Friday, May 16, 2008

Tribes In The Media Series: MGM Grand At Foxwoods

In the Tribes In The Media series, we reprint an article we came across on the Foxwoods expansion in the British magazine The Economist. After this article was printed, a The Economist later issued a correction on May 22, 2008 that stated: "In a piece on gambling (“Bringing Vegas to the east”, May 17th) we wrongly stated that Standard & Poor's had downgraded its rating on Mohegan Sun. Instead, it changed the outlook on its rating from stable to negative."

Bringing Vegas to the east
May 15th 2008
From The Economist print edition

An Indian casino hopes to add some grand gambolling to its gambling

WITH its turquoise towers bursting from the Connecticut trees, Foxwoods casino is oddly reminiscent of the Wizard of Oz's Emerald City. It has recently added some Las Vegas surreality by going into partnership with MGM Mirage, owner of some of Vegas's biggest casinos, including the Bellagio and Luxor. The opening, planned for May 17th, promises to bring more of that Nevada glitz. John Mayer and Alicia Keys are performing in a new auditorium modelled on Hollywood's Kodak theatre. Michael Douglas and Catherine Zeta-Jones are coming. Sean “Diddy” Combs is hosting an exclusive after-party at “Diddy's Den”.

Foxwoods, already North America's largest resort casino, is hoping that its $700m expansion will add glamour, raise hospitality standards and bring in more punters. The partnership is really a licensing agreement. Foxwoods will continue to own and manage the new facility; MGM receives a percentage of the earnings and acts as a consultant. David Schwartz of the Centre for Gaming Research says it will also bring in its player database, specifically its Vegas high-rollers.

The Mashantucket Pequot Tribal Nation opened its first bingo hall in 1986 and its Foxwoods casino in 1992. Today it has 40,000 visitors daily, most coming from next-door Massachusetts. Other Indian tribes have had similar agreements, as Alan Meister, an economist with Analysis Group, points out. Harrah's, the largest gambling company in the world, has linked up with tribes in Arizona and California. What makes MGM's foray different, he says, is that Foxwoods is already established. Gillian Murphy, general manager of MGM Grand at Foxwoods, is hoping to keep current visitor numbers but also to attract New Yorkers. According to one industry report, a mere 9% of its patrons in 2007 came from New York, which is only two-and-a half hours away.

Among Indian casinos, Foxwoods and the nearby Mohegan Sun take in the most revenue from gaming in the country: some $2.4 billion in 2007. Connecticut's state coffers receive 25% of their net takings from slot machines. The payment totalled $430.5m last year, which is more than half the amount collected through the state's corporate income tax. “There has never been so much gaming in the north-east,” says Barry Cregan, president of Foxwoods. He points to new Indian casinos and racinos (racetrack-cum-casinos) in New York, and commercial racinos in Rhode Island and Pennsylvania. But he thinks there is still room for growth. The Mohegan Sun, too, plans to expand by opening a new $925m hotel and casino by next year.

Standard and Poor's recently downgraded its outlook for Mohegan Sun because of the softness in the Connecticut gaming market. Slot machine revenues are down at both Mohegan and Foxwoods. Gambling has also dipped a bit in Atlantic City. Along the Las Vegas Strip, it fell 4.8% in March, the third consecutive monthly decline. But the folk at Foxwoods and Mohegan are still full of hope.