Casinos feel heat from neighboring states
Updated 7:56 am, Sunday, July 31, 2016
For nearly a decade, Connecticut gaming revenue has declined. Competition from other forms of entertainment and the effects of the recession are among the reasons often cited for this trend.
But it’s a third factor that has driven efforts to build a third casino, this time in the Hartford area.
“The gaming revenues have declined over the last nine years, in part because of new competition coming on from neighboring states,” said Colin Mansfield, associate director at Fitch Ratings.
With the anticipated 2018 opening of an MGM casino in nearby Springfield, Mass., the tribes that operate the state’s casinos, Mohegan Sun and Foxwoods, have warned the new venture could cause Connecticut to lose $702 million in revenue, up to $100 million in annual tax receipts and 9,300 direct and indirect gaming jobs.
“Convenience and drive time are important factors in interstate gaming,” Mansfield said. He said when a casino opened in New York City, near John F. Kennedy Airport, several years ago, it affected local revenue as people in southern Connecticut gravitated south.
In the same way, a casino in Massachusetts could draw in people from the northern part of the state. “Since convenience is such an important factor, it may be attractive to residents of northern Connecticut,” Mansfield said.
Because of this, he said it makes sense that locations in the Greater Hartford area are being considered for a third casino. “That’s just strategic in a sense that it could help keep residents from going across the border,” he said.
Last year, the Mohegan Tribe and the Mashantucket Pequot Tribal Nation together received state approval to build a new casino along Interstate 91.
“They employ thousands of people directly and support small businesses throughout the state,” said Andrew Doba, a spokesman for the two tribes. “Given the state’s fiscal outlook, these jobs and the revenue these two facilities send to the state are more important now than ever.”
MGM is now suing the state, claiming that the law that allowed the joint venture between the tribes on non-tribal land is unconstitutional.
The Schaghticoke Indian tribe, backed by MGM, has also filed a lawsuit claiming the law is unconstitutional because it excludes other possible casino operators from bidding on a facility.
“We have believed for some time that Connecticut is an attractive marketplace, and we continue to think that,” said Alan Feldman, executive vice president of MGM Resorts International. “We’d like the opportunity to compete.”
He added he believed the state should conduct a thorough review of where a third casino should be located.
“If the state believes a third casino — its first commercial casino — can benefit the state economically, why is that discussion being limited to north central Connecticut?” Feldman said. “If maximizing job creation and revenue is the goal, why not take a step back and look at the entire state to see where a third casino might best be able to flourish?”
Mansfield noted Fitch analysts have a cautious view on regional gaming because other avenues of entertainment, like social gaming and the lottery, are growing in popularity.
“Those segments are seeing healthy growth rates, and they’re alternative forms of gambling,” Mansfield said.
“There are so many more forms of entertainment today than there were 30, 40 or 50 years ago,” added Alex Bumazhny, senior director at Fitch Ratings.
He said the number of slot machines across the country has declined over the years due to less interest in that form of gambling.
“Historically, the baby boomers and Generation X have gambled considerably more,” Bumazhny said, noting that these generations have more free time and more disposable income.
According to a study released in 2014 by the American Gaming Association, the gaming industry contributes $240 billion to the U.S. economy, including revenues of more than $81 billion from casinos.
The study, conducted by Oxford Economics, also found that gaming directly employs approximately 734,000 U.S. workers and generates nearly $17.3 billion in federal taxes, about $11 billion in state and local taxes and nearly $10 billion in state and local gaming taxes.
Connecticut’s gaming revenue has steadily declined over the last decade, but recently state gaming revenues appear to be stabilizing, and have remained more or less flat over the last 12 months, Mansfield said.
Bumazhny attributed this to several factors, including lower gas prices and a milder winter. “People tend to drive less to casinos when the weather is bad,” he noted. The lower gas prices, meanwhile, helped boost discretionary income for many people.
He also noted that no new casinos have been built in the area. “You haven’t had a ton of new supply coming in recently,” Bumazhny said.
That will change in 2018.
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