Casinos still at mercy of economy in the new year

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Economic recovery at the state and national levels is all that stands between Connecticut's casinos and a prosperous 2013.

Sound familiar?

Each of the last five years has begun the same way, with analysts linking the gaming industry's outlook to such broad economic indicators as unemployment rates, housing markets and the price of gasoline.

This year is no different, executives at Mohegan Sun and Foxwoods Resort Casino say.

"In Connecticut, how goes the economy will have a lot to say about how Mohegan Sun and Foxwoods fare in 2013," Mitchell Etess, the Mohegan Tribal Gaming Authority's chief executive officer, said last week, as "fiscal cliff" talks ground to an impasse. "If people's taxes go up, that means they'll have less discretionary income, which could affect their gaming trips. The overall economy is going to say a lot about the industry."

Foxwoods CEO Scott Butera agreed, acknowledging that much hinges on the outcome of the negotiations in Washington.

"If they can get something done, I'm optimistic we'll see growth. Not gangbusters growth but positive growth," he said. "We've seen housing and unemployment improving. … Anything that involves discretionary spending is going to be affected, and gaming is one of the ultimate discretionary spends."

Surely, the last few years have disproved the adage that gaming is "recession-proof."

"It was an ill-conceived theory," Butera said. "Some people thought certain businesses would survive in a bad economy because they provided an escape. But the bottom line is that when people have less money, they don't spend it on entertainment. Even if some are willing to spend, they're going to run out of money more quickly.

"We know that what's happening in the economy has a tremendous effect on us."

To a lesser extent, competition has been and will continue to be a factor, too.

In recent years, economic conditions have actually benefited so-called "convenience" destinations like slots-only facilities in Rhode Island and New York, which siphon business from the Connecticut casinos.

While additional competition looms in Massachusetts, which has authorized three resort casinos and a slots parlor, and New York, where lawmakers could approve table games, it may still be years away. Butera said Foxwoods is operating on the assumption that other than this year's introduction of table games at Twin River casino in Lincoln, R.I., no additional gaming will open in the local market before 2016.

In a December report on gaming's outlook, Fitch Ratings notes that an expanded-gambling measure in New York could be put before voters in a referendum as soon as November 2013. If approved, table games could be installed at Resorts World Casino in New York City and Empire City Casino in Yonkers as early as 2014, the report says.

Twin River's new games - blackjack, craps, roulette and the like - are expected to be in place this summer.

"We know what the outlook is for new supply; no surprises there," Butera said.

Targeting demand is another matter, one requiring the Connecticut casinos to continually diversify their properties' offerings while containing costs.

After laying off some 300 employees and closing an authority-owned restaurant in the fall, Mohegan Sun opened Hash House A Go Go, a new restaurant operated by a third-party owner. In time for New Year's Eve, the casino opened the Lansdowne Irish Pub & Music Hall and Mist, a nightclub. Another new restaurant is expected in the space occupied by Big Bubba's BBQ, which closed several weeks ago.

In the coming year, Mohegan Sun will take a new approach to its entertainment bookings, according to Etess, who said the Wolf Den will host fewer free acts while Mohegan Sun Arena will be reconfigured at times to accommodate acts suited to smaller venues.

The Mohegan authority, which also operates Mohegan Sun at Pocono Downs in Wilkes-Barre, Pa., will continue to focus on "outside endeavors" in the new year.

"Obviously, Massachusetts will be in the forefront," Etess said.

Within the next two weeks, the authority is expected to apply for a license that would enable it to develop a resort casino in Palmer. The authority would have to compete with perhaps two or more other casino operators seeking the one license the Massachusetts Gaming Commission will award for the Bay State's four westernmost counties. The authority must also pay a non-refundable $400,000 application fee.

Two casino giants that have proposed projects for Springfield, Mass. - MGM Resorts International and Penn National Gaming - have already filed their applications and fees.

"We continue to believe we are absolutely the best choice," said Etess, who doesn't expect the commission to grant a license until 2014.

The authority also expects this year to "relaunch" Resorts Casino Hotel, the Atlantic City, N.J., property it manages through its Mohegan Gaming Advisors and in which it has a minority ownership stake. The casino is scheduled to open a Margaritaville-themed complex, including a restaurant, retail shops and bars, around Memorial Day.

At its Pocono Downs casino, the authority expects by year's end to open a new hotel that's under construction.

A major aspect of Foxwoods' diversification efforts - a proposed shopping mall linking Foxwoods Resort Casino and MGM Grand at Foxwoods — is now set to move forward early this year, though the mall's roughly 75 stores aren't expected to open until the following year.

Groundbreaking for the 312,000-square-foot development should take place by the end of February, according to Butera.

Of more immediate impact, Butera said, is completion of the Mashantucket Pequot Tribe's restructuring of a $2.2 billion debt load. While the tribe, which owns Foxwoods, announced months ago that sufficient numbers of bondholders had signed on to a restructuring plan, it is still working to close the deal.

"We have support from a substantial number of noteholders, but you need to get closure with 99 percent-plus," Butera said. "We have a couple of steps to go to get that done."

Finalizing the agreement, he said, will put the tribe and Foxwoods on "solid footing" as they proceed with a master plan for upgrading the casino's food-and-beverage and retail amenities.


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