The casino at Resorts World Catskills is off to a disappointing start, generating in its first five months of operation less than half the revenue needed to meet first-year projections.
The newest, largest and most expensive of New York’s four commercial gaming resorts has been averaging $11.9 million from its slots and table games since it opened February 8, putting the $900 million property on a pace for $143 million in gaming revenue its first year, a 48 percent miss on owner Empire Resorts’ $277 million year-one estimate.
“The results are indicative of a challenging marketplace,” said Empire President and CEO Ryan Eller. “There’s a huge market out there, and we’re developing better ways to go after it.”
Eller attributes the early struggles, in part, to competition in a very crowded Northeast gaming market, stressing, however, that it’s premature to draw any conclusions from them, noting that Resorts World Catskills opened a month early in difficult winter weather and without its full complement of hotel rooms and non-gaming attractions.
Plans call for the opening of a hotel in December along with 15,000 square feet of retail and food and beverage space, with more on the way early in 2019, including a $150 million indoor water park, a second hotel and a revamped golf course.
“Here we are five months in, and we’re going to say, ‘They’re going to fall flat on their face?’” said Marc Baez, president and CEO of the Sullivan County Partnership for Economic Development, a non-profit that promotes the county’s economy.
“Everyone needs to relax and take a chill pill. The water park, the golf course and the rest of the property aren’t open. They haven’t lured the Asian market yet. And they need time for their promotions and advertising to take effect.”
Richard McGowan, a Boston College management professor specializing in gaming, is less sanguine.
“They’ll certainly improve themselves when those other things open,” he said, though he wonders how much of it will meaningfully translate to more play at the slots and tables. “There’s a question of how much more casino activity can take place. What we have here is a classic case of over-projection. There’s too much saturation” of gambling in the Northeast.
Clyde Barrow, an industry expert at Pyramid Associates of Westport, Mass., said Resorts World’s proximity to New York City is no guarantee of success either. “Who’s going to drive 90 miles and spend the night, when they have all this other stuff to do right in the city?”
Moody’s Investors Service is concerned enough about the soft start to downgrade the $535 million of debt incurred by Empire’s casino management subsidiary, Montreign Operating Company, to Caa1. That’s a low “negative” rating for debt considered to be “in poor standing.” The credit ratings agency said another downgrade to Caa2, near “speculative,” could be warranted if earnings don’t improve.
“The issue is not that it’s a bad property,” said Keith Folely, a Moody’s senior vice president who covers gaming. “The issue is market saturation.”
It’s been a problem across New York, which is home to three other upstate commercial casinos, seven Native-American casinos and 10 racetrack casinos, not to mention pari-mutuel betting, a state lottery and a growing array of competing gaming options in neighboring Pennsylvania, Connecticut and Massachusetts.
The commercial casinos preceding Resorts World Tioga Downs Casino Resort, which opened in December 2016, and del Lago Resort and Casino and Rivers Casino & Resort, which opened in February 2017 collectively came up more than $200 million short of gaming revenue projections in their first year.
del Lago, located in the Finger Lakes between Rochester and Syracuse amid a large and established Indian market, continues to be the hardest hit, slumping by 2 percent from February to June over the same period in 2017. Moody’s recently downgraded its debt to Caa2, with “negative” guidance.
Rivers, on the Mohawk River in Schenectady, is faring better on a comparative basis, growing gaming revenue by 15 percent over the first five months of last year.
Tioga Downs, on the Pennsylvania border near Binghamton, is up 10.5 percent year on year through June.
