The increasing saturation of casinos in the Northeast will likely hamper state gambling revenue, according to credit analysts.
New casinos are slated to open this year in Atlantic City, Upstate New York and Massachusetts along with an expanded gambing facility in Rhode Island. A planned expansion of gambling options in Pennsylvania will also place budget pressure on states that rely on gambling revenues, according to S&P Global Ratings analyst Timothy Little.
“S&P Global Ratings anticipates that states in New England and the Mid-Atlantic will likely experience negative revenue variances from casino gaming taxes in 2018 due to increasing market cannibalization,” said Little in report published Wednesday. “In our opinion, commercial casino gaming expansion in the region may provide short-term economic and budgetary gains, but is unlikely to improve state credit quality and may prove a long-term credit risk for states in the region.”
Moody’s Investors Service gaming analyst Keith Foley noted in a Monday report that two new casinos in Upstate New York – del Lago Resort and Casino in Waterloo and Rivers Casino Schenectady – have helped state revenue grow 30%. However, del Lago’s property revenue ramp-up is well below expectations, according to Foley, with $150 million now estimated for the first year of operations compared to the $250 million forecasted. Foley added that the two new casinos have also taken “a big chunk” of gambling revenue from its closest competitors, Finger Lakes Gaming and Vernon Downs.
“This trend, where newcomers are stealing share from incumbents, is consistent with what has been occurring throughout U.S. gaming markets, particularly in the Northeastern portion of the U.S.,” said Foley in his report. “We expect this to continue in eastern part of upstate New York, where another large casino, Resorts World Catskills, is scheduled to open this March.”
Atlantic City, where five casino have closed since 2014, is expected to regain two in 2018 including a re-opening of the Revel under new ownership four years after declaring bankruptcy. Hard Rock International is also planning a summer opening of a facility featuring 2,400 slots and table games at the former Trump Taj Mahal Casino Resort site.
Little said while the new Atlantic City casinos are positive for a distressed city that saw gambling revenues remitted to New Jersey drop 59% from 2006 to 2015, increased competition including a planned facility in nearby Philadelphia could threaten consumer demand. S&P rates Atlantic City general obligation bonds at CCC-plus.
“A fundamental credit concern about the lack of diversity in the city's tax base persists, augmented by ongoing regional commercial casino gaming expansion,” said Little. “The opening of a new casino in the next three years in Philadelphia will likely further erode demand for casino gaming in Atlantic City.”
Connecticut is also feeling the heat of planned new nearby gambling options with Springfield, Mass. scheduled to open a new MGM Casino this fall.
Little noted that to offset anticipated revenue losses from the new competition, the Connecticut state government allowed the Mashantucket Pequot and Mohegan tribal nations to operate a joint commercial casino off tribal land 16 miles from Springfield in East Windsor. That project, however, remains in flux after being caught up in litigation. The Connecticut legislature's nonpartisan Office of Fiscal Analysis indicated the state could see a $68.3 million revenue loss in the 2019 fiscal year if the Springfield casino opens on schedule, according to S&P.