 percent, year over year, at Foxwoods, and 15 percent at Mohegan. MGM could be a bigger factor than Encore: Slots revenues at both casinos have declined every month since MGM opened in Springfield a year ago.

Next up: Foxwoods and Mohegan Sun plan a joint $300 million casino in East Windsor, Conn., to recapture some of the gamblers they’re losing to MGM. When they start building is anyone’s guess. MGM sued to block their project, arguing the tribes were granted an unfair monopoly for off-reservation gambling. (MGM has its own plans for a casino in Bridgeport.)

Then there’s Southeastern Massachusetts. Chicago casino mogul Neil Bluhm hasn’t given up his dream for a casino in Brockton, and Quincy developer Tom O’Connell just unveiled his vision for a slots parlor/racetrack/hotel in Wareham.

Public officials in all three states have a big incentive to allow more construction: to pull the tax revenue over the state line and into their coffers. It’s an expensive tug-of-war. McGowan, the BC casino expert, doesn’t see room for another casino. But developers are still lining up to place their bets.

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