Slot machine revenue drops at N.E. casinos
Slide could hurt Patrick's plan
As the debate heats up on allowing casinos in Massachusetts, the gambling industry in New England is cooling down.
Slot machine revenues are off by more than 6 percent at Connecticut's casinos, Foxwoods and Mohegan Sun, in the five months ending Jan. 31, compared to a year ago. For Mohegan Sun, the downturn is its first after more than a decade of steady growth.
At Twin River in Rhode Island, the recent addition of almost 1,000 new video lottery terminals, which are very similar to slot machines, has improved overall revenue there, but the earnings per machine have dropped by 6 percent in the last three months, leading operators to impose new cost-cutting measures, including shutting down two restaurants for all but weekends.
Specialists said the trend is partly a result of the nation's faltering economy, affecting the casino industry nationwide, and is also an indication that the region's casinos are exhausting the supply of new gamblers who have fueled rapidly rising profits since casinos were introduced in the 1990s. Now, they are beginning to com pete more intensely for existing gamblers.
"We're getting an indication of market saturation," said Arthur Wright, a University of Connecticut economist who has tracked the casino industry for years.
The trend could make it more difficult for Governor Deval Patrick to sell the Legislature on his plan to license three casinos in Massachusetts, particularly outside the Boston metropolitan region. His plan would nearly double the number of slot machines in New England, a goal he says is achievable because it would keep tens of thousands of Massachusetts gamblers, who now travel to Connecticut and Rhode Island, in their home state.
Specialists agree that Patrick's proposal for a casino within easy access to the millions of people in and around Boston is sure to draw huge crowds. But some said the current downturn indicates there may be serious limits on how other facilities would perform.
"Boston, in my mind, is a slam dunk," said Wright. "But I have my doubts about the others."
William Eadington, an economist and director of gambling research at the University of Nevada at Reno, said the current trend shows that the $220 million expansion and renovation of Twin River in Rhode Island merely shifted the New England market geographically; it has not expanded it.
"Twin River did not grow the market," he said. He likened it to 1990, when Donald Trump opened a new casino in Atlantic City. Trump's casino did well enough, he said, but only because patrons deserted other casinos there for Trump's.
Eadington said an important test will come in May, when Foxwoods is to open its $700 million MGM Grand casino, with 1,400 new slot machines. The new casino may attract customers without affecting business at Mohegan Sun and Twin River. "If not, then the market is saturated," he said.
A Globe review of slot revenues at all three facilities shows that, while the casinos have added 5 percent more machines to attract gamblers in the five-month period ending Jan. 31, revenue has fallen off. The revenues are posted by the Connecticut state Department of Special Revenue and the Rhode Island Lottery Commission.
That dip in New England coincides with a national gaming decline.
Commercial casinos in the 12 states where they are legal experienced a 1.3 percent drop in revenue in the three-month period ending Jan. 31, compared to the same period a year earlier, according to the American Gaming Association, a trade group.
How much demand for gambling remains unmet in New England is a crucial question in the political battle that is raging on Beacon Hill and is sure to come up next Tuesday, during a hearing on Patrick's casino plan before the Legislature's Joint Committee on Economic Development and Emerging Technologies.
Patrick proposes to put commercial licenses out to bid in three regions of the state: metropolitan Boston, Western Massachusetts, and Southeastern Massachusetts. He believes that the state can sell the licenses for $200 million each, for 10-year terms. And he plans to tax casino revenue at 27 percent, producing $400 million a year in gambling taxes for the state.
Currently, there are 18,053 slot machines or video lottery terminals in the Connecticut casinos and Twin River. Combined, they are producing $287 per machine per day.
The estimates produced by Patrick and Daniel O'Connell, the state secretary of economic development, anticipate $2 billion in revenue from 15,000 slot machines and 450 table games, such as black jack and roulette. Patrick's proposal anticipates $300 per slot machine per day, which would produce $1.65 billion from slots alone.
But if Patrick succeeds in bringing 15,000 new slot machines to New England at three casinos, the total number of slot machines and video lottery terminals will be vastly increased, from about 18,000 to 33,000, and could dilute the market.
Besides that, ongoing expansions at Foxwoods and Mohegan Sun means that another 1,900 slot machines are expected to be on line before any casinos are built in Massachusetts.
Patrick, when pondering whether to back casinos last summer, relied on Mohegan Sun's more than $400 a day per machine house winnings prior to July 2007 for assurance that in Massachusetts a $300-a-day estimate was reasonable, said Kofi Jones, spokeswoman for O'Connell.
The daily win for slot machines at Mohegan Sun was down from more than $400 to $355 in January, the most recent available figures, according to the Connecticut state website.
But even though the win at Mohegan Sun has dropped, the governor has no plans to revise his projections, Jones said.
"We remain confident that Massachusetts is one of the most desirable locations for gaming, based on untapped market share," said a statement provided by Jones.
Casino executives acknowledged the more crowded playing field.
Saviero Mancini, a spokesman for Foxwoods, said "There is more competition, more slot machines on the market, and that has taken some business away."
Sean Murphy can be reached at smurphy@globe.com.
rising
falling 