Casinos in Connecticut and Rhode Island have sucked billions from the Massachusetts economy over the past decade. Now Bay State lawmakers, as they prepare to legalize casinos as early as this January, could wind up turning the tables with a vengeance.
A green light for slot machines in Massachusetts could put both Foxwoods and Twin River, already struggling, on the ropes.
The legalization of one or more casinos in the Bay State, combined with some slot parlors, could strike a devastating blow at both Foxwoods and Twin River, overnight wiping out a third or more of their business, according to one top local gaming industry expert.
And it could not come at a worse time for our still formidable, but increasingly vulnerable, out-of-state casino competitors.
Now the largest casino in the world, Foxwoods is scrambling to renegotiate billions in debt after a massive expansion plan gone awry. Rhode Island’s Twin River, for its part, is stuck in bankruptcy court, its future ownership uncertain and its lenders increasingly holding the cards.
Really the only gainer outside the Bay State of casino legalization here would be Mohegan Sun, which has craftily insulated itself from such a future with plans for a network of feeder casinos.
“It does not put them out of business, but it certainly creates some major difficulties for them,” said Clyde Barrow, a professor and gaming industry expert at the University of Massachusetts Dartmouth, of Foxwoods. “They would have to downsize their operations.”
Of course, there’s one very simple reason why casino legalization in Massachusetts would strike particularly hard at Foxwoods and Twin River: Massachusetts gamblers account for the largest block of business for both casinos beyond their home states.
As much as 35 percent of Foxwoods’ customers now come from Massachusetts, UMass Dartmouth’s Barrow estimates. And, since they drive in from out of state, they probably account for an even larger share of revenue, spending more, proportionally, on hotel rooms and restaurant meals.
The percentage is even higher for Twin River, with as much as 40 percent of the racino’s customers crossing over the border from Massachusetts to gamble there.
All told, gamblers from the Bay State spent more than $900 million in 2008 at Foxwoods, Mohegan and Twin River. Over the past 10 years, the amount of money the Bay State’s high-rollers have pumped into Connecticut and Rhode Island slot palaces amounts to a whopping $10 billion, Barrow estimates.
But don’t fool yourself into thinking there’s a deep reservoir of customer loyalty here.
Within the first year after the rollout of casinos and slot machines in Massachusetts, more than two-thirds of Bay State gamblers who now frequent Connecticut and Rhode Island would shift their business back home, according to a recent survey by Barrow and UMass Dartmouth.
Twin River, more of a convenience gambling venue with much fewer frills, would be especially vulnerable.
The pending arrival of competition from neighboring Massachusetts, meanwhile, could not come at a worse time for either gambling venue.
Foxwoods last year rolled out an expansive and expensive $1 billion MGM Grand-themed addition, hiring 2,000 workers to staff it.
The big investment has been rewarded with a long decline in slot revenues, which fell again – 2.8 percent – in September, and which has prompted the first job cuts in the history of the giant Indian casino.
Folding Under Debt
More troubling, the Mashantucket Pequot Tribal Council, which owns Foxwoods, has begun what could be a long and harrowing process of restructuring $2.3 billion in debt.
The tribe recently announced it had reached a forbearance agreement with senior lenders, but that only takes it through Jan. 20.
Twin River, for its part, is already in bankruptcy court, saddled with hundreds of millions of debt that also stems from a bold, boom-time expansion plan gone bad.
If Massachusetts does indeed pull the trigger on casino gambling early next year, as widely expected, you can expect some real scrambling by these two, major out-of-state competitors.
By contrast, Mohegan Sun has quietly covered all the bases.
Mohegan has been hard at work building support for plans to open a mini Mohegan Sun just across the border in Palmer. That could give Mohegan a piece of the Bay State market, while taking away customers from its cross-town rival, Foxwoods.
It is part of a feeder casino strategy Mohegan has pursued, having also set up a racino in the relatively new Pennsylvania gambling market as well.
While Foxwoods and Twin River face the loss of hundreds of millions in revenue should Massachusetts roll the dice, Mohegan could actually make money on the deal, Barrow notes.
