Inside Asian Gaming

INSIDE ASIAN GAMING | May 2008 36 Market Outlook F or more than a decade, the discussion of casino gaming in the northeastern United States started and ended with two states: New Jersey and Connecticut. New Jersey is home to Atlantic City, long the pre-eminent gaming centre for the region, and is currently home to 11 resort-style casinos that traditionally cater to customers from the New York City and Philadelphia metro areas. Casino gaming in Connecticut took hold during the 1990s, when the Mashantucket Pequot and Mohegan tribes successfully negotiated with the state to install Las Vegas- style slots at gaming facilities—Foxwoods Resort Casino andMohegan Sun,respectively. These properties have grown to become two of the largest and most successful casino resorts in the world, pulling in a constant stream of people from the population-rich NewYork City to Boston corridor. Over the years, the gaming primacy of these two markets has been encroached upon in a variety of ways. The Connecticut casinos have had to compete with tribes opening gaming facilities in upstate New York, and with racetracks and parimutuel outlets in New York and Rhode Island winning the rights to house slot-like gaming machines (video lottery terminals, or VLTs). Atlantic City has been tested by the spread of gaming machines to parimutuel operations in West Virginia and Delaware. For the most part, both Atlantic City and the Connecticut tribal casinos have managed to shrug off these contenders and continue to dominate casino gaming in the region. Now, however, these markets are facing their greatest challenges to date.For Atlantic City, the threat comes in the form of casino and racino—combined race track and casino—legalization in Pennsylvania. The Keystone state currently has seven gaming facilities up-and-operating, with the goal of establishing seven more—including slot parlors in the cities of Philadelphia and Pittsburgh—in the next few years. The existing Pennsylvania gaming operations appear to have already taken a bite out of Eastbound Traffic Gaming expansion in Massachusetts and other eastern states puts pressure on the region’s established casino markets the Atlantic City marketplace, with casinos reporting US$4.9 billion in gaming revenue during 2007, a drop of 5.7% from the US$5.2 billion the properties took in 2006, the first decline in revenue since casinos opened in 1978. Slot machine revenues for Atlantic City dipped by 8.9% to US$3.46 billion during this time period as well. “What happened to the industry in 2007 was clearly the result of new competition and a partial ban on smoking in Atlantic City’s casinos,” said New Jersey Gaming Casino Control Commission Chairman Linda Kassekert in a prepared statement. While Atlantic City casinos contends with Pennsylvania,theMashantucket Pequot and Mohegan gaming properties may have to come to grips with casino resorts in Massachusetts, where Gov. Deval Patrick has proposed establishing three such facilities in yet-to-be-determined locations throughout the state,already accounting for tax revenues raised from the proposed project in this year’s state budget. The Massachusetts- based Mashpee Wampanoag tribe is also pushing for a massive casino resort in the community of Middleboro. Potential competition from Massachu- setts comes at a bad time for the Connecti- cut casinos, which saw state slot revenue decline 7% last October and 3% last Novem- ber, a result of high gasoline prices and an unsteady regional economy, reported the New York Times . The prospect of Massachu- setts casinos has Connecticut officials un- derstandably nervous. The two Connecticut casinos posted about US$2.5 billion in rev- enue last year, and it’s estimated that about 30% comes from Massachusetts. “What we’re seeing is, with consumer confidence down and people feeling not so good about their own net worth, people are spending less. Declines are somewhat unprecedented for us,” Mitchell Etess, chief executive of the Mohegan Tribal Gaming Authority, told the Times . For both Connecticut and Atlantic City, continued gaming expansion in New York looms as a potential hindrance as well. Gov. Elliot Spitzer has thrown his support behind the establishment of tribal gaming facilities in the Catskills, an area less than a Foxwoods Resort Casino