Rhode Island has two casinos, the Twin River and Newport Grand slots parlors. Soon both will have the same owners.
Twin River Casino, in the form of the Twin River Management Group, has entered into an agreement to purchase its rival, where revenues are in a steady decline.
Terms of the purchase are not available yet, including the price, although the purchase is due to close in June. The sale is subject to approval by the Rhode Island Department of Business Regulation and the Division of Lotteries.
Joe Paolino, former mayor of Providence, recently tried to persuade voters to allow table games at the Newport Grand, which he said he would buy if they were legalized. That didn’t happen, so Twin River to made the purchase.
Twin River says it can make its erstwhile rival profitable without the tables. Twin River Chairman John E. Taylor last week promised not to make another attempt to legalize tables for at least a year.
“It’s pretty clear that the people of Newport do not want an expansion of gaming there. Until and unless—and maybe never—they express support for that, we are not going to pursue that,” Taylor told NBC 10 last week.
Regarding the purchase, he said, “As a company headquartered in Rhode Island, we understand how important the future of Newport Grand is to the State and when the acquisition opportunity presented itself, believed that we might be best qualified to preserve and possibly enhance that revenue and protect valuable jobs.”
He predicted that his company’s “unique understanding” of the market had enabled it to develop a formula for successfully competing there.
“Additionally, there are significant synergies that exist between Newport Grand and Twin River with respect to cost efficiencies, technical integrations and importantly, marketing approach and cooperative dollars that would allow for maximization of future revenues,” Taylor said.
Twin Riverrecently announced its intention to build a 200-room hotel next to the slots parlor. That will require the permission of the city of Lincoln and the state’s General Assembly. The moves, said Taylor, are intended to blunt the effects of new casino resorts in Massachusetts.
Recently Taylor said, “It’s critical for the state and the town that Twin River remain competitive and that revenue and jobs are preserved. We see the addition of a small hotel as a valuable amenity and one we would very much like to further explore.’’
Taylor added, “The first is that there is no denying that the New England gaming landscape has changed dramatically in the last two years. In a few short months we will begin to compete against a Massachusetts ‘racino’ just 12 miles from our front door. Within another 18 months, we will be competing against destination casinos owned by premier operator Steve Wynn just outside of Boston and MGM in Springfield.”
Patrons consistently ask for dining and the ability to stay all night.
The legislature may be open to the change. House Speaker Nicholas Mattiello’s office recently commented, “Speaker Mattiello is open to any proposal that will help protect our state’s third-largest revenue source, while considering the hospitality industry at large.”
Operating a hotel is a new concept for the slots parlor, which a year ago said it didn’t want to advance beyond being a “convenience casino.”
State law, which specifically forbids the former greyhound track from building a hotel, would have to be changed to accommodate the request.
Rhode Island Governor Lincoln Chafee said recently that whichever developer wins the Southeastern license will impact his state’s ability to balance its budget, and whether the Newport Grand slots parlor survives.
Chafee estimates that the state will lose $100 million in casino revenue. The two slots parlors in Rhode Island are the third largest source of revenue for state government.
For Liz Taber, president of Citizens Concerned About Casino Gambling, that dependence needs to end.
Last week she said, “It’s predatory on the people you represent. You’ve got to get the revenues out of them if it’s you’re dependency. So if the state was giving you frequent flyer miles because you drank a fifth of vodka every week. My problem is the state’s pushing it, that they’re that incented for people to gamble.”
One ace in the hole for Rhode Island casinos in their battle to survive the feared onslaught from Massachusetts may be the fact that smoking is not illegal in Rhode Island, or in neighboring Connecticut, but will be in the Bay State casinos.
The truth of this prediction will be seen when the first casino, a slots parlor, opens in June in Plainville. The Plainridge Park racino is located a dozen miles from the Twin River Casino in Lincoln.
According to State Lottery Director Gerald Aubin, who oversees Rhode Island’s two casinos, “From a revenue protection perspective, smoking at the facilities has allowed the state of Rhode Island to stay on equal competitive footing with Foxwoods and Mohegan Sun.”
This causes some Rhode Island legislators to choke up in dismay. State Senator V. Susan Sosnowski recently introduced a bill to ban smoking at both casinos. She says she was inspired to do it by a Twin River employee who said he was worried about the “unhealthy atmosphere.”
The senator commented, “I’m sure people are going to say it’s going to be a big loss in revenue. I can remember when bills started coming in for no smoking in the workplace, restaurant and bar owners said the same thing. Then they started seeing more clientele coming in.”
Twin River notes that employees can apply to work in either the smoking section or the non-smoking section of the casino.
Smoking bans have been introduced for the state’s casinos on a fairly regular basis for about a decade. They have rarely made it beyond the committee level. Especially once estimates of how much the state will lose in revenues have been released to legislators.
One study showed that when Delaware introduced a smoking ban in 2002 that it saw a 12.4 percent decline in revenue at its three racinos. Similar results have been recorded for other states, although the results also show that eventually the customers return—or at least some of them do.
Some studies also show a correlation between cigarette smoking and problem gambling.
The state took in an estimated $314.9 million from the Twin River and Newport Grand last year.
Meanwhile, the two gaming tribes in Connecticut, Foxwoods, Mashantucket Pequot tribe and the Mohegans, met last week with the state to discuss building a third casino located on the state borders.
State Rep. Steve Dargan, the co-chairman of the General Assembly’s Public Safety Committee, is considering submitting a bill that would allow the tribes to operate casinos off their reservations in the state.
“We understand that, one, there’s competition from other states and two, the tribes have been good corporate citizens to the state of Connecticut,” Dargan told the AP. The two tribes have the exclusive rights to offer casino gaming in the state.
One proposal calls for a smaller casino along Interstate 91 north of Hartford that might have 1,800 slot machines, some table games and some restaurants. The facility would have very limited amenities compared to Mohegan Sun or Foxwoods, but enough to entice visitors who might otherwise travel north to Springfield, Massachusetts, where MGM Resorts is planning to open an $800 million casino.
Mohegan President Bobby Soper said it only makes sense. “Clearly there’s going to be some impact when Massachusetts opens up. It makes sense for Connecticut to have a facility that will recapture lost business so we can maintain jobs, and tax revenues as well.”
The question of how well the Mohegans will manage competition from the Bay State is tied up with the possibility that the Mohegan Sun, as well as its rival Foxwoods Resort Casinos, may have to go through another restructuring.
Fitch Ratings suggested this last week. In a report Fitch said that the two large casinos, “did not cut enough debt and recovery did not materialize.”
Foxwoods is in default on some of its debts two years after restructuring, and Fitch predicts much the same for the Mohegans. Restructurings or even debt exchanges are about the only means available to creditors of tribal casinos because U.S. bankruptcy laws do not have jurisdiction over tribes, which are sovereign nations.
The Fitch report predicts that Foxwoods and the Mohegan Sun collectively will lose $136 million in earnings once the new Massachusetts casinos open. Competition from recently built New York casinos will only add to the problem.
Last week, the Mohegan Sun Casino announced plans for a second hotel that will cost $120 million.
Tribal Chairman Kevin “Red Eagle” Brown said the tribe turns away more than 500,000 room nights a year. He said demand for gambling remains strong in New England and Mohegan will continue to compete by adding more rooms and non-gaming amenities like meetings and convention space, retail and entertainment.
Governor Dannel Malloy said he’d keep an open mind about additional casinos on the state borders.
“I’ll listen, I’ll watch, I’ll hear what’s going on and what the proposal looks like and we’ll make a decision at some point in the future,” he said.
The proposal to establish border casinos comes from a report that concluded people neighboring Connecticut are giving up on the state’s two casinos; Foxwoods and Mohegan Sun. Compared to a decade ago, Massachusetts residents spend roughly $400 million less on the casinos per year, while Rhode Island residents aren’t too far behind at $200 million less.
It’s not that people aren’t going to casinos, but rather they are spending their money elsewhere. The customers are going to newer, fresher properties like the slot parlors in metro New York, remodeled casinos in Rhode Island, and even two new casinos in Maine.
Some are comparing the decline in Connecticut to what has recently been seen in Atlantic City. Atlantic City, through the past decade, has lost about $2.5 billion of its gaming business, while Connecticut has seen annual revenue of what was once $3.2 billion slide $1.2 billion.
Over the decade, the casinos have removed some 4,000 slot machines, according to state numbers. Although this has not led to any casino closures, it is almost as if one was closed, when looking at the numbers. “If you recognize the fact that Foxwoods has four gaming floors and Mohegan has three, Connecticut has in effect closed the equivalent of two Atlantic City casinos already—two big ones,” Clyde Barrow, the report’s author, and a partner at Pyramid Associates, a gaming police research firm said.
The report also noted since 2006, revenue and employment at the two casinos has fallen nearly 40 percent. The casinos’ slot revenue peaked in 2007, which saw the state receive some $430 million, a number expected to plummet to $191 million by 2018 after MGM Springfield and the three New York casinos come to play.
