Tuesday, December 18, 2007

Slot Revenues Decline for Third Consecutive Month at Both Connecticut Casinos

By Ken Davison

Slot revenues at both the Mohegan Sun and Foxwoods casinos declined in each of the last three months, continuing a downward trend that began last Spring.

Competition in New York and Rhode Island and a weaker economy and higher gas prices may be partially responsible for the decline but fewer slot machines in use on the gaming floor also played a role.

The Mohegan's business arm, the Mohegan Tribal Gaming Commission (MTGA), reported $70.5 million in November slot revenue at the Mohegan Sun casino, a 3.8 % decline from the same month in the prior year. Overall, slot revenues declined 2.7% in the three month period of September through November while wagers at the machines, also known as slot handle, fell by 4.5%.

Since April, slot machine wagers at Mohegan Sun have decreased for 6 of the last 8 months. Overall, the handle fell by 2.4% at Mohegan Sun in the last 8 month period while wagers at Foxwoods have risen over that same period by less than one percent. By comparison, for the 15 months prior to April, the handle at Mohegan Sun fell only once - in December 2005.

Although figures for the number of slot machines and the daily win-per-machine for November were not available, on average Mohegan Sun had about 200 fewer slot machines in use between April and October of this year when compared to that same period in the previous year. Mohegan Sun's win-per-slot machine for April through October was $432 compared to $420 for the same period in the prior year. Foxwoods, on the other hand, had an average of 135 more machines in use from April through October this year than in the past year.

Slot machine revenue at the Mohegan Sun alone accounts for over 50% of the Mohegan Tribal Gaming Authority’s total revenues, contributing $922 million out of the $1.75 billion in total MTGA revenue for the twelve months that ended in September, or Fiscal Year 2007. The amount wagered at slot machines is not included in the revenue, only the amount lost by customers (wagers, or handle - less payouts) is counted as slot machine revenue.

Slot machine revenue at both the Mohegan Sun and Pocono Downs, combined, accounted for nearly two-thirds of MTGA’s $1.75 in total revenue for the last fiscal year.

Last week, Foxwoods also reported a decline in November slot revenue. They reported $58.9 million, a decrease of slightly over 1% from the prior year. Like Mohegan Sun, Foxwoods slot revenue has also declined in each of the last three months but their slot handle actually increased in two of those months. In the last three months, slot revenues decreased overall by 5.6% while the handle went down by 1.3% over that same period.

For the month of November, the Mohegan Sun reported $814 million in slot handle, a 3.4% decrease from the prior year. Foxwoods reported $734 million in handle, an increase of 6.7%. Had Foxwoods not increased the percentage of its handle paid out to its customers in November, its revenues would have reflected an increase compared to the prior year. Mohegan paid out 91.35% of its November handle and Foxwoods paid 91.97%.

Mitchell Etess attributed the declines to weaker consumer confidence and was quoted in The Day newspaper of New London, CT "Overall, when you compare our declines to Atlantic City, we feel like we're holding our own." Slot revenues at Atlantic City's 11 casinos fell by 12.6% in both September and October, reflecting in large part a barrage of new casino openings over the past year in neighboring Pennsylvania. This year is almost certain to become the first year in the state's 29 year casino history that casino revenues will have declined from the prior year.

The month of December may extend the slot declines at both casinos if only because last December may be hard to beat: In December 2006, the Mohegan Sun had its largest monthly increase in its slot handle for the past two and a half years and Foxwoods recorded an 11% increase in its December slot handle last year.

The winter storm in recent days couldn't have helped revenues at either casino. The Tribe's Pocono Downs race track-casino in Pennsylvania continued to record record low revenues since the competing Mount Airy Casino opened in late October. In the week that ended on Sunday, slot revenues were down by 37% since the week before Mount Airy Casino opened.

The daily win-per-machine at Pocono Downs was $275 for last week compared to $439 in the week before Mount Airy Casino opened. Since Mount Airy Casino's opening, the daily win-per-machine has averaged $325 per machine.

Currently, Mohegan Sun has about 6,200 slot machines and Foxwoods has about 7,200 machines.

Upon completion of their current expansions, Foxwoods expects to have a total of 8,650 slot machines and the Mohegan Sun plans to have 7,000 machines.

Note: MTGA's FY 2007 income statement shows gross revenue of $1.75 billion and is comprised of the following:

Gaming Revenue $1.1 billion
Table Game Revenue $395 million
Entertainment and Retail Revenue $133 million
Food and Beverage Revenue $102 million
Hotel Revenue $47 million

The gross revenues of $1.75 billion are reduced by promotional allowances of $132 million to arrive at net revenues of $1.62 billion in the last fiscal year, which ended on September 30, 2007. This figure of $1.75 billion less expenses equals the profit. This article doesn't deal with expenses, however it should be clarified that Pennsylvania taxes and payments to the state of Connecticut and to Trading Cove Associates are classified as expenses on the income statement.

The Tribe pays the state of Connecticut 25% of its slot revenues and pays Trading Cove Associates 5% of the slot revenues (and other revenues) at Mohegan Sun. The Tribe pays 55% of its Pocono Downs slot revenue to the state of Pennsylvania.