ALBANY

How upstate's new casinos are underperforming

Joseph Spector
Albany Bureau Chief
A picture from the first day of the del Lago Casino in Tyre, Seneca County, in February.

ALBANY — Seneca and Broome counties were conservative in their revenue estimates from new casinos in their regions.

It's a good thing: Three new upstate casinos have fallen well short of projections so far during their first year of operation.

A review of state records by the USA Today Network's Albany Bureau shows the casinos in the Finger Lakes, Southern Tier and Albany area, based on their averages so far, could end up their first year with about $220 million less in total revenue than they projected to New York regulators when they won the bids for the casinos in 2014.

A saturated casino market in upstate New York coupled with rosy estimates aimed at winning state approval may be contributing to the less-than-expected performance, officials said.

But the casinos are undaunted, saying they expect to improve as they solidify their operations. They said they have already boosted the local economy through thousands of new jobs, construction of the gaming halls and hotels, and tax revenue for state and local governments.

“From many aspects, del Lago Resort & Casino has been a wonderful success story in less than nine months," Jeff Babinski, the general manager of the del Lago Resort & Casino in Tyre, Seneca County, said in a statement.

"While our revenue in the first eight months has been below projections, we are confident that we are moving in the right direction."

Add one more casino to upstate NY

With three new NY casinos open, can they succeed?

New casinos dip into tracks' revenue

Early projections

Last December, Tioga Downs in the Southern Tier converted from a race track with video-lottery terminals to a full-scale casino after receiving one of four upstate gaming licenses.

In its state application, it predicted $103 million in gaming revenue in its first year. So far, through August, it produced $52 million and is on pace to be at about $70 million at year's end.

"The projections we had were wrong," said Jeff Gural, who owns Tioga Downs. "The truth is, from an economic development standpoint, it’s been a huge success."

Gural said he expects revenue will improve when a new hotel opens up later this year.

The projections for the Rivers Casino in Schenectady and del Lago have been even further off.

Rivers estimated it would gross $222 million in its first year, but has brought in $82 million in its first seven months, and is on pace to finish its first year at about $80 million less than initial projections.

The numbers are even worse for del Lago, which despite having 800 more slot machines than Rivers, brought in just $6 million more than Rivers through its first seven months.

That puts del Lago on pace to be at least $100 million off its original projections of $263 million in its first year.

Put another way, the new three casinos brought in $222 million through August, which is $366 million less than the first-year projections, the Times Union in Albany reported last month.

Babinski brushed off the slow start.

"Our new hotel has been extraordinarily well received, and we are filling rooms with tourists who are visiting the attractions and businesses throughout the Finger Lakes," his statement continued.

"Here’s the bottom line: I wouldn’t bet against del Lago as we have already proven to be a great community steward and economic generator for the region.”

Concerns realized

The sluggish start has fueled concerns that the three upstate casinos won't have the broad economic impact the state and their advocates had hoped for.

All along there have been questions about whether the market could sustain three new casinos — with a fourth, the largest of them, the $1 billion Resorts World Catskills, to open next March in Sullivan County, about 90 miles north of New York City.

Between Batavia and Albany there are nine casinos, with a 10th owned by the Oneida Indian Nation set to open next year. Then in the Buffalo area, the Senecas own three casinos.

Del Lago's win per day — the amount of revenue in the slot machines after payouts to winners — was $135 per machine for the week ending Sept. 24, records from the state Gaming Commission showed.

That's compared to $164 per machine at Tioga Downs and $200 at Rivers.

"I figured as much," Assembly Gaming Committee chairman Gary Pretlow, D-Mount Vernon, said about the weak revenue numbers, particularly del Lago.

"I always thought that we were oversaturating the central part of the state."

Governments impacted

How the casinos fare doesn't only affect their bottom line. It impacts local governments who get a piece of the revenue to help pay for programs and services.

But the municipalities appear to be taking a cautious approach to the new casinos.

Casino tax revenue for Seneca County was predicted to be $3.8 million this year, but the county estimated $1.5 million to be on the safe side. It might end up with about $2 million at year's end, said county manager John Sheppard.

"I would rather be in that side of the budget equation than the other," Sheppard said.

Broome County, which gets revenue from both Tioga Downs and del Lago, also took a conservative approach: It estimated $2.2 million from the facilities this year, but may end up with $3.2 million at year's end, said County Executive Jason Garnar.

It is estimating $3.2 million again next year.

"It’s not a big part, but it’s an important part of our budget," Garnar said. "We’d be in a lot of trouble if we didn’t have that casino revenue."

Local governments have praised the economic activity and jobs the casinos have created, including the casinos paying for infrastructure upgrades and, in the case of del Lago, also paying for police services.

"Like any business, it'll take a few years to stabilize," Sheppard said. "I sure hope it does. I’ve been impressed with their contribution to the county so far."

Increasing the pot

Gov. Andrew Cuomo, who got the state Legislature in 2012 to approve four upstate casinos, said in August he was pleased with the casinos.

"The variance with the projections doesn’t bother me that much," Cuomo told reporters in Rochester. "They have all been wildly successful in creating jobs and building beautiful complexes. Now they have actual data, and they’ll adjust."

Del Lago has 1,956 slot machines and 85 table games; Rivers has 1,150 slots and 67 table games, and Tioga has 944 slots and 32 table games.

Cuomo said the state's overall gambling revenue has increased with the new casinos: It's up nearly $200 million since they opened, and the majority of that money is designated to fund education, according to the Gaming Commission.

"It’s much too early to make any judgment on gaming performance," said Lee Park, a spokesman for the Gaming Commission, saying the commission considered, in part, projections in year three of their operations.

Cuomo fostered a competitive process for the casino bidding, with a siting commission he appointed initially picking del Lago, Rivers and Resorts World out of 17 applications for three upstate regions under consideration.

The del Lago selection, in particular, raised eyebrows because it is in the northern tip of the designated "Southern Tier/Finger Lakes" region and because of the existing competition to the east from the Oneidas in central New York and two racetracks with video-lottery terminals, Finger Lakes and Batavia Downs, to the west.

But Tom Wilmot, the Rochester-area mall magnate and a main owner of the $425 million del Lago, was undeterred, saying they all could go co-exist.

Pretlow said the bidding process may have led the casinos to submit aggressive revenue projections.

"I think they’ll downsize and reconfigure their operations, and they’ll be successful," he predicted. "Not on the scale that they expected to be, but they’ll still be profitable."

Waiting game

The del Lago selection, though, led to a cascade of subsequent events.

Angered he was passed over for a casino license, Gural and local leaders pressed for the fourth upstate casino license to be awarded to Tioga Downs. They were ultimately awarded it by the siting panel.

The Oneidas, concerned about the added competition to its Turning Stone casino, opened the Yellow Brick Road Casino closer to Syracuse in 2015, and its new Point Place Casino is expected to open next year in Madison County, just on the edge of Onondaga County.

Then the state had to negotiate a better tax rate for the Finger Lakes track because it is less than 30 miles from del Lago, and the sides also later agreed to a new revenue deal for the horsemen at the track.

Vernon Downs, also owned by Gural in central New York, got a better tax deal this year, and Batavia Downs is also seeking one.

The pick of del Lago "caused a lot of grief in that area," Pretlow said.

Pretlow said he is bracing for the casinos, at least one if not more, to ultimately come back to the state to seek a better deal from the state.

"My prediction is they’ll be coming back and asking for tax break to take money out of education again," Pretlow said, "and I’m going to have to fight it. Because it’s not right."