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Scale will matter for success of New York casinos

Published on NewsOK Modified: August 31, 2014 at 8:19 pm •  Published: August 31, 2014

ALBANY, N.Y. (AP) — Racino revenue is down. Casinos are closing in Atlantic City, while new ones are opening in Maryland and Massachusetts. Yet New York is just now getting into the game, with more than a dozen groups lining up to open upstate casinos.

The state's late arrival at the betting table is forcing developers to think smaller. Rather than behemoths like Foxwoods and Mohegan Sun in Connecticut or the gambling palaces in Las Vegas or Atlantic City, the contenders for the four available licenses are pushing more modest facilities designed to appeal to a local customer base within a few hours' drive.

They liken it to a Goldilocks zone: The facility must be grand enough to lure customers, with the glitz of amenities and the feel of a resort but not something so big and expensive that it doesn't break even in a competitive market.

"You might figure: Build a bigger casino, you might have a better chance of winning," said Mitchell Grossinger Etess, CEO of the Mohegan Tribal Gaming Authority, which is proposing a $550 million casino in Sullivan County. "But you have to look at the market size. You need the right-sized building that can operate efficiently. There will never be another Mohegan Sun. That's the way the market has shifted."

Gamblers are increasingly choosing smaller casinos closer to home over gargantuan resorts. Once, Atlantic City, Las Vegas and a scattering of tribal casinos dominated the market. Now, Atlantic City is losing four of its 12 casinos this year, and most Americans are within a few hours' drive of casinos in cities like Baltimore, Philadelphia, Pittsburgh, Kansas City, Detroit and Cleveland.

New York's casino expansion was sold on the idea that it would draw tourists and their money upstate. Yet the developers now acknowledge that they need local gamblers to succeed.

"Times have changed," said Bill Walsh, the developer behind the $212 million Traditions Casino and Resort proposal in the state's Southern Tier. "People are looking for convenience. They don't want to drive five hours to get to a casino now. You need a primary market."

When voters approved a plan to license up to four casinos in upstate New York, Gov. Andrew Cuomo said casinos held the promise of jobs, tourism and economic revitalization for struggling communities. More recently he's expressed trust in the developers, noting they're the ones investing money in the proposals.

"The private market ... will make a determination as to what scale and scope the market can support," he said in July. "And they will then build the buildings and employ people and run the business because they think it's a good business to run. I'm sure they will propose what they believe will be successful."

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