Jeff Gural doesn’t just own Tioga Downs Casino Resort. He’s the chief executive greeter. His uniform: blue jeans, orange Crocs and an open-neck, collared dress shirt with rolled-up sleeves.
Gural, 75, a blunt, affable Nassau County native with an edge sharpened from five decades in high-stakes New York real estate development, is a fixture at his resort-casino in Nichols, midway between Elmira and Binghamton.
He and his lenders recently plowed $160 million into converting the property from a racino to a true “destination resort” 30 miles south of the Finger Lakes.
Now, he asks visitors what would keep them coming back for harness racing, eight eateries and bars, 32 poker tables, 950 slot machines, a 161-room hotel, golf and other attractions. Gural wonders how Tioga can boost gaming revenue, which recently fell 25 percent short of the casino’s $100 million year-one projection.
Come Feb. 8, Empire Resorts’ executives will face a similarly daunting competitive challenge as they open Resorts World Catskills in a crowded, cutthroat Northeast gaming market.
With 2,157 slot machines and 150 table games on a 100,000-square-foot gaming floor, the Town of Thompson property will be New York’s 25th commercial or Indian gaming licensee. Resorts World Catskills, which will be open 24 hours a day, 365 days a year, joins a lineup of venues featuring horse racing, casino gaming, video lottery terminals and off-track betting.
It will be New York’s 10th casino, including six Indian locations. Shortly after Resorts World Catskills debuts, the Oneida Nation will open the 11th, Point Place, in Madison County near Syracuse.
Twenty-five years ago, scant gambling competition existed in the Northeast, until the Oneida opened Turning Stone in Verona five years after the 1988 Indian Gaming Regulatory Act allowed federally recognized tribes to open gaming venues.
Today, the list of luxurious casino-resorts and gaming options continues to grow throughout the Northeast, as every state except Vermont now has gambling options.
Pennsylvania alone has 12 casinos. Two new casinos are planned in Atlantic City, N.J., even after market saturation led five of the city’s casinos to close from 2014 to 2016. And several new and expanded casino-resorts are planned over the next two years, including the bar-raising $2.4 billion Wynn Boston Harbor due next year.
“There’s no question the market is saturated,” said Moody’s analyst Keith Foley of casinos in upstate New York. “Market saturation is like a game of musical chairs. At some point, there will be no place left for more gaming.”
Statewide, New York falls far below the saturation levels for areas of the country considered full, such as the Tunica-Lula area of Mississippi and the St. Louis market, according to statistical modeling that Barrow performed for the Times Herald-Record.
Barrow’s analysis also found that New York officials awarding gaming licenses in 2015 and 2016 misplaced the first four non-Indian casinos in cash-strapped, customer-short upstate areas with limited demand and spending power when they could have allowed one or two easily profitable projects in or near New York City.
“What we’re doing isn’t easy,” said Ryan Eller, president and CEO of Empire Resorts, which is building Resorts World Catskills. “If you’re closer (to New York City), you can hit that same revenue number with less investment and less risk. This isn’t a layup. It’s a heck of a lot of investment and risk.”
Resorts World Catskills’ operators hope to capture gamers of all ages with gaming and amenities they say are on par with Las Vegas and Macau.
The project features an 18-story, 332-suite luxury hotel; a 2,000-seat event center for fights, conferences and concerts; and more than 10 bars and restaurants like an Italian steakhouse by celebrity chef Scott Conant.
Subsequent plans include a mid-market boutique hotel, along with 15,000 square feet of additional retail, food and beverage space, due in the fourth quarter of this year.
Nearby, the $150 million-plus Kartrite indoor, family water park and hotel is being developed by Pennsylvania’s Camelback Resort co-owners Ken Ellis and Arthur Berry III. It’s due by spring 2019. And golfers will tee off at Resorts World Catskills’ revamped golf course by mid-2019.
Odds of success
Resorts World Catskills’ leaders say their “comprehensive integrated resort” model will succeed because of the property’s quality and proximity within two hours of New York City. But given the glut of upstate gaming, the casino’s gross gaming revenues will be the real gauge of its success.
To be healthy in year one, the casino must earn a daily average of at least $228 to $246 for each of its 2,157 slot machines and a minimum of $1,517 to $1,770 per table game, according to the Record’s calculations based on the project’s state license application data and consultations with gaming industry experts.
In year three, after full build out, Resorts World Catskills expects its gross gaming revenues to grow to $301.6 million – meaning average daily earnings of $249 to $268 per slot machine and $1,652 to $1,928 per table game, based on the casino’s current number of slot machines and table games.
To put those totals in perspective, the giant northeast Connecticut casino Mohegan Sun averaged $411 per slot machine each day in fiscal year 2006-07, when it had little competition, according to data collected by Connecticut.
Around the same time, when Atlantic City’s casinos were still dominant, most averaged daily per table earnings between $2,200 and $3,000, Barrow said.
New York’s three new casinos have fallen far short of those standards, as well as their own projections. Through the end of December, Tioga Downs averaged just $170 per machine per day, according to the New York State Gaming Commission. Del Lago Resort and Casino, in Waterloo between Rochester and Syracuse, earned $150, and Schenectady’s Rivers Casino Resort took in $209.
Table-game revenue was even worse for Tioga Downs and Del Lago. Between April and December 2017, Tioga Downs averaged $873 per table game daily, del Lago, $1,346 and Rivers, $2,041.
Signs of market cannibalization are appearing, too, according to a new casino saturation report by Moody’s, which predicted “Resorts World will be entering a very tough gaming market” in upstate New York.
Although Del Lago and Rivers have expanded the overall gaming revenue market, they’ve also taken big chunks of revenue from nearby competitors like Finger Lakes Gaming and Vernon Downs, Moody’s found. Barrow’s analysis also showed competing upstate casinos’ gaming revenues have been cannibalized.
“It’s a good thing that we didn’t have the right projections, because probably all three of the casinos wouldn’t have been built if we had the accurate information,” Gural said. “I think (the consultants) were using formulas that didn’t fully take into account the saturation factor.”
Moody’s Foley recently downgraded debt for Del Lago to a rating of Caa2 or “very weak creditworthiness,” with a “negative” outlook for future ratings. It is on track to earn $150 million in gross gaming revenue instead of the $250 million Moody’s expected.
Foley and the other experts interviewed for this article aren’t yet questioning if New York’s new casinos will survive, but they say it remains to be seen if they will gross enough gaming revenues to thrive.
“From what states is (Resorts World Catskills) going to be taking people from?” asked Father Richard McGowan, a Boston College management professor specializing in gaming. “Let’s face it, no one will be coming from New Jersey or New England to go there. … Good luck.”
Politics over profits
Resorts World Catskills’ leaders will rely on the New York City metropolitan area to supply most of its customer base. They’re also betting the casino will attract “whales” or big-time gamblers, particularly from the Far East, via its upmarket amenities.
In line with industry standards, Resorts World Catskills expects to give away seven in 10 luxury hotel rooms to high rollers. The casino also is targeting Asian gamers in general with a gaming area designed for them.
If Resorts World Catskills underperforms, it’ll be because of politics, gaming industry experts said. Gov. Andrew Cuomo sold a 2013 referendum to amend New York’s Constitution to permit more gaming as a way to bring jobs and investment to economically disadvantaged upstate areas.
“These (new casinos) have been extremely successful from an economic development standpoint, creating all of the jobs promised,” said Gural, who added that he’s not ungrateful for his Tioga Downs license. “The real losers are the owners of the casinos who are not making the profit” they anticipated.
Kevin Law, who chaired the state board that selected the upstate casino sites, was not available for an interview.
“New York went into this regional resort-casino market long after that trend had been exhausted in this country,” Barrow said. “Globally, the trend is big mega-casinos in major cities. They should have just put a big one in New York City to be better positioned to compete against other forms of entertainment and to attract customers who don’t want drive 90 miles.”
Building casinos in urban centers helps entice gamers of all ages, unlike the upstate New York market, where casinos are cannibalizing each other’s older customers, said S&P Global Ratings analyst Timothy Little.
“Millennials tend to move toward larger population and urban centers, away from some of the more rural parts of the state where New York’s casinos are,” said Little, who co-authored a recent report on Northeast casino saturation. “It’s unclear to what extent these (New York gaming) facilities will draw consumers living in other states and abroad.”
Sullivan County’s soon-to-open casino, located on 1,700 acres of the former Concord Resort property, is $600 million less expensive and twice as far from New York City as a failed 2014 Tuxedo bid would have been.
Like Resorts World Catskills, the Tuxedo application came from Malaysian-Chinese casino magnate K.T. Lim. He also financially rescued Resorts World Catskills’ parent, Monticello Raceway owner Empire Resorts, from a potential bankruptcy in 2009 after it lost $38.4 million in 2007 and 2008, according to public filings. And he’s kept it afloat since.
Lim is a key part of the family trust that owns Kien Huat Realty, an investment company that is the majority shareholder in Empire Resorts and Genting Berhad. The latter is part of the Genting Group, a $37 billion Malaysian gaming, biotech and palm oil conglomerate.
Under a branding agreement with Genting, Sullivan County’s casino is using Genting’s “Resorts World” name, though it’s technically not a Genting casino.
Colossal casino competition
Although a 2014 Tuxedo casino proposal faced controversy for its potential effects on Sterling Forest, gaming experts said a site closer to New York City would’ve been assured success. Eller agreed.
Resorts World Catskills “would be a hell of a lot easier if we were closer to our core market,” of New York City, said Eller, 42, who led the Tuxedo project’s application before taking Empire Resorts’ helm last year.
A former Marine major, a Harvard MBA, and a 12-year gaming industry veteran, Eller is overseeing a 1,400-employee Resorts World Catskills entertainment complex that will eventually grow to 2,200 workers and $1.2 billion. That’ll occur by the end of 2019, when the $150 million-plus, 600-employee Kartrite Hotel & Indoor Waterpark opens.
Regardless of location, for new casino properties like Resorts World Catskills to succeed, they must diversify well beyond gaming, said David G. Schwartz, the director of the Center for Gaming Research at the University of Nevada-Las Vegas.
“Once you could just put out quarter slot machines, but that’s not enough,” Schwartz said. “So, now they have to put much more emphasis on dining and entertainment options.”
That’s exactly what Connecticut’s Foxwoods and Mohegan Sun have done. Foxwoods’ Rodney Butler, chairman of the Mashantucket Pequot Tribal Council, and Mario Kontomerkos, CEO of Mohegan Gaming and Entertainment, said they’ve had to expand their amenities to remain competitive over the past decade.
As the Northeast has grown more competitive, each casino has taken giant revenue hits since fiscal 2006-07, when Mohegan Sun raked in $916.4 million in slots revenue and Foxwoods brought home $805.5 million. By 2016-17, those totals had fallen to $602.3 million and $457.5 million, respectively, according to state of Connecticut data.
Las Vegas model
The two tribes pioneered the Las Vegas model in the Northeast. With funding from K.T. Lim’s father, Lim Goh Tong, the Mashantucket Pequot Tribe heavily built up Foxwoods in Ledyard, Conn., in 1992 and ’93.
Nearby, the Mohegan Tribe developed Mohegan Sun in Uncasville three years later. Northeast competitors have mushroomed ever since to emulate the Connecticut casinos’ success.
To remain relevant, Connecticut’s casinos have morphed into cities unto themselves. With 9 million square feet, Foxwoods is larger than the Pentagon, and just 340,000 square feet is reserved for gaming.
The rest goes toward dining, lodging, retail and recreational options. Mohegan Sun’s similar-size gaming floor is complemented by two luxury hotel towers totaling 1,563 rooms, a 10,000-seat arena, 275,000 square feet of meeting and function space and more than 40 restaurants, bars and lounges.
Foxwoods has “put over $3 billion in the ground over 25 years, and it’s probably closer to $5 billion adjusted for inflation,” Butler said.
“We know the (Lim) family well, and Resorts World Catskills will be a great property,” he added. “They’re brilliant operators, and the partnership with the (Kartrite) indoor water park is a great idea. But our market has shifted (to New England), so we’re not too concerned with what you’re doing in the Catskills.”
Given how different Northeast casinos are, it’s simplistic to ask whether the casino market is saturated, said Jeremy Kleiman, a veteran New Jersey gaming lawyer.
Foxwoods’ and Mohegan Sun’s leaders agreed. They say they’re in an elite class competing for whales. Or as Mohegan Sun’s Kontomerkos put it, “Walmarts compete against Walmarts and Nordstroms compete against Nordstroms.”
At Resorts World Catskills, Eller too aspires to create a “destination resort casino” full of amenities, as opposed to the convenience gaming offered by racinos like Resorts World Casino New York City at Aqueduct Racetrack in Queens.
Yet even without table games, that Queens property – owned by K.T. Lim under his Genting Berhad umbrella – could compete with Resorts World Catskills.
Resorts World Casino New York City averages a strong $404 in revenue per day for each slot machine, and Lim is currently expanding the New York City complex by $400 million, adding a hotel, restaurants, retail and more slots.
To help Resorts World Catskills succeed, Roberta Byron-Lockwood, president and CEO of the Sullivan Catskills tourism bureau, plans to aggressively market the property as “a full-fledged, full-service, four-season, multi-attraction destination casino, appealing not only to New York and other states, but also to international visitors, and those from the Pacific Rim.”
Marc Baez, president and CEO of the Sullivan County Partnership for Economic Development, touted the same marketing approach. He said Resorts World Catskills will thrive by building on the Catskills’ history of resorts, while capitalizing on local assets like Bethel Woods, the planned Town of Goshen Legoland and the future Yo1 Lifestyle Wellness Resort in Monticello.
“We’ll pretty much have something to do for everybody,” Baez said.
Eller is the first to admit his won’t be the biggest, highest-earning casino in the Northeast. But he said it has “the right investment and strategy as an integrated resort and the right revenue estimates” to create new gaming receipts beyond merely cannibalizing existing regional totals.
Like Gural, who owns Tioga Downs, Eller said Resorts World Catskills’ success will be “built on relationships, and that has nothing to do with the distance,” because high-rollers have the means to travel most anywhere.
But there is at least one key difference between the two casino leaders. Eller is more likely to greet whales in a power suit than orange Crocs and jeans.
“Are people from the New York metro area going to drive 90 to 100 miles to go play table games” at Resorts World Catskills? Eller asked. “The reality is they already do, they go to Atlantic City. They go to Connecticut. They go to Vegas.”
“We’re built on a Las Vegas casino model where there’s entertainment all the time,” Eller added. “You should feel like you’re stepping into a casino in Las Vegas.”