Skip to content

Cards on the table: Fear of East Coast casino overbuilding might be overblown

Aug. 01, 2022
14 min read
Encore Boston Harbor facade
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

A crashing wave of casino resort development up and down the East Coast cannibalized the finite pool of customer revenue that exists in the U.S. — at least, that was the thinking only a few years ago. The reality today is quite different, with several of these new resorts seeing their best financial performance to date.

The nearly $65 million in gross gaming revenue Encore Boston Harbor — Wynn Resorts’ $2.6 billion casino just north of downtown Boston — collected in March was the resort’s largest amount earned in any month since opening, according to the Massachusetts Gaming Commission. While the sprawling property’s revenue haul scaled back slightly to a little more than $60 million in June, it's still considerably more than it was for several months in the property's opening year in 2019, when the resort often brought in revenue below the $50 million mark.

Further south in Maryland, the Old Line State’s casino industry — which is dominated by MGM National Harbor outside Washington, D.C., and Live! Casino Hotel Maryland in the Baltimore suburbs — reported its best year ever in 2021.

Sign up for our daily newsletter

For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.

Nationally, the $14.31 billion in U.S. gaming revenue reported for the first three months of this year was the strongest start to any year in reporting history. It was only bested by the $14.35 billion reported for the last three months of 2021, according to the American Gaming Association.

The Poker Room at Live! Casino Hotel Maryland. (Photo by Sarah L. Voisin/The Washington Post via Getty Images)

Oddly, stock prices don’t reflect the positive trends. MGM Resorts International’s stock was down roughly 28% Friday afternoon when compared to where it was a year ago. Wynn Resorts stock was also down nearly 28%, and Caesars Entertainment was down more than 50%.

“According to Wall Street, the shoe’s about to drop, and they're about to get killed by a recession. It never happens the way Wall Street thinks,” said Alan Woinski, CEO at Gaming USA Corporation, a casino consulting and publishing company. “Regional casinos do better than most expect in a recession. The number of times the industry is counted out is just ridiculous, and they always come back fine.”

Much ado about nothing?

That doesn’t mean the East Coast is out of the woods in terms of the risk of casino saturation, though. New York lawmakers approved a measure earlier this year to bring three full-service casino resorts to the New York City area.

But experts say a business strategy built on local gamblers instead of more ambitious proposals (like banking on ultra-wealthy international gamblers to fly into a new gaming destination) helped with the more recent financial strength. There’s no better example of that than Encore Boston Harbor.

To say the $2.6 billion resort north of Boston had a difficult time getting to opening day is akin to saying the Titanic’s maiden voyage was only mildly unpleasant.

Wynn Resorts founder Steve Wynn was one of several high-profile men accused of widespread sexual harassment during the early months of the #MeToo era (allegations he firmly denies to date) and while the Massachusetts casino project was still in development.

Wynn eventually stepped down from his eponymous company, but Encore Boston Harbor — at the time known as Wynn Boston Harbor — still faced scrutiny from Massachusetts gaming regulators over how many remaining executives knew about their former boss’ behavior.

(Courtesy of Encore Boston Harbor)

Wynn Resorts still opened the resort after changing the property's name and paying fines, but monthly revenue numbers fell short of what was necessary to hit the company’s initial estimates of $800 million in gaming revenue for the resort’s first full year of operation.

The pandemic also soured Wynn Resorts’ ambitious plan to make the casino an East Coast hub for ultra-high-end international gamblers. Travel restrictions in place in certain parts of Asia, including China, mean that plan still hasn’t been realized.

Encore Boston Harbor has gone through a string of leaders (Robert DeSalvio left Encore several months after it opened in 2019, and his replacement, Brian Gullbrants, left in the summer of 2021). It appears the third time is the charm, as the resort — which is focusing almost entirely on regional gambling instead of its original international plan — settles into the community.

“Did we absolutely make some mistakes at opening? There's no doubt about that, and that happens with every opening, especially when you're the first and only one in a city as big and as independent and as unique as Boston,” said Jenny Holaday, who has been president of the resort since last August. “There wasn't another model to look to say, ‘Oh, you know, how does that other Boston casino do it?' We were inventing a brand-new category, which is a five-star super-regional casino.”

Is the regional focus the key to success?

Unlike destination casinos, which are like the sprawling resorts of Las Vegas (think: the Bellagio or Resorts World Las Vegas) that draw gamblers in from all parts of the country and even international locations, regional casinos sit in more suburban or even rural markets and typically pull in clientele from the surrounding area and not much further.

It’s hard to classify Encore Boston Harbor as either, as the property’s recent five-star awards from Forbes Travel Guide for both its hotel and spa don’t exactly fit the mold of regional casinos. But travel restrictions lingering in countries like China means Wynn Resorts can’t market the casino to international travelers as originally planned.

A guest room at Encore Boston Harbor. (Courtesy of Encore Boston Harbor)

However, the property does plan to market to Canadian gamblers in cities like Toronto more in the near term, Holaday said.

“You make some assumptions. You draw on your experience. You understand what the regional competition is like, and then you do your best,” she added. “So, we definitely learned a lot of lessons really quickly.”

Changes at Encore include everything from swapping out the property’s buffet for a sports bar to pursuing future expansion like an events space and restaurant across the street from the main resort.

Further development plans independent of Wynn Resorts — like a long-rumored and long-awaited soccer stadium for the New England Revolution MLS franchise — are also under consideration around the resort, potentially turning it into only one part of a broader, regional district of housing, sports and entertainment.

But there’s a reason casino companies should listen to Holaday’s “super-regional” take on Encore Boston Harbor. Think of it as an ultimate lesson in “Keep it simple.”

Even Las Vegas casinos spent the better part of 2021 behaving more like regional casinos than their more recent turn as omni-entertainment mega-resorts offering everything from pop diva residencies to prize fights to five-star restaurants. Travel and lingering pandemic restrictions meant the main event last year was the casino floor.

Palms Casino Resort, once a fixture on reality television and a hub for celebrities, relaunched earlier this year targeting more local and regional guests than ever before.

The broader regional gaming draw paid off: The $13.4 billion in gaming revenue Nevada reported last year was the highest on record and bested 2019 levels by more than 11%.

“Las Vegas up until the pandemic was just spinning its wheels, trying to attract more non-gaming, and it didn't work,” Woinski said. “Margins were at their lowest, and they had trouble reaching their numbers. Now, they're well above what they ever thought they would do because it's all gamblers again. The regional mentality is much better than the destination mentality.”

City casinos are no silver bullet for tax revenue

The Atlantic City Boardwalk. (Photo by Jon Hicks/Getty Images)

There are a few caveats to the regionalization push in the casino industry, Woinski said.

Casino resorts typically take a few years to get their sea legs, so some of this string of financial strength stems from that coupled with pandemic travel restrictions where a local casino was often one of the few places people could go. Not to mention, these casinos doing well today doesn’t mean the market is ready for more multibillion-dollar resorts to flood into every state — especially ones with major cities.

“You look at big-city casinos, and they've all underperformed,” Woinski said. “I don't know why these companies keep doing this over and over again. Harrah's New Orleans went bankrupt twice. They just don't do well. No. 1, there's too much competition for entertainment dollars. And No. 2, no gambler wants to have a problem getting to or from a casino.”

Gaming revenue at the Horseshoe Casino in downtown Baltimore brings in less revenue than casinos in more suburban Maryland locations like MGM National Harbor and Live! Casino Hotel Maryland. Casinos in urban markets like Detroit and Cleveland also underperformed when compared to pre-opening expectations.

Encore similarly opened with a less-than-expected stream of gaming revenue before having to suspend operations less than a year after opening due to the pandemic. But those interviewed for this story attribute the resort’s evolution to better situating into the community — Steve Wynn’s Beau Rivage project (now owned by MGM Resorts International) in Biloxi, Mississippi, had similar teething issues — and its easier access than other urban casinos as key advantages.

This doesn’t mean the project is going to only be about locals in the long term; the Encore Boston Harbor team recognizes that. While there was obviously a major financial incentive to open a casino in Greater Boston, their hefty investment in the project wasn’t solely about catering to a local audience.

“The truth of the matter is, this market already had lots of people who enjoyed casino gaming as entertainment, but they were probably going to Connecticut or Rhode Island," Holaday said. "It’s similar to the argument people use for sports betting. Do you want the revenue to go across state lines, or do you want the revenue to stay here? So that's sort of how I think about our place in this market, which has done very well for us post-pandemic to rely on and work so closely with our most immediate customer bases.”

“But obviously, you build a $2.6 billion facility to attract a lot more than just your local customer, and that's the one we don't know the answer to,” she added. “How much international travel will come back post-pandemic, and when will it come back?”

New York state of mind

All of these factors are at play as the New York City area is poised to gain three full-service casino resorts. While East Coast casinos may have seen financial strength when pandemic restrictions lifted, one can't help but wonder how many casinos a region can take.

Mohegan Sun and Foxwoods Resort Casino are Connecticut casino resorts that typically appeal to New Yorkers. Atlantic City, New Jersey, may not be as flashy as Las Vegas, but it also appeals to gamblers in the tri-state region.

Atlantic City's Boardwalk. (Photo by Ultima_Gaina/Getty Images)

Experts argue Greater New York City’s hefty population — the city alone has more than 8 million residents, while its Combined Statistical Area population exceeds 23 million people — is fertile soil for gambling.

If anyone is going to lose out from the three new casinos, it’s likely to be New Jersey, which stalled several years back on a plan to add a casino at the Meadowlands Sports Complex (an 8-mile drive from Times Square in Manhattan). If New York’s push to expand casinos catalyzes New Jersey to do the same at the Meadowlands, that may be a headwind to the Empire State’s rush to add more tax revenue from casinos to its coffers.

But some say casino companies as well as legislators are waking up to the idea that there is only so much revenue to go around, and various checks are in play to limit more casino resort supply from flooding the market.

“There's a combination of regulatory issues, political issues and pressure from casino operators trying to limit competition. So, it's like a counterbalance,” said Michael Paz, an assistant professor of accounting at Cornell's School of Hotel Administration. “Revenues are at an all-time high in these casinos all around the Northeast, so it's hard to say for certain the saturation point has been reached.”

“Three years ago, I would have said young people aren't gambling, and now I feel like that's not necessarily true, especially with the introduction of sports betting in some of these states,” he added. “I think that's an [entry point] for getting young men in particular into casinos. Then once they're in, they're capturing some of their spend for entertainment.”

The online gaming elephant in the room

Golden Nugget Atlantic City at night. (Photo by Barry Winiker/Getty Images)

The less-spoken factor regarding whether the East Coast is hitting the ceiling of how many casinos it can handle is online gaming. There isn't as much of a need to fly to Las Vegas or drive to a nearby regional casino to gamble, as more states are legalizing online gambling.

Casino companies themselves are pumping more resources into their own online gaming platforms. MGM Resorts is even selling off casino real estate in Las Vegas in favor of deals where the company maintains a management agreement (and keeps the branding) on a physical casino but uses the cash from the real estate sale to focus on expanding its BetMGM platform.

Company leaders maintain it doesn’t have to be an either-or situation when it comes to physical casinos and online gaming platforms.

“The idea omnichannel can and will work and not be cannibalizing is something I’m excited about moving forward,” said MGM Resorts CEO William Hornbuckle during an investor call last year.

Hornbuckle later referenced company data showing the company’s Detroit casino gained market share in the summer of 2021 while BetMGM held a leading position in Michigan’s online gaming market.

But if there’s so much attention on growing an enterprise where one can gamble from the comfort of their living room, why even bother going through all the hassle of opening a new, pricey East Coast resort?

MGM is behind one of several proposals vying for one of the three New York City area casino resort licenses.

“You have to understand that a traditional casino creates so many jobs where online sports betting or online gaming creates very few jobs,” Woinski said. “So, if you're a state or a city that wants to get casinos, they're not just looking for just tax dollars. They’re looking for the entire package and what it's supposed to do for the market and for the region.”

But it can also be a case of too little, too late for less-populated states just coming around to the idea of bringing on more casinos. Virginia legalized casinos in 2020, and Texas lawmakers are also considering legalizing casinos to some degree.

“Are they late to the table?" Woinski asked. "Absolutely.”

Featured image by Encore Boston Harbor
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

TPG featured card

Best starter travel card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

1 - 3X points
3XEarn 3 Points per $1 spent at Restaurants and Supermarkets
3XEarn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
1XEarn 1 Point per $1 spent on all other purchases

Intro offer

Earn 80,000 ThankYou® points60,000 points
For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening

Annual Fee

$95

Recommended Credit

670-850
Excellent, Good
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The Citi Premier’s 3 points per dollar spent across a wide range of popular categories is one of the more lucrative offerings in the world of points and miles. The Citi Premier comes with a $95 annual fee and is currently offering a solid sign up bonus of 80,000 points after you spend $4,000 on purchases within the first three months. It also has some valuable transfer partners to make the most of your rewards. Add in access to Citi Entertainment plus a $100 hotel credit for any single-stay hotel booking that exceeds $500 or more, excluding taxes and fees, booked through the Citi travel website, there are few reasons why the Citi Premier should not be in every traveler’s wallet.

Pros

  • Earns 3x points on restaurants, supermarkets, gas stations, air travel and hotels.
  • $100 annual hotel savings benefit (on single hotel stay bookings of $500 or more, excluding taxes and fees, booked through thankyou.com)
  • Points transfer to 16 airline programs, from JetBlue to Virgin Atlantic.
  • World Elite Mastercard benefits, extended warranty, damage and theft protection.

Cons

  • $95 annual fee
  • Lacks travel protections that other travel rewards cards come with
  • For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening
  • Earn 3 Points per $1 spent at Restaurants and Supermarkets
  • Earn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
  • Earn 1 Point per $1 spent on all other purchases
  • Annual Hotel Savings Benefit
  • 80,000 Points are redeemable for $800 in gift cards when redeemed at thankyou.com
  • No expiration and no limit to the amount of points you can earn with this card
  • No Foreign Transaction Fees on purchases
Best starter travel card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

3XEarn 3 Points per $1 spent at Restaurants and Supermarkets
3XEarn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
1XEarn 1 Point per $1 spent on all other purchases
  • Intro Offer
    For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening

    Earn 80,000 ThankYou® points
    60,000 points
  • Annual Fee

    $95
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent, Good

Why We Chose It

The Citi Premier’s 3 points per dollar spent across a wide range of popular categories is one of the more lucrative offerings in the world of points and miles. The Citi Premier comes with a $95 annual fee and is currently offering a solid sign up bonus of 80,000 points after you spend $4,000 on purchases within the first three months. It also has some valuable transfer partners to make the most of your rewards. Add in access to Citi Entertainment plus a $100 hotel credit for any single-stay hotel booking that exceeds $500 or more, excluding taxes and fees, booked through the Citi travel website, there are few reasons why the Citi Premier should not be in every traveler’s wallet.

Pros

  • Earns 3x points on restaurants, supermarkets, gas stations, air travel and hotels.
  • $100 annual hotel savings benefit (on single hotel stay bookings of $500 or more, excluding taxes and fees, booked through thankyou.com)
  • Points transfer to 16 airline programs, from JetBlue to Virgin Atlantic.
  • World Elite Mastercard benefits, extended warranty, damage and theft protection.

Cons

  • $95 annual fee
  • Lacks travel protections that other travel rewards cards come with
  • For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening
  • Earn 3 Points per $1 spent at Restaurants and Supermarkets
  • Earn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
  • Earn 1 Point per $1 spent on all other purchases
  • Annual Hotel Savings Benefit
  • 80,000 Points are redeemable for $800 in gift cards when redeemed at thankyou.com
  • No expiration and no limit to the amount of points you can earn with this card
  • No Foreign Transaction Fees on purchases