Two Connecticut gaming tribes who have what might be called “a history” are tossing aside their rivalries because of the necessity of building a united front to protect their casinos from outside competition.
The Mashantucket Pequot Tribal Nation, which owns and operates the Foxwoods Casino and the Mohegan tribe, owners of the Mohegan Sun, aren’t just casino rivals. They have had bad blood for over nearly 400 years, since the days when the Pilgrims landed at Plymouth Rock.
This led Mohegan Chairman Kevin Brown, who served with the U.S. army in Iraq, to comment to Salon magazine, “I spent a good portion of my life in Iraq trying to unite the Sunni and Shia tribal leaders. Now I’m doing it at home.”
For nearly 20 years the tribes have operated rival casino less than seven miles from each other. Brown and his opposite number, Pequot Chairman Rodney Butler, have had many conversations over the months where they discussed ancient and recent history and the need to put that aside.
They realized that last fall when voters in nearby Massachusetts voted not to repeal the gaming expansion law of 2011.
“We had to start moving forward because it was game on,” said Brown. “Competition from Massachusetts became a definite reality.”
At the same time state legislators began agitating for action to respond to the threat of Bay State gaming because the state gets 25 percent of tribal gaming revenue. Because the tribal compacts give the tribes exclusive rights to offer gaming, their cooperation was essential.
Rep. Stephen Dargan told Salon, “We reached out to tribes and said, ‘Hey, you guys aren’t really helping the cause here. You guys need to reach out to the respective leadership of the four caucuses.’ ” In time they did.
Because of the perceived urgency of the Bay State threat, the bill, “An Act Concerning Gaming” has been fast-tracked. Last week the legislature’s Public Safety and Security Committee voted 15-8 for the Senate bill that would allow the two tribes to jointly operate three casinos. The bill withstood attempts to amend it, including one that would have prevented the state from assisting the tribes with a grant.
Senator Timothy Larson commented, “This is simply a logical step to allow the joint compact to move forward with the opportunity to preserve revenue.”
While permitting the three casinos, the bill also authorizes the Attorney General to negotiate operating agreements with the tribes. No casino could be located in a community without that community’s consent, although a referendum is not required.
The most feared casino from the perspective of the tribes is the $800 million MGM Springfield, which held a groundbreaking last week. Springfield is closer to the greater Hartford metropolitan area than are either tribal casino.
Not all lawmakers support adding more casinos in Connecticut. Rep. J.P. Sredzinski, declared, “The market for these three facilities is going to be the people who go to gamble just to gamble. We’re looking to get people’s money before they drive too far. And for me, that is really the reason I’m unable to support this today.”
Tribal Chairmen Butler and Brown issued a statement after the committee passed the bill. “Although it is early in the process, we are encouraged by today’s vote, and the bipartisan support of lawmakers. Working together, we have the opportunity to protect good-paying jobs that allow thousands of people to provide for their families, and the tourism and entertainment industry that has brought economic prosperity to southeastern Connecticut.”
Connecticut’s defensive measures underscore the generally shared opinion that the Northeast is approaching or has already arrived at gaming saturation.
Atlantic City and the demise of four of its casinos seems to be the warning tocsin for those who share that view. The decline was brought about the by Great Recession, and the weakest of the casinos did not recover when the recession receded.
The conclusions are not clear cut, according to Clyde W. Barrow, a gaming expert on the region, who was director of the Center for Policy Analysis at the University of Massachusetts-Dartmouth until last year.
“It’s a very difficult question,” Barrow testified at the legislative hearing last week. He said in his opinion that the region can absorb more players and that the state ought to be able to save a lot of its customer base. “It’s a really malleable thing that you can’t just pin down,” he said.
Barrow was recently hired by both tribes to study how much market share the tribes might lose to competition from the MGM Springfield.
He told lawmakers that the term “saturation” is largely misunderstood because it is affected by population of a region and income, which both grow. Other factors include how much a population is willing to spend on gaming.
“That number can vary widely depending on how close the people are to casinos, but even in states that have it, I’ve seen it vary from about 0.3 percent to as high as 1.45 percent, in Rhode Island, in particular,” he told the committee.
Moody’s Investor Service analyst and Senior Vice President Keith Foley believes saturation has already arrived in the region. “Basically what happens when all this new supply comes in New England, it’s flat. The market share just shifts,” He told Time. “I don’t think anybody would argue it’s not saturated.”
The Great Recession certainly took a huge bite out of the revenues of the Pequots and Mohegans and led to 3,000 casino workers laid off at each.
In addition to proposing building three smaller casinos, the tribes are also beefing up the offerings at their existing casinos. Foxwoods, for example, will this year open an 85-store Tanger Outlets Foxwoods mall. The Mohegans are bringing in 50 retailers and building a new 400-room hotel to add to their existing Sky Hotel.
This two pronged approach is designed to target two kinds of patrons, those who like to visit destinations and those who just want to gamble at the nearest, most convenient place they can find.
According to Brown, quoted by Time, “At the equilibrium point, we’re fighting for the same customer. We just want to be in the fight.”
Butler agrees, “Most of the population [in the Northeast] has access to convenient gaming on some level.”
According to Barrow, the “convenience” gambler doesn’t go for the food. “They don’t go there to watch shows. They don’t go there to stay overnight. They tend to come within a 35-to-40-minute radius. And they will visit both types of facilities, but their preference is, most of the time, to visit the closest one. They’re just looking for a slot machine. Period. … And that’s really, I think, what these satellite facilities are aimed at.”
MGM Resorts International Chairman and CEO Jim Murren reacted to the talk of fighting the MGM Springfield with something approaching scorn. At the conclusion of the casino’s groundbreaking he observed, “I’m a little bit bemused, I have to say. Connecticut has had a duopoly for decades and instead of attempting to improve the quality of entertainment on the existing resorts, there seems to be a desire to sprinkle slots around the state,” he said.
He added, “A legislative reaction … after having basically a duopoly for decades, to try to, you know, keep money in the state, I don’t think will succeed. I think the people of Massachusetts, at least, would vastly prefer to go to a brand-new, luxury resort than a box of slots on the Connecticut border.”
Brown soon after corrected the misperception that the casinos the two tribes want to build would be slots parlors.
“Please don’t say slot parlor,” he told the Hartford Courant. “That’s one of the myths we’re trying to take out … It’s a first-rate gaming facility.”
