THOMPSON — Revenue at Resorts World Catskills parent company is far below the level needed to cover the casino's expenses, according to a new corporate earnings report and state Gaming Commission figures.
Empire Resorts logged a second-quarter loss of $37.2 million on revenue of $49.1 million and had operating expenses of $71.5 million, according to its second-quarter earnings report with the Securities and Exchange Commission, as the company continues the phased opening of a casino-entertainment complex outside Monticello that debuted Feb. 8.
Charlie Degliomini, executive vice president of Empire Resorts, would not comment on the company’s performance this week.
“It's going to take time to penetrate the market, and you need some runway to do that,” Degliomini said in a July interview. The casino is growing stronger “now that more of our amenities are online, and we’ve activated our million-dollar summer marketing campaign, in conjunction with our multimedia marketing campaign, and we have more attractions coming," he continued.
The effort to gain financial momentum is a familiar one in New York state’s young casino industry. Resorts World Catskills is the fourth (and at this point final) non-Indian casino to open in less than two years. Tioga Downs opened in December 2016 in the Southern Tier region, del Lago Resort and Casino opened in January 2017 in the Finger Lakes region, and Rivers Casino & Resort opened in February 2017 in Schenectady.
Each missed its revenue projections in its first year of operation. As they passed their first anniversary, both Del Lago and Rivers requested better financial terms from the state, which takes a significant cut of their revenue in the form of gaming tax. Gov. Andrew Cuomo, who had advocated for limited legalized casino gambling, rejected the requests, calling them a request for a “bailout.”
Rivers has shown significantly increased revenue in its second year. It has consistently declined to comment on its finances, however, and declined comment again Tuesday on how it is showing improvement as its competitors increase in number and, in some cases, struggle financially.
Most critically for the owner of the $920 million, 1.6-million-square-foot Resorts World Catskills, Empire Resorts is generating just $16.6 million per month in revenue, which projects to $196.5 million for the year. Revenue includes cash from gaming, restaurants, hotel rooms and other sources.
During the second quarter of the year, the company reported a $22.4 million operating loss, which doesn’t count its $15 million of interest expense. According to Moody’s, a healthy regional casino produces a 25 percent margin for earnings before interest, taxes, depreciation and amortization.
Even if Empire Resorts improved enough to generate that margin, it would fall about $25 million per year short of covering its $75 million in annual debt- and capital investment-related expenses. Empire Resorts owes more than $500 million in debt and other long-term liabilities.
“Without a rapid and significant increase in revenue, the company won’t be able to meet its interest obligations,” said Keith Foley, a Moody's senior vice president and gaming-industry expert. “At some point, the company may not be able to cover its current level of operating expenses.
“The real question is: How do they ramp up fast enough to cover their fixed charges?” Foley added.
An unspecified amount of Empire Resorts’ operating losses and interest expenses came from the Monticello Casino and Raceway. Opened in 1958, the racino features video gaming machines and harness racing. It has been a major money-loser over the past decade.
In the second quarter of 2017, when Empire Resorts operated only the racino, it recorded $13 million in operating losses and interest expenses.
Malaysian-Chinese casino magnate K.T. Lim, whose family trust has accumulated 88 percent ownership of Empire Resorts since rescuing the company in 2009, agreed to keep the racino open in a 2014 state casino application.
That trust, Kien Huat Realty, loaned the company $30 million in June.
New figures released Friday by the state Gaming Commission show Empire Resorts’ gaming revenue remained well below company projections in July. The casino earned $111 per slot machine per day and $1,192 per table game per day in July. The company’s goals were more than $200 per day per slot machine and more than $1,500 per table game.
The casino’s viability is questionable if it earns less than $200 daily per slot machine and below $1,200 daily per table, gaming experts have told the Record.
In Empire Resorts’ SEC filing, its leaders conceded: “We cannot be certain that our business will generate sufficient cash flow from operations, that our anticipated earnings from the casino will be realized, or that future borrowings will be available under our existing debt arrangements or otherwise to enable us to service our indebtedness, make anticipated capital expenditures and satisfy working capital needs.”
Empire Resorts’ leaders are betting a new $33 million entertainment complex due in December will drive foot traffic to gaming options and increase non-gaming revenue.
The planned expansion includes a mid-market hotel, restaurants and additional retail and entertainment attractions. The remodeled Monster golf course is anticipated for summer 2019.
Plus, in March, Ken Ellis and Arthur Berry III, the operators of the Camelback Resort in the Poconos, will open the nearly $200 million Kartrite Hotel & Indoor Waterpark nearby.
The park is owned by EPR Properties, a large Kansas City real estate trust that owns successful theme parks across America. Casino leaders hope it, too, will drive visitors to Resorts World Catskills.
“Clearly, they’re going to need to greatly increase the non-gaming revenue,” said Richard McGowan, a Boston College management professor specializing in gaming. “Attracting people from New York City will make or break them.”
Daily Gazette Business Editor John Cropley contributed to this report.