Saturday, September 5, 2009

Speculation That Rhode Island's Slot Parlors May Add Table Games

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This installment is an opinion piece by a Providence Journal editor on what could take place in the near future with the Twin River slot parlor in Lincoln, R.I.

As gambling industry struggles, it’s a safe bet that Twin River will get bigger
By John Kostrzewa
Providence Journal
September 6, 2009

The gambling industry is in the midst of its biggest shakeout in history.

Casino companies are failing. Slot revenues are down. Politicians are filling gaps in state budgets by adding new gaming parlors to siphon off gamblers from the weakened, traditional venues.

All the turbulence is affecting Twin River.

To survive, the bankrupt slot parlor in Lincoln won’t be able to operate in the same way it has in the past. It either has to expand into something bigger or reduce the amount of money it pays the state.

Pay attention Rhode Islanders, if you care about how much you pay in taxes or how much gambling goes on here. Changes are coming.

Consider what’s happening up and down the East Coast:

• Massachusetts’ political leaders are lining up to approve either full-fledged casinos, slot parlors at racetracks or slot machines at bars and restaurants.

• New Hampshire legislators are lobbying to allow slots at Rockingham and Seabrook, two racetracks on Massachusetts’ border.

• Foxwoods Resort Casino and Mohegan Sun in Connecticut reported that slot revenues slid 7.5 percent in the first six months of 2009. The Mashantucket Pequot Tribal Nation, the owner of Foxwoods, is trying to restructure at least $1.45 billion in debt to avoid default.

• Trump Entertainment Resorts, once controlled by Donald Trump, filed for bankruptcy in February and is still trying to find a way to restructure its debt and attract new owners to the casino company in Atlantic City, N.J.

• New York City’s Aqueduct Racetrack is expanding and adding slots.

The fallout from all will reach Twin River.

For years, the Lincoln slot parlor has been able to pull gamblers from northern New England who are looking for a place to play without driving to the Connecticut casinos. A study by UMass Dartmouth found that 40 percent of all the gambling-related dollars spent at Twin River and Newport Grand in 2008 came from Massachusetts residents.

Twin River’s draw will be cut sharply if Massachusetts Governor Patrick, House Speaker Robert A. DeLeo, D-Revere, and Senate President Therese Murray, D-Plymouth, have their way. All three favor opening the state to legalized gambling. State House hearings may start this month.

The only question is whether legislators follow Patrick’s plan to legalize three resort-style casinos in Boston and the southeastern and western parts of the state, or to allow slot machines at restaurants, bars or racetracks, such as Plainridge and Raynham Park. Or they could allow a combination of the proposals.

While a full-fledged casino could take a couple years to be up and running, installing slot machines at racetracks and restaurants would take only months, and could start sucking gambling dollars away from Twin River sometime next year.

At that same time, the ongoing recession and changing consumer spending habits could cut the take in Lincoln. So far, gamblers continue to feed the slots at Twin River and Newport Grand. A report for the fiscal year that ended June 30 shows the state took in $338.1 million from the two venues, down only 1.5 percent from what the state leaders estimated to balance the budget.

But those numbers could slip as the recession lingers. Rhode Island’s 12.7 percent jobless rate, with 72,200 people out of work, won’t get much better soon. And economists say consumers, stuck with flat personal income growth, are spending less and saving more. That’s going to leave less money for gambling.

All of this is under way while Twin River, stuck in bankruptcy court, is trying to reorganize.

Twin River’s operator, UTGR Inc., a subsidiary of BLB Investors, filed for federal bankruptcy court protection in June. The company defaulted on its loan obligations and plans to restructure $568 million in debt. The plan includes the lenders taking ownership of the facility, devising a new business plan and hiring a new operator of the slot parlor.

But who would want to take over in this environment, with competition growing, even if operating expenses can be cut and the debt burden reduced.

Whoever controls Twin River may want to cut the state’s take of 60 cents of every dollar a slot player leaves in the machines, or it may want to expand with flashy new offerings to attract more customers. With state leaders so reliant on Twin River’s contribution to balance the state budget, there will be little appetite at the State House to cut the state’s take.

So bet on the expansion.

Governor Carcieri, House Speaker William Murphy, D-West Warwick, and Senate President M. Teresa Paiva Weed, D-Newport, will be pushed to let Twin River’s new owners and operators add more attractions to bring in more gamblers. That could include blackjack, poker and craps tables, and maybe a hotel and entertainment complex. Twin River will become a destination casino, not a stop for day trippers.

If you think that’s unlikely, remember the history.

When BLB took over the old Lincoln Greyhound Park from Wembley in 2005, the new owner said it needed more slot machines and gambling attractions to go with the renovations they planned. State leaders granted their wishes.

Gambling expanded in Rhode Island because Rhode Island politicians were locked into a budget that needs gambling revenue to pay the state’s bills.

Now, it will be a new owner’s turn to use the calamity in the gambling industry to its advantage.

Twin River will get bigger.