Why Casinos in the First Place?
Massachusetts’s Casino Revenue – the Game Within the Game
Analysts such as Alan Woinski of Gaming USA Corp reported that “…..it’s been a long time since a new casino in the U.S. hit its expected revenue. I don’t know if it’s just reluctance to update that model or to bring it up to reality, but it’s been going on for over 10 years now.” There are two reasons for the model not working. One is the saturation of gaming in the northeast. The second may not have anything to do with the casinos themselves. Politics and elected officials who welcome gaming laws tied to outsized hopes is the other. That pressure gets channeled from regulators to casino companies to the analysts making the projections. Massachusetts’s lower casino revenue could very well be the new state expectation forecast for the future.
The same game can be seen to the west. New York State’s three new commercial casinos began 2017 turning out much weaker gambling revenues than projected, with gross receipts at one gaming hall off about 40 percent. Revenues have increased at the three casinos – del Lago, Rivers and Tioga Downs – since 2017. As the casinos enter their third year, they are coming up about $203 million short that was projected. The advent of sports betting in New York state is expected to raise revenues higher, closer to the projected value. But for now, same expectations, same results. New York’s upper state commercial casinos mirror the underachieving Massachusetts revenue reports.
The “industrial chic” downtown casino MGM built in Springfield, MA. is now over a year old.
Since its opening in late August 2018, MGM Springfield has brought in less than two thirds of the $418 million in gross gaming revenue MGM executives told the state the casino would bring in during its first year. The casino’s gross gaming revenue was $273.8 million from its opening on Aug. 24, 2018 through the end of August 2019. MGM Springfield President and COO Mike Mathis, recently reassigned, defended the estimate as realistic at the time, but said the regional casino market is tighter now. Saturation could be the MGC’s opinion also, since they denied the Brockton license again, Wampanoag’s Tribal casino still in limbo and new casino in Wareham met with little interest. Here are the facts of MGM’s year concerning Massachusetts Casino Revenue:
A Change of Heart and Design
MGM Springfield has started 2020 trying to reach out to the gambler’s cries for a better experience. If there is one thing that is a constant in the casino business it’s change. Changes on the casino floor at MGM Springfield include:
- Additional Video poker (although the pay tables are less than desirable, and some diminish the Royal Flush from the original 1000 credits.
- Added VIP Lounge – however, the space is small, without a bar, and limited food items, breakfast seems particularly lacking. It is only open to Platinum and Noir card holders, which has many Gold card members up in arms.
- Added an additional bar, with VIP bartops – same paytables.
- Added multiline VP machine, some with $.05 minimums, a definite plus.
- Took out 700 slot machines, making more space and a more comfortable ambiance.
- the addition of Stadium gaming and electronic table games
- The 5th floor of the hotel is being turned into suites.
- better table games rules and minimums.
A Change of Leadership
Mike Mathis worked on the MGM Springfield project through local and state approval, ballot campaigns, construction, opening and — this past year and a half — operation. Now the company is thanking Mathis for his work, and sending him to a job back in Las Vegas. He’s been reassigned to serve as MGM Resorts’ senior vice president of business development. It looks similar to firing the manager, even though the players are lousy. In this case, the players were the gambling nuts & bolts to get more people through the doors. The new president and COO in Springfield will be Chris Kelley, who’s held high-level jobs at casinos in San Diego, Detroit and most recently, Northfield Park, outside of Cleveland.
Connecticut’s Casino Loyalty
MGM admitted another mistake a few months ago. The president of MGM Springfield said Monday that tough competition from Connecticut’s two venerable tribal casinos is partly to blame for the the gambling and entertainment complex falling short of its revenue projections in its first year in operation. “This market has some really strong competitors that have been in the market for 20-plus years,” Mike Mathis, head of MGM Springfield, told reporters. “So I think we underestimated that level of loyalty and what it would take for those customers to give us a shot.”
The $960 million MGM Springfield was immediately seen as a threat by the Mohegans, who run the Mohegan Sun, and Mashantucket Pequots, who operate Foxwoods Resort Casino. MGM Springfield is among the biggest of the competitors to the two casinos since they opened in southeast Connecticut in the early 1990s.
Recently, US District Court in Washington, DC said that the four claims MGM made in contesting amendments to gaming compacts for the Mashantucket Pequot and Mohegan tribes should be dismissed. That would allow the tribes to move forward with plans for a casino in East Windsor, CT., just 15 minutes from MGM Springfield, which would further impact the Massachusetts casino revenue.
Encore Low Gaming Revenues Cause To Pause
Wynn Resorts’ $2.6 billion Everett casino saw its lowest gaming revenues yet in October, earning $45.8 million in gross gaming revenue. The revenue stats for Encore’s brief history or Lower Than Expected Casino Revenue:Revenue-Encore-10-2019
According to Paul DeBole, a political science professor at Lasell University who studies the industry, since opening, Encore has seen an abnormally high ratio of table game revenue to slots revenue. Most casinos typically see 60% or 70% of their revenue come from slots. Encore’s table games have exceeded expectations by accounting for more than half of gross gaming revenues. Tables minimums have been higher than any other casino in New England. The success is partially attributed to Wynn Resorts’ reputation as an upscale casino catering to high rollers from around the world. But, they now agree that a Las Vegas Resort casino is wrong for Boston. Brian Gullbrants, Encore’s new president, told the Massachusetts Gaming Commission “The last thing we want to do is be a Vegas casino in Boston. We want to be Greater Boston’s hometown casino.”
The latest changes to make Encore BH “Greater Boston’s hometown casino” include:
- $15 table game minimums
- free self parking
- a tiered Rewards system to offer rewards for a variety of players
- lower room rates – sales down to under $200, compared to opening rates around $600.
- a bright red food truck appeared on the gaming floor – Encore Cantina offers affordable dining, with such options as nachos at only $7 a pop
- To further provide a better guest experience, the casino announced just a few weeks ago that the venue would be adding self-service machines for drinks.
However, there is still concern over low paying slots. While the inventory includes almost every new machine under the sun, table games are still taking the most attention. January was quite a turnaround with a tables decrease and a slot increase in revenue. Food offerings are priced higher than other New England Casino properties, more on par with Vegas Strip price points. The goal of Encore is to create changes that will provide quality at a price point that appeals to every market. To be Boston’s “hometown casino” will take more than that.
- The Massachusetts Gaming Commission were leaning toward getting big industry names in their state from the beginning. Having bloated numbers to present to the public is part of the procedure these days and certainly hurt their prime directive.
- Both Encore and Wynn completely misunderstood the New England landscape and it’s gamblers. Getting the high roller from all over the world hasn’t translated into expected revenue. MGM further misunderstood what is wanted by high-rollers and Asian clientele, when they visit and spend big money in Springfield.