New Casinos Cannibalize Business of Existing Ones in NY

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New Casinos Cannibalize Business of Existing Ones in NY

Moody’s Investors Services has just released a report examining the way in which the newest casinos opened up in New York over the past 13 months have been affecting the business of those already established casinos in the state. It doesn’t take much to figure out what is taking place judging by the study’s title, either, which is called “Cannibalization of gaming revenue continues in the Northeast”.

Nevertheless, overall gambling revenues in New York have soared by an impressive 30% since the opening of the Del Lago resort in Seneca County, the Rivers Casino in Schenectady, and the Tioga Downs Casino in Nichols, with the first two mostly accounting for the industry’s impressive growth. Overall, this has amounted to an increase in revenues from around $600 million to over $750 million since their opening, although conversely Upstate’s existing casinos have reported a revenue decline over the same period of time.

New York Casino Market

New York’s newest casinos opened up within 12 months of each other, with a fourth casino, the $1 billion Resorts World Catskills situated 90 miles north of New York city sets to open its doors for business on February 8th. There are also another eight video lottery casinos spread out throughout the state that have been in operation for more than a decade, in addition to numerous tribal casinos.

Lower than Forecast Revenues

Revenues generated by New York’s newest casinos have come in significantly below expectations, despite providing a 30% lift to the market over their first year of operation. According to Moody’s they have produced a collective $200 million less than initial optimistic predictions suggested, while revenues from more established casinos have been flat on average over the year. Commenting upon the situation, the Moody’s report stated:

“This flat growth speaks to the broader growth challenges facing even new entrants getting off to a strong start in the region as they have not been able to grow the market enough to avoid a substantial amount of cannibalization as well as meet their ramp-up targets.”

Cannibalization

According to Moody’s, the Del Lago and Rivers casinos’ opening have had a dramatic impact on the bottom lines of two racinos located in upstate New York, namely Finger Lakes Gaming in Farmington and Vernon Downs in Oneida County. As the study subsequently points out, Finger Lakes Gaming has seen its gross gaming revenue plummet by 15% from $129 million to $100 million over a 12 month period since del Lago opened, while Vernon Downs has seen its gross gaming revenue tumble by 14% from $37 million to $32 million over the same length of time. Similarly, the Saratoga Casino Hotel located near to Rivers Casino & Resort reported a massive 14% revenue decline, representing a major blow for the venue.

Resorts World Catskills

Looking ahead to the opening of the Resorts World within a couple of weeks, the venue is being touted as a way of revitalizing tourism in the Catskill Mountain, which tailed off in the mid 20th century. The huge integrated casino is by far the largest of the state’s four approved new gambling venues, and will boast 2,150 slots and 150 table games when opened, with its non-gambling attractions including a hotel, conference facilities, nightclubs, restaurants, as well as a golf course and indoor water park.

The casino is majority owned by Malaysian casino operator Genting, and will help further stimulate the local economy by adding another 2,000 jobs to the area. Commenting upon the venue’s potential, Charles Degliomini, executive VP, said that the huge development will help “put the Catskills back on the map” as a top rate tourist destination.

Nevertheless, Moody’s report has tempered the optimism somewhat by stating that Resorts World will face similar challenges to del Lago and Rivers in making its businesses successful, including not only growing the gaming market, but also attracting customers from already existing rivals. That said, the report stated that Resorts World stands to benefit more from its location than the other two casinos mentioned, explaining:

“However, unlike del Lago and Rivers, Resorts World has the downstate portion of New York as one of its primary market areas because it will be located within a reasonable driving distance from the densely populated New York metro area. That said, like del Lago, we expect Resorts World will be entering a very tough gaming market.”

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