Casinos to be Built, but Will Customers Come?

4:10 PM, Nov 10, 2013   |    comments
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By Joseph Spector, Gannett Albany Bureau Chief

ALBANY - New York will embark next year on its largest gambling expansion in more than a decade, banking on New York City residents and tourists to fuel a rebirth in struggling upstate communities.

After voters Tuesday approved the development of seven casinos in New York, Gov. Andrew Cuomo is hoping that the city's 50 million annual visitors and 22 million people living the metropolitan area will travel upstate to new casino resorts.

The state is seeking a jackpot: $430 million annually is projected from the four upstate casinos to fund education and local governments.

The four casinos will be in the Catskills, Southern Tier and Albany area. The final three, after a seven-year moratorium, would likely be in the New York City area.

But the immediate focus is on upstate, Cuomo said.

"It means we finally have a magnet to attract the tourists from downstate, from New York City, north," Cuomo said Wednesday in the Catskills. "Think north, I keep saying to them when I'm in New York City."

Whether the odds are in the state's favor, though, is unknown.

New York's gambling expansion comes at a time when casinos across the country are struggling amid growing competition. Atlantic City, once a top tourist draw for the New York City area, has been crippled by gambling expansions in Pennsylvania, New York and Connecticut.

And New York is far from a newcomer to the scene.

Its nine racetracks with video-lottery terminals and five Native American casinos made New York third in the nation in gambling revenue in 2011 - ahead of New Jersey and behind only Nevada and California, a report last month showed.

New York has the two largest racinos in the world: Aqueduct in Queens and Empire City in Yonkers. They have thrived in the New York City market because they give the city its closest gambling options.

Whether upstate casinos can outmaneuver the crowded landscape has drawn skeptics. The Northeast is nearly saturated with 55 casinos.

"Because you had these casinos that are somewhat close already to New York City, it's kind of tough to make that decision that I want to go farther -- to go up to the Catskills," said RBC Capital Market gaming analyst John Kempf, who is based in the city.

Kempf said the casinos, particularly those in the Catskills, could draw from the city, but it's uncertain how much. The Albany area and the Southern Tier casinos would be more of a regional draw, he predicted.

The Northeast includes 12 casinos in Atlantic City and 11 in Pennsylvania. Three are planned for Massachusetts. Connecticut has the massive Foxwoods and Mohegan Sun casinos and is considering three new gaming halls.

"I understand the idea. But at the end of the day, it just all comes down to convenience," Kempf said of upstate New York casinos. "There will be business up there. The amount of business to support the kind of projects they want to build? That's the thing we don't know."

Resort towns

Cuomo envisions "resort destinations" - rekindling the tourism draw of the Catskills, which was once dotted by hotels filled with New York City vacationers.

Richard "Skip" Bronson, chairman of California-based U.S. Digital Gaming, said upstate casinos can work. They just need to be unique.

"Casino gambling in and of itself is no longer enough. You need to do so much more," said Bronson, a former director of Mirage Resorts in Las Vegas.

"If they create something compelling, and make some creative and unique, people will go there," he said. "If it's just for gambling, people aren't going to go there."

The Southern Tier and the Catskills have struggled economically, and the regions overwhelmingly approved the casino referendum Tuesday.

The proposition passed statewide with 57 percent of the vote, with opposition in western New York, parts of the North Country, Manhattan and the Albany area.

The Binghamton area and the region of Newburgh, Middletown and Poughkeepsie were the only two places in New York to have a decline in private-sector jobs between August 2012 and August 2013, state labor department statistics show.

Sullivan County and "southern Ulster County, we need it badly. There is much pain here," Sen. John Bonacic, R-Mount Hope, Orange County, a major proponent of the plan, said.

There are at least three proposals for casinos in the Catskills, including from the owners of Foxwoods and Mohegan Sun. One plan calls for the redevelopment of the former Nevelle Hotel in Ulster County.

Bidding to begin

Two racinos -- Tioga Downs in the Southern Tier and Saratoga Raceway in the Albany area - are expected to bid on casinos, which would allow them to add table games.

The state Gaming Commission will soon appoint a siting committee to review bids. The law takes effect Jan. 1, and then the commission would have 90 days to put out requests for proposals.

The sites are likely to be determined by the middle of next year.

The four casinos would result in about 4,000 to 5,000 new slot machines, estimated Eilers Research, a California-based company that works with gaming equipment suppliers.

The state is also planning to allow Off-Track Betting corporations in Nassau and Suffolk counties to operate up to 1,000 video-lottery terminals in each county.

New York already has about 30,000 electronic gaming machines, which includes the slot machines at the Native American casinos and 18,000 video-lottery terminals. New York allowed for the tribes and tracks to add gambling in 2001.

Downstate, upstate

In a report Wednesday, Moody's Investment Services said the casino proposition's passage is "credit positive" for Yonkers and Aqueduct.

The state is giving the upstate casinos exclusivity for seven years - meaning no other casinos downstate can be built during that period, either.

Moody's said the amendment, though, is a "mixed bag" for current upstate operators.

The agreement gives gambling exclusivity to the state's three tribes with casinos in their regions: western and central New York and the North Country. The tribes will have to give the state a cut of revenue, and Moody's said the current facilities could face pressure from the new casinos.

Ultimately, Moody's said the focus will be on casinos in New York City - the largest gaming market in the country.

"For the U.S. gaming industry, the Big Apple is the Holy Grail," the report said. "New York City's status as a major global tourist destination and the metropolitan area's high population density make it extremely attractive for gaming."

Empire City Casino at Yonkers Raceway said it plans to bid for a casino license when the seven-year moratorium expires. It was among the racetracks that pumped more than $3 million into an ad campaign to get the casino referendum passed.

Yonkers recently spent $50 million on an expansion. It has 5,400 video-lottery terminals, the most in the state. Resorts World at Aqueduct has 5,000.

"It is clear New Yorkers want to spend their gaming entertainment dollars at home rather than traveling to neighboring states," Timothy Rooney Jr., the track's general counsel, said in a statement.

"We intend to secure a full gaming license when one becomes available in our region and will continue to invest in Empire City to develop it into the premier gaming destination in the nation."

JSPECTOR@Gannett.com

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