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Sunday, September 28, 2014

Yonkers Ain't Buyin' It

Empire City Casino at Yonkers Raceway is having none of the talk from Genting that a casino in Tuxedo won't hurt them.

"The revenue from this single property is nearly $300 million a year just for education and we employ nearly 1,400 residents, most of whom are from Westchester, so it puts at risk not only the revenues that are generated by one of the most successful casinos in the state but also would ultimately mean layoffs as well," Duffy told the Journal News. [Politics on the Hudson]

Yonkers, of course, is quick to play the jobs card here. As we mentioned in the prior post, Genting CFO Christian Goode is saying that a Sterling Forest casino would not hurt Yonkers because gamblers there (and at Resorts World) are largely those with just $60-$80 to spend, and they won't cut into that budget by traveling. Before we go on, that brings up a couple of points: That makes perfect sense given my visual observations of customers at Aqueduct; that as opposed to those photos of affluent-looking young folks that you see on racino websites. And, at the risk of sounding presumptuous, it seems unfortunate that those with a limited amount of disposable income choose to dispose of it by sitting in front of a zombie-inducing machine that is eventually going to take most or all of it. (And even more distressing that this is now an accepted way of balancing state budgets and subsidizing horse racing.)

Yonkers will tell you that they've lost 15% of their business since Resorts World opened at the Big A. Net win figures I've seen are more like 11%.....but let's go with their figure. That is business lost to a racino located 24 miles away....and one which has aggressively provided free busing from areas in and around the city. (Their big ugly red buses have become quite ubiquitous around town.) So, how much more business would they lose to a full-blown casino located some 40 miles away? And one which has made it clear that they are more interested in big-money baccarat players from around the globe than small-time slots players? And where blackjack tables will have $25-$50 minimums? (In a recent interview, Yonkers GM Bob Galterio broke down their customer base as such: 15% NJ, 7% CT, 30% Westchester, 20% Bronx, the rest from the other boroughs and Long Island.)

So how much business would they really lose to Sterling Forest? Or, to a casino in Woodbury or thereabouts? I'm not going to guess. What I think we can surmise however is that, eventually, as these things proliferate here in NY and in NJ and in Massachusetts (perhaps), each will, for the most part, serve a local customer base. Beyond that, whether any of them can really draw customers from around the region, based on amenities such as golf or water parks or spectacular views, remains to be seen. (For this purpose, let's exclude Genting's grander scheme of flying in customers from Beijing.) With all the talk about the proposals being considered, this whole idea of a "casino resort" in rural areas of NYS attracting families is a totally unproven business model. We do know that the business model of resorts without the casinos in the Catskills was a failure. Whether Mom and Dad will really bring the kids so they can slip off and play casino games surely remains to be seen. I found it quite surprising that only once did any of the board members question the concept during the oral presentations....and that question was posed to Howe Caverns, which actually does have a track record of attracting tourists from beyond their immediate area.

- Noting that his location board heard from 415 citizens during the three days of hearings, and received around 3,000 written comments, chairperson Kevin Laws says that this is "true democracy in action, hearing directly from hundreds of individuals who feel very strongly about the future of their communities." Of course, true democracy requires the participation of both sides. It's one thing for the people to speak. Those making the decisons have to also truly listen. We'll reserve judgment for now.


Anonymous said...

Hi Alan,

I am of the belief that the "unproven" business model of casino resorts is the most promising aspect of the proposals. If you just keep erecting day tripping facilities, which essentially amount to gambling and food, then you are just shuffling the deck and fighting for the same customers. That model hasn't worked out so well lately. Focus SHOULD shift to non-gaming revenues.

And Alan, this is not, and never was about making as much money as possible, it's about bringing jobs and economic activity to areas of upstate New York, that rely on tourism.

Look, I'd love to see tech companies and manufacturing come to the Catskills, but that is not going to happen. Many families livelihood depend on tourism in that region, and they need a draw. And not for nothing Alan, but the developers have done he math and decided that they are willing to take a calculated risk on region that nobody else has been willing to invest in. You want to deny the Catskills $1.5 billion in investment, and thousands of jobs, just so that Genting can protect Resorts World by securing a downstate casino in Sterling Forest State Park?

I don't believe for one second that ASian millionaires will scoff at evey exotic location, every gambling hub, and fly halfway across the world to New Windsor, and drive to Tuxedo just to gamble. And play table games that NET Genting 90% of the revenue! That's right, Genting pays a paltry 10% on those baccarat revenues. Yonkers on the other hand pays out almost 70% tax to NYS on its slots. So, why would you support a casino in the middle of Sterling Forest State Park, that would cut off tourism to upstate New York, pay out 10% tax (since they apparently aren't after slot players), and threaten another downstate operation that pays out 70% on its revenues?

Alan Mann said...

Thanks for the thoughtful comment.

>>And Alan, this is not, and never was about making as much money as possible, it's about bringing jobs and economic activity to areas of upstate New York, that rely on tourism.

Well, that was the original concept, as articulated by the governor (when he's not traveling to Israel and Afghanistan). Then Orange County got in the mix. We shall see what the board decides is the real priority.

Look, I hope that the Catskills get the licenses, and I hope they help to relieve the economic depression that that area has been suffering for years, without causing suffering and hardship to those who gamble in them. Are people who could drive a half hour or less to their local slots parlor really going to travel to the Catskills so they can golf or ski or swim? I'm skeptical. We shall see. If the board passes up the big money and grants the license(s) there.

El Angelo said...

Trips to Europe, that's what the kids want. 22 countries in 3 days.

Anonymous said...

Thanks for the response, Alan.

While nobody knows for sure what the outcome will be (whether NYS awards licenses consistent with the intent and manner in which the legislation was promoted to the public, or if they decide to go with a short term boost from day trippers to OC before NJ responds immediately with a more convenient day tripping casino only 5 minutes from Manhattan).

Irony is, with all the lawsuits and approval issues related to the Southern OC sites, NJ may have a casino up and running before Southern OC would.

I am not sure that Governor Cuomo will want to stand united with a foreign casino giant in its battle to erect a casino in Sterling Forest State Park. I am not so sure that Governor Cuomo will want to stand united with Caesers in their battle against the Harriman Family to erect a casino at the intersection of route 17 and exit 116 on the Thruway, bordering Harriman State Park either.

Now a few months ago, I wasn't so sure. It truly looked like a backdoor deal was in place and the fix was in for a downstate casino under the Upstate Economic Gaming and Development Act. Personally, (and I think its becoming more evident), Genting reacted to protect its investment in Resorts World. If Caesers and Penn didn't show up, I don't think Genting would have been as aggressive. And they have put their modus operandi on full display now, and people are turned off by how these guys operate.

But then Robert Willaims provided a reason for OC's inclusion that made perfect sense. They included it because it has historically been identified as part of the district that includes Ulster-Dutchess-Sullivan and Orange vs. Putnam-Westchester-Rockland. As someone who grew up in the mid-hudson valley, I completely agree with those district boundary lines. So maybe, Albany really just didn't understand the problems OC's inclusion would cause? They aren't gaming experts after all.

But now, they certainly understand. And all the opposition, lawsuits, comments, etc...I would assume have changed things a bit. All TBD..and I wouldn't want to bet oen way or other other.

But I will say that I truly do believe that a new model in gaming needs to be tested. One that does not focus strictly on maximizing gaming revenues. We are already seeing a lot of speculators in Sullivan County. You already have Bethel Woods, the Raceway, the new Nascar Speedway, and hopefully a lot more economic activity to come with a casino, in a region that is starving for investment. Hey, if it doesn't work out? No problem, because its all upside for the Catskills. It can't really get much worse than it already is. But if you site a casino on route 17 only 35 miles from midtown mahnahttan, then it will effect not only the catskills, but tourism heading upstate will surely take a significant hit. It could be disaster in a number of respects, and all for a quick burst of revenue lasting only until NJ gets Meadowlands casino up and running. Or does Cuomo and Christie maintain the status quo, take the safe bet, and concentrate on fixing up AC And the Upstate economy for now?

I just want to conclude by saying the people of the Catskills are ready to take this risk. they any casinos, and are fully supportive, despite the risks. They already have the raceway which offers over 1,000 slots, and there is nothing out there to suggest it has been a drag on the local population.

I truly do believe that there will be ademand for people looking to take a short drive to the mountains to get away from the city for a short trip, and enjoy the country and wager a bit. TBD if I am right. Remember, as long as they make a profit, and create jobs and economic activity, its a success in a region that has nothing left to risk.

jk said...

Aqueduct racino's growth slows
As Genting competes for an upstate license, it looks to boost its Queens outpost.

Resorts World has not been as successful tapping into the robust tourism industry in the Big Apple as it would have liked. The vast majority of its customers are locals from Brooklyn, Queens and Long Island. To attract more visitors, Mr. Goode is considering developing a hotel near John F. Kennedy International Airport—one that would offer better amenities than the existing budget airport properties—and help the casino capture international travelers, who would be shuttled directly to Aqueduct.