SCHENECTADY – The State Gaming Commission released a comprehensive report from an advisor on the New York Gambling Industry this week, which includes extensive predictions about the impact of new or expanded casinos.
The conclusions and recommendations align well with some of the budget proposals Governor Andrew Cuomo made for the casino industry last week. These include the potential benefits of opening three more casinos, the potential reduction in taxes paid by existing casinos, and the implementation of digital sports betting.
“This report provides a valuable tool for the Commission and policy makers to continue discussions about the future of the New York gaming industry,” said Brad Maione, spokesman for the Schenectady-based Gaming Commission. “This report should help you make informed tax decisions.”
Pennsylvania-based Spectrum Gaming Group was selected to conduct a market analysis in November 2019. An analysis of the effects of COVID was then included in the scope.
Spectrum has been providing research and professional services related to the gaming industry since 1993, including studies or consultations in 40 states or territories and in 48 countries on six continents.
The 345-page Gaming Market Study: New York State offers extensive facts, predictions, and recommendations.
Some of the points are quoted or summarized below:
- The Upstate New York Gaming Economic Development Act of 2013 allowed four resort-scale commercial casinos to be established in the Upstate market, all of which have since been developed and are in operation. The downstate market, particularly the New York City area, was considered for possible development in a second phase after the upstate facilities’ performance was demonstrated.
- Downstate residents will spend an estimated $ 681 million in casinos in Connecticut, New Jersey, and Pennsylvania in 2025 if no new options are added, or just $ 323 million if the right mix of new facilities are built in New York becomes.
- New York should recognize the benefits of tracking additional profits quickly, but rely heavily on policies and licensing decisions that will bring the greatest long-term benefits. One of the major challenges is to avoid using long-term solutions to solve problems of limited duration.
- The state lottery with the highest turnover takes place in New York. The reliance on lottery revenues underscores the need to ensure convergence, rather than competition, between all forms of gambling within its boundaries.
- In fiscal 2019, gross gaming revenue – GGR, the money played in gaming facilities – could roughly be broken down into the seventh New York: four parts from video lottery casinos like the Saratoga Casino Hotel, two parts from India-run casinos and one Part of commercial casinos such as Rivers Casino & Resort.
- Employment at New York’s Casinos / VLT has grown from about 12,000 jobs in 2015 to about 15,700 in 2020 (pre-COVID), an increase from 3,700, all but 300 of which were in the four new commercial casinos that opened in late 2016 opened until the beginning of the state in 2018.
- The total employment impact increased from about 25,000 to 32,600, which means roughly one non-casino job was created for every casino job.
- Gaming contributed $ 2.9 billion to New York’s gross product in 2015 and rose to $ 4.2 billion in 2020.
- New York state increased from 15 venues in 2015 to 27 in 2019.
- For the region in the hinterland, all analysis methods indicate a considerable oversaturation. While above-average gaming participation and spending by the regional population are evident, this region’s gaming properties also attract those who live in other regions, as well as tourists to vacation spots like Niagara Falls and the Finger Lakes region, seemingly exceeding the GGR-saturated plains.
- The residents of the market in the hinterland are well served by the existing operators. While there may be isolated areas in which a new, small casino could thrive, adding capacity or amenities to existing operations would largely redistribute the existing regional GGR market, rather than expanding the market enough to increase the cost of capital involved justify.
- All analytical methods show that there is no room for sales growth in the hinterland market.
- However, the addition of hotel and resort facilities in select hotels could enable these operators to optimize their business models. This would result in a low number of incremental visits from off-market tourists and convention / meeting companies, although significant coverage of these market segments has so far proven elusive for the existing commercial casino operators.
- The potential of the New York market and its northern suburbs could be unlocked with new or expanded gaming facilities.
- The potential of the market in the northern suburbs of New York City could be exploited with a new VLT system, but this would have a negative impact on existing systems.
- The Long Island market is underserved when it comes to games but has seen limited expansion.
- As already mentioned, the market in the hinterland is saturated.
- Two dozen scenarios were analyzed, all of which involved new casinos in and / or near New York City. They resulted in projected 2025 GGR reductions of up to 44% at Resorts World Catskills in Monticello and 38% at Jake’s 58 on Long Island. Far to the north, the scenarios resulted in projected declines of up to 13% for the Rivers Casino in Schenectady and up to 8% for the Saratoga Casino Hotel, thanks to a ripple effect in the Hudson Valley. For all government gambling establishments – Indian, commercial and VLT – a decrease in GGR of up to 6% was forecast.
- It is important to maintain realistic expectations. Host communities – and even host countries – do not necessarily share proportionally the benefits or costs of gaming.
- Spectrum reviewed the academic literature using data-driven studies and found that most of the negative social effects of gambling can be attributed to gambling addiction.
- As legal gambling options expand in New York, the risk of gambling increases and there may be a short-term increase in gambling disorder. Potential impacts include crime, drunk driving deaths, and bankruptcy.
- However, such increases are likely to be short-lived as residents adjust to expand play options. In the long term, the prevalence rate of gambling disorders in New York should remain stable.
- Concrete conclusions are difficult to draw because the correlation does not prove causality. There is currently no indication that the opening of Rivers, for example, resulted in an increase in bankruptcy filings in Schenectady County, but there are very few years of data to analyze.
- In another example, the crime rate in Schenectady County is much higher than in Saratoga County. But it was also much higher than Saratoga County’s rate in 2016, the year before Rivers opened.
- After all, neither after the rivers opened, nor after the World Catskills or Del Lago resorts opened, the data shows any increase in local alcohol-related traffic delays or vehicle accidents.
- New York is one of the few states that impose different tax rates on different entities and this has raised questions of equity and fairness. However, New York is a very diverse state in every way – a statewide rate simply isn’t a sensible option given this economic and demographic diversity.
- The most effective way to ensure that future tax considerations and changes are based on economic principles is to propose that operators apply to the state for relief.
- Petitions would be considered individually based on the entirety of the circumstances. The licensee would need to state in detail the reasons for applying for the tax adjustment and provide all necessary documentation. In all cases, the licensee would need to demonstrate that the granting of the requested relief promotes a legitimate public interest, which could include the ability to continue operating.
- The licensee would need to demonstrate that the reason for the requested relief was due to external causes beyond the control of the licensee and not due to unsuccessful management decisions that adversely affect operational performance.
- Spectrum estimates that combined retail and digital sports betting would generate an annual PIA of $ 816 to $ 1.14 billion across the state of New York.
- Various scenarios for advanced private sector sports betting, taxed at a 10% tax rate, would result in annual mobile sports betting tax revenues of $ 72-99 million.
- (Cuomo has suggested that the state government control mobile sports betting, much like they run the lottery, and keep most of the revenue to itself, with only a commission going to the private contractor who does the real work. This model doesn’t seem like it to be taken into account in the report.)
- The games industry is robust. While this was once thought to be recession-proof, it has not proven to be the case. However, people enjoy gambling, socializing, and entertainment. Spending on entertainment and other non-essential items declines during recessions but gradually returns as consumers gain confidence in their economic situation.
- Around 1,000 casinos across Germany closed their doors in spring 2020 due to the COVID pandemic. Most had reopened at least partially by October 2020.
- The impact on gaming revenue in Southeast Asia after the 2003 SARS pandemic and in the US after the Great Recession was significant and persistent, with the recovery steadily but slowly recovering over the next several years.
- GGR is down in New York and is slowly recovering to pre-COVID levels. It was $ 3.82 billion in fiscal 2020 and is expected to be $ 3.25 billion in fiscal 2023.
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