Executives from two major casino operators said Tuesday that their companies expect to bid for a potential casino license in New York City.
Hard Rock International CEO Jim Allen and Caesars Entertainment CEO Tom Reeg said during speeches at the East Coast Gaming Congress in Atlantic City that they would make a play for one of up to three casino licenses in the New York City metro area that has been long coveted by many of the world’s elite casino operators.
Allen said Hard Rock will submit a response to the request for information regarding three downstate casinos that the New York State Gaming Commission released last week in advance of the December 10 deadline.
“Hard Rock will 100 percent be submitting on that December 10 date,” Allen said. “We’ve been working on it for years.”
“This date has been known for seven years, we’ve been working on it since then,” he added, referring to a provision in a 2013 casino law that granted a seven-year window for operators of casino-resorts in upstate New York. “We are ready and prepared and very exciting about the opportunity.”
Reeg said that although Caesars is interested in building a casino in New York, he is concerned about whether such a project will ultimately be feasible as the process plays out.
“Personally, I’m skeptical that the terms on which you’ll be able to build there are going to be economic, but we want to pursue this license in case I’m wrong, and we’ve got exciting plans there,” Reeg said.
For Allen’s part, he also expressed concern over the effects of the expanded New York licenses on Atlantic City, where his company has spent $500m to purchase and renovate the former Taj Mahal property into Hard Rock Atlantic City.
“There’s an old joke a cat has nine lives, does Atlantic City have 99?” Allen quipped. “Because it certainly seems like it does, and frankly enjoying tremendous business volume right now.”
“When we have true entertainment facilities [in New York City] offering all the amenities and entertainment, including a full scope of table games, that product is going to be a challenge to compete with Atlantic City.”
Allen said that estimates on the amount of gross gaming revenue (GGR) that comes to Atlantic City from upstate New Jersey and New York was at least 26 percent, with some estimates pegging the figure at more than 40 percent of revenue.
“I’m not sure if we have another life to take us to 100 because so many times Atlantic City has had its challenges but rebounded,” Allen said. “I’m not sure the town can absorb another 30 to 40 percent loss of revenues.”
However, other market observers believe the impact on Atlantic City would not be as great as Allen fears.
“If it’s a property in Queens or Brooklyn or Long Island, I think people who wanted that convenience option, they do have options now,” said Chad Beynon, managing director of Macquarie Securities.
“I do think it would keep some of the business from making an extra trip down [to Atlantic City], but where we are from an Atlantic City GGR standpoint … I would expect a low to mid-single digit impact.”
“I think a lot of the New York City to Atlantic City business, whether it’s convention related or recreational, is based on the fact that it’s a destination, it is not just about the convenience or any gaming functionality,” added Lloyd Danzig, managing partner of Sharp Alpha Advisors.
“I do think the distinction between a Las Vegas or Atlantic City-like destination and an entertainment venue, but one that’s primarily convenience, is an important distinction to make.”
In addition to New York and other expansion plans, Allen said Hard Rock will submit a bid for the downtown Chicago casino license in advance of Friday’s deadline to do so.
“We were shortlisted, we said we’re not going to go the next route, they literally called us back and said we want you to submit,” Allen said. “We said we’re not sure, [but] we met with the leadership of the city of Chicago, they said the project is obviously still open, so we are submitting by this Friday.”
Several large operators, including MGM Resorts International, Caesars and Wynn Resorts, are not expected to bid on the license, largely because of a tax structure that even after a legislative fix last year is still thought by many to be too high for the Chicago project to be economically feasible.
The city initially set an August deadline for bids but pushed it back to October 29 after initial interest appeared to be cool.