As the number of casinos continues to rise across the mid-Atlantic and New England regions, the industry boom could result in increased risk for those states, according to a report released Monday by S&P Global Ratings.
"Casino gaming creates short-term budgetary and economic gains, at the expense of long-term risk," S&P analyst Timothy Little wrote in the report. “Continued casino gaming expansion, coupled with weak demographic trends, will only exacerbate the narrowing competitive advantage of new properties being developed in the region.”
The region is projected to see only moderate economic growth and weak demographic trends compared to the rest of the country, according to the report.
Most growth has been seen in densely populated metropolitan areas, such as New York City, Boston, Philadelphia and Washington, D.C., where these cities' economies have expanded since the recession and provide over 55% of the region’s gross domestic product.
This has led to the development of casinos in the region in close proximity to cities. Since 2007, two racinos (a combined racetrack and casino) have opened in the New York metropolitan area; two gaming venues have opened in the Philadelphia metro area; and three in D.C. One is slated to open in Boston in 2019.
S&P believes the changes in market share could result in reduced revenue.
Until 1992, Atlantic City was the only destination for gamblers in the region. This was followed by the openings in Connecticut of Foxwoods Resort and Casino and Mohegan Sun. Atlantic City began to see declining revenue figures thereafter.
During the Great Recession, Atlantic City saw its revenues drop to $3.6 billion in 2010 from $5.2 billion in 2007. Following the recession, revenues continued to decline 4.5% or more annually until 2016 where they stayed stagnant at $2.6 billion. Revenue streams from gambling services faced a similar roughly 50% decrease in the same time period, S&P said.
In Massachusetts, where casino gaming was expanded in 2011 to provide three casinos in different areas of the state, the state receives 25% of gross gaming revenues and 40% of gross gaming revenue from a separate slots parlor, S&P said.
Rhode Island’s most recent five-year projection, after Tiverton residents approved construction of a new facility, forecasts a $2.6 million revenue loss in fiscal 2017 from increased gaming competition in the region.
S&P added that aging populations have also have an impact on the casino industry.
Millennials, those born between 1980 and 2000, have surpassed baby boomers as the largest demographic in America. Therefore millennial spending patterns and views are shaping the consumer space in the economy.
“It has become well accepted that traditional gambling is not as attractive to young people as it was to their parents or grandparents,” Little said.
S&P said that the proportion of residents aged 65 and older exceeds 15% in many states of the mid-Atlantic and New England, well above the national average of 13.7%.
“We believe this opens states that depend on this demographic for tax revenue to long-term risk,” the report said.