Foss: Casino cannibalization continues

PHOTOGRAPHER: Peter R. Barber

Rivers Casino & Resort in Schenectady.

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Cannibalization.

The word usually conjures up an image of an animal tearing apart another animal of the same species.

But it’s a word that can be used in other ways, and in an analysis issued almost exactly a year ago, it was how the credit rating agency Moody’s Investors Services described the impact the opening of two upstate casinos — Rivers Casino & Resort, in Schenectady, and Del Lago Resort Casino, near Seneca Falls — was having on gambling revenues.

“Del Lago and Rivers have taken a big chunk of gaming revenue from their closest competitors,” the report observed. “This trend, where newcomers are stealing share from incumbents, is consistent with what has been occurring throughout the U.S. gaming markets, particularly in the Northeastern portion of the U.S.”

One year later, the cannibalization of gambling revenues appears to be continuing apace.

On Tuesday Monticello Raceway, in Sullivan County, announced that it would shutter its gambling parlor and consolidate operations with nearby Resorts World Catskills.

Resorts World has struggled since opening a year ago, but so has the Monticello casino, which saw betting plunge 50 percent between April 2017 and April 2018.

It’s a familiar story — one that the Moody’s analysis both described and foretold.

The state has seen an increase in gaming revenues, but there’s no denying that the expansion of the upstate casino market has had both winners and losers.

Here in the Capital Region, Rivers has emerged as one of the expansion’s clear winners, despite revenues that are about 72 percent what was initially projected.

That’s because the casino’s overall performance has improved, with gross gaming revenue increasing from an average of $11.66 million in gross gaming revenue per month in 2017 to $12.86 million in gross gaming revenue per month in 2018.

Unfortunately, you don’t have to travel too far from Schenectady to find one of the casino expansion’s losers: Saratoga Casino Hotel, which saw its average gross revenue fall from $13.63 million per month in 2015-2016 to $10.69 million per month for the first nine months of 2018-2019, a decrease of 21 percent.

Another loser is del Lago, which saw Moody’s downgrade its credit rating for the second straight year.

The casino’s financial outlook is bleak, with Moody’s warning that del Lago’s gross gaming revenue “will not generate enough (earnings before interest, taxes, depreciation and amortization) to cover the company’s interest and scheduled principal repayments during the next 12 to 18 months.”

The governor has always portrayed the upstate casinos as a way to revitalize the economy, even as the evidence continues to mount that building four new gaming facilities was a mistake, with negative and unintended consequences.

Three, as the state gaming board initially recommended before approving a fourth facility in response to protests, would have been better, and there’s a good argument to be made that two, one or even zero would have been better than that.

All that being said, the casinos have been built and they’re not going anywhere.

The most we can do is hope for the state to make more sensible decisions about gaming in the future.

Gov. Andrew Cuomo should continue to oppose bailing out casinos, as he did last year, and while sports gambling is likely to be approved during the coming legislative session at the four upstate casinos, we should temper our expectations.

Sports betting will generate more revenue for these casinos, but I doubt it will be enough to salvage a seemingly doomed operation like del Lago.

Fortunately for Schenectady, Rivers Casino seems to have figured out a winning formula.

It might never fulfill the rosy revenue projections from its bid, but it should be around for the foreseeable future — something I’m not sure the other upstate casinos and gaming facilities can claim.

Reach Gazette columnist Sara Foss at [email protected]. Opinions expressed here are her own and not necessarily the newspaper’s.