The prospect of three new licenses to operate full-fledged casinos in or around New York City will come with the most expensive licensing price tag in U.S. history, as analysts and executives warn the new casinos will have a major impact on the financial wellbeing of Atlantic City.
“It’s going to have a big impact,” said Jeff Gural, chairman and CEO of American Racing and Entertainment, which owns the Meadowlands Racetrack in East Rutherford, New Jersey, as well as two racinos in upstate New York.
Speaking at the 25th annual East Coast Gaming Congress in Atlantic City last week, Gural said he could not imagine that Atlantic City or Connecticut’s tribal casinos would not be hurt, even though Connecticut’s Mohegan Sun is expanding its footprint, “so maybe they are smarter than me.”
Almost everybody is assuming that MGM Resorts’ Empire City Casino in Yonkers and Genting’s Resorts World Casino in Queens will get two of the three licenses made available through the state’s budget law passed in April, Gural said.
“They should have given them the license on the second day because it is so obvious there will be no local opposition and I think they can convert over [to full casinos] in a month,” he said.
Gural told attendees he was hoping when the downstate casinos open, they would attract a lot of New Jersey customers who complain about sitting in traffic and paying a $16 toll to travel to New York.
Those players should then ask why New Jersey has not authorized a casino at the Meadowlands, site of the home stadium of the New York Giants and Jets, as well as Gural’s racetrack facility that includes a FanDuel sportsbook.
“I’m planting the seeds,” Gural said. “I honestly hope New York is a big success and at some point, people will say this makes no sense allowing people to drive to New York to lose their money. Why don’t we keep that money in New Jersey?”
Voters in 2016 overwhelmingly defeated a referendum to allow two casinos to be built in North New Jersey. The referendum lacked specific details, but analysts believed sites at the Meadowlands and in Jersey City were the leading contenders for a casino license had the initiative been approved.
When up to seven casinos were authorized through a 2014 amendment to New York’s constitution, it was decided to let four facilities open across upstate New York first, with three downstate facilities opening no sooner than seven years later.
Gaming companies seeking one of the three New York City-area licenses will likely have to put up at least $500m as an upfront fee.
“When we think about return prospects, obviously, the minimum $500m license fee is a big price tag,” said Colin Mansfield, head of U.S. gaming and leisure with Fitch Ratings.
“It’s the biggest I’ve ever seen in the United States,” Mansfield said, noting the upfront fee for a casino-resort license in downtown Chicago will be around $120m.
Mansfield said building in New York City is notoriously challenging from both a price and red tape perspective.
“When we think about where the property could be, Manhattan scares me a little bit just because of how challenging it can be to get in and out of there,” Mansfield told conference delegates.
“But when I think about what could be built, I’m not necessarily of the mindset that you need all the pomp and circumstance of a very large integrated resort.”
Mansfield stressed that an Encore Boston Harbor is not needed in Manhattan, referring to Wynn Resorts’ luxury casino-resort located just north of Boston in Massachusetts.
He said a gaming company would enjoy a better return on their investment building more of a regional casino, “something where you have gaming, maybe a hotel tower.”