Although the MGM Springfield has half the number of slot machines of either of the Indian casinos in Connecticut, its impact is expected to hit them like a swinging bag of bricks.
The MGM Springfield has drawn a target squarely on Foxwoods Resort Casino and the Mohegan Sun, which operated for 20 years without much competition, except from each other.
The erstwhile rivals joined forces last year to form MMCT Venture LLC and persuaded lawmakers to authorize a third, satellite casino in East Windsor that they will run jointly. The project creating 4,300 jobs, of which 650 will be hired from the Hartford area.
The prosperity of the gaming tribes is a big deal for the state’s lawmakers, since they pay 25 percent of slots revenues to the state, which was about $274 million last year. That number has been going down for years from its peak of $430 million more than ten years ago. It’s expected that it will take a further hit with the opening of the MGM Springfield. The Lion’s bite could take $50 million or more, state officials fear.
The market is worth fight for. The region’s gaming industry is worth an estimated $2.7 billion.
As Michael Pollock of Spectrum Gaming, a Pennsylvania-based consultant on the economics, regulation and policy of gaming, puts it “MGM, by definition, is a formidable brand and a formidable operator and competitor.” MGM has grown in recent years to become an even bigger national player, which it had been just in Las Vegas. “And they’ve got a very robust, attractive loyalty program that they will leverage to the hilt, like they should, because that is an enormous asset. It’s a powerful opener.”
That doesn’t mean that the Indian casinos will be pushovers. Pollock told the Hartford Courant, “The existing properties are not without their arsenal. Both Foxwoods and Mohegan Sun also have made significant capital investments in their properties. They have their own databases covering a huge swath of New England. They are going to be leveraging that.”
The Mohegan Sun just announced that members of its Momentum loyalty program will be able to earn discounts and other goodies at the Baha Mar Casino and Hotel resort in the Bahamas, a $4.2 billion integrated casino resort near Nassau. The resort is the home to a Grand Hyatt, SLS and Rosewood hotel. It is the largest casino in the Caribbean,
The program was recently enlarged to include Massachusetts’ Six Flags New England amusement park and the Naismith Memorial Basketball Hall of Fame. But this is the first time it was extended to a resort in the Caribbean.
Mohegan Sun President and General Manager Ray Pineault declared “Mohegan Sun’s Momentum program gets an impressive boost with this Baha Mar addition. Baha Mar is really an amazing place to visit-right on the shores of the Bahamas. We’re thrilled to be partnering with them and are just as excited about the opportunities our Momentum members can now take advantage of!”
The MGM Springfield says it expects to attract six million visitors a year. Most will probably come from a 75-mile radium, with a third coming from Connecticut.
The New England gaming market is much different than when the Indian casinos first opened in the 1990s. At first there were just two casinos, now there are seven, eight when the MGM Springfield is counted, and nine when the Encore Boston Harbor opens next year.
Kevin Brown, chairman of the Mohegan tribe, says they have been preparing for this day for years. He told the Hartford Courant, “The center line for this whole conversation is that competition is going to be intense, right? We didn’t wake up today to this. We have been adjusting the rheostat and doing a multitude of other things to make us remain competitive.”
The tribes have warned that the MGM Springfield could cost the state 9,000 jobs and up to $100 million in taxes.
Two years ago the Mohegan Sun opened its $130 million Earth Tower with 400 rooms. A few months ago it opened the $80 million Earth Expo & Convention Center. It also plans to create a hotel within a hotel for VIP guests that will open in a few months.
Rodney Butler, chairman of the Mashantucket Pequot Tribal Nation, who was also interviewed by the Courant, said Foxwoods recently opened the Tanger outlet mall and has developed outdoor entertainment such as the “Thrill Tower” and HighFlyer ZipLine.
Butler added that Foxwoods is also beefing up its loyalty program. “The key to a successful rewards program is to have compelling offers that your patrons are going to be attracted to, are going to enjoy, and are going to use more frequently,” he said.
One area that the tribes had hoped to have ready to help blunt the opening of the MGM Springfield is the “satellite” casino in East Windsor. Authorized, with a 14 acre site ready to go, and the former Showcase cinema now razed, it has not broken ground because it lacks a key approval from the Department of the Interior. It does have a general contractor waiting to and even a name and logo soon to be announced.
MMCT Venture has not yet applied for a building permit, which would require the city to hire a consultant to review the plans. Once all approvals are granted and construction begins, the tribes say the earlier the casino could open is 2020.
The tribes blame MGM for the Department of the Interior roadblock, and there is plenty of evidence to support the supposition it used its influence to prevent the Department from signing off on an amendment to one of the tribe’s state tribal gaming compacts that the legislation authorizing the satellite casino requires. It has published permission for the Mohegan tribe in the Federal Register but not for the Pequots. The remaining permission is the subject of a federal lawsuit against the Department that has not yet been resolved.
The Department’s lack of action is also the subject of a federal Inspector General’s investigation that was launched at the request of the state’s congressional delegation.
When the tribes first started work on the casino they hoped to have it open before the MGM casino was ready.
However, MGM created every legal, rhetorical and legislative pothole in that road that it could. Such as proposing a $700 million commercial casino in Bridgeport, which peeled off support for the tribes from that city’s extensive legislative delegation.
The $300 million East Windsor casino was never intended to be anything more than a “convenience” casino that would blunt some of the flow of state players from crossing the state line and driving 14 miles into Massachusetts.
As Butler put it, “There is a certain radius of the population that is going to stay within that radius because it’s just easier for them to go and gamble very quickly and they are not going because they have great entertainment or great restaurants.”
Brown added, “Ideally, we wished a lot of things could have gone differently, and that we could have been in the ground and close to opening right now. But, at the end of the day, that customer who gambles at the closest casino is still going to ultimately make a decision based on convenience.”
Despite their cooperation, the tribes continue to compete for market share within their sphere. For several years that was split down the middle, but in the last few years the Mohegan Sun’s share rose to 56 percent, which translates to $1.1 billion in revenue and a profit margin of 30 percent. This compares to $844 million for Foxwoods, which had a profit margin of 17 percent.
The Mohegans also has more debt than its rival, which it used to diversify into investments such as building a casino for the Cowlitz tribe in Washington.
