Raynham Casino, Racino, Slots, Raynham Taunton Dog Track in Massachusetts.

$100M will be recaptured from Rhode Island slot parlors
Connecticut casino revenues mostly unaffected

If state leaders next year approve 1,000 slot machines at each Massachusetts racetrack, the four tracks will generate at least $300 million, according to a preliminary review by the Center for Policy Analysis (CPA) at the University of Massachusetts/Dartmouth. Estimates show that the 4,000 slots will also capture $100 million from Rhode Island’s two slot parlors --- Lincoln Park and Newport Grand.

House and Senate legislation filed for the 2005 session seeks approval of slot machines at the state’s racetracks and the licensing of two casinos --- one in western Massachusetts and the other in either Bristol or Plymouth County. A more detailed analysis will be contained in the center’s “2005 New England Casino Gaming Update,” scheduled to be released in late January.

CPA Director Dr. Clyde W. Barrow said that slots “could be the first step toward recapturing some of the $1 billion-plus spent annually by Massachusetts residents at Connecticut’s casinos and Rhode Island’s slot parlors.” Last year’s New England Casino Gaming Update estimated that Massachusetts residents spend about $829 million, and Rhode Island residents more than $300 million, at Foxwoods and Mohegan Sun.

“Massachusetts slots will spur intense competition for the region’s convenience gaming dollars that are now monopolized by Lincoln Park and Newport Grand,” Barrow said. Rhode Island’s facilities offer video lottery terminal (VLT)-style gaming --- similar to slot machines --- and simulcast betting on horse and greyhound racing. Lincoln Park also offers live greyhound racing.

Barrow said that CPA’s analysis is a "conservative estimate." But with Massachusetts residents representing a sizable percentage of Lincoln Park and Newport Grand’s patrons, he added, "once Massachusetts' slots come on line, the Massachusetts tracks will begin to cannibalize a significant portion of Rhode Island’s VLT revenues, and capture additional dollars due to currently unsatisfied demand for convenience gaming." He also said that Massachusetts residents account for half of New England’s population and, with most residing in communities from Worcester County east to Cape Cod, "that demographic suggests the four Massachusetts tracks are ideally situated to dominate the region’s convenience gaming demand."

Barrow cautioned the legislation's reference to casinos is highly speculative and does not note the investment and size of a casino project, specific sites, the gaming tax, and forms of gaming and non-gaming amenities. "As such, discerning the fiscal and economic impact at this time would be difficult."

Conservatively assuming a win-per-machine (wpm) of $200 per day, the 4,000 slot machines would achieve $292 million in new revenues. Foxwoods, Mohegan Sun and Lincoln Park all have wpm per day averages exceeding $300, while Newport Grand’s exceeds $200. Massachusetts slots could soon approach or exceed a $300 wpm per day, but to do that, Barrow said, "Massachusetts convenience gaming would need to mature, require increased marketing, and need to capture some of Foxwoods and Mohegan Sun's Massachusetts patrons." The latter, Barrow added, "may not be so easily achieved."

Despite Lincoln Park and Newport Grand’s decade-long convenience gaming monopoly and revenue success, neither Rhode Island facility has been able to intercept the $829 million that Massachusetts residents spend annually at Foxwoods and Mohegan Sun, nor have they been about to recapture the $300 million that Rhode Islanders spend at Foxwoods and Mohegan Sun. "That’s because slot parlors and destination-casinos attract different clientele and occupy distinct niche markets," Barrow said.

Barrow said with southeastern Massachusetts' Raynham-Taunton Greyhound Park (Raynham) and Plainridge Race Course's (Plainville) proximity to Rhode Island, "there’s no question that Massachusetts slots will seriously impact Rhode Island’s VLT revenues," But without casinos, "Massachusetts, like Rhode Island, will continue to lose hundreds of millions of dollars annually to Foxwoods and Mohegan Sun."

The difference between Rhode Island's slot parlors and Connecticut's casinos is that racetracks require little capital investment to house and operate slot machines," Barrow said. "Casinos built to compete with Foxwoods and Mohegan Sun will require at least $500 million in initial capital investment, but no corporation is going to invest such monies if a gaming tax renders it incapable of competing."

Unlike traditional gaming tax structures, the Rhode Island Lottery Commission owns and operates the VLT’s, but contracts with the slot parlors to house the machines. The state then pays Lincoln Park, Newport Grand, technology providers, communications providers, and host communities a combined 40% share of VLT revenues. By compact with the state, Connecticut’s casinos pay 25% of the slot win to the state treasury; table games and other forms of gaming are exempt from the compacts. "Most Massachusetts residents aren’t going to drive to a Rhode Island slot parlor or Connecticut casino if they can have the same experience in Massachusetts," Barrow said, "and the best way to ensure that residents stay and play in Massachusetts is to frame slot or casino legislation that is competitive in size, types of gaming, amenities and tax structure."

Barrow said Massachusetts track owners should also take a page from Connecticut’s playbook. "Their tourism and hospitality industries embrace the casinos as economic partners and, as a consequence, southeastern Connecticut is now the state’s premier tourism region, and there has been strong growth in jobs, wages, hotels, restaurants and retail in that region."

Rhode Island’s tourism and hospitality groups have been less enthusiastic toward Lincoln Park and Newport Grand and, in many instances, advertise the state’s proximity to southeastern Connecticut casinos --- at the expense of Rhode Island’s slot parlors. The lesson to be learned, he added, is "Massachusetts will compete easily with Lincoln Park and Newport Grand, dominate the region’s convenience gaming market, and impact Foxwoods and Mohegan Sun’s revenues, if Bay State gaming operators work in tandem with Massachusetts tourism and hospitality groups."

Time to change these numbers.

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