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August 19, 2013

CT casinos embrace new market

Photos | HBJ File Mohegan Sun (left) and Foxwoods (right) casinos face declining slot revenues.

Once the dominant forces in the Northeast, Connecticut's two resort casinos are preparing for a future of creating profits on declining revenues.

Foxwoods Resort Casino in Mashantucket and Mohegan Sun in Uncasville raked in more than $1.7 billion in slot revenues alone during their peak years in the late 2000s, but the economic slowdown and increased competition in the gaming market has forced them to refocus.

Slot revenues declined to $1.2 billion in the last fiscal year that ended in July, as more competitors popped up on the landscape in New York, Rhode Island, and Pennsylvania.

With Massachusetts set to approve four gambling establishments in the next year, Foxwoods and Mohegan will see further erosion of their market share in which they once held a duopoly. Both casinos are vying for Massachusetts resort licenses, although both are up against several other proposals from national renown operators like MGM and Caesars Entertainment.

While slot revenues are only a portion of the Foxwoods and Mohegan business, they are the only ones both are required to disclose publicly, and are an indicator of how busy the casinos are. Other revenue streams include hotels, concerts, restaurants, table games, spas, golf courses, and Keno.

As these numbers decline, both Foxwoods and Mohegan have slashed expenses to find profitability on smaller revenues.

Mohegan laid off 300 workers in September and refinanced $1 billion worth of debt in March 2012. Foxwoods reduced and refinanced more than $2 billion worth of debt in July, most of which was accumulated during its MGM Grand expansion.

Now, both casinos expect less business and are more sharply focused on profitability instead of generating enormous revenues. The grandiose expansions of their gaming properties have given way to more diverse developments, such as proposals from both to expand their retail shops.

But credit rating agency Moody's last week said added revenue from retail developments likely won't make up for the loss of gaming revenue.

Scott Butera, Foxwoods chief executive, said the casino had targeted decreased revenues when the resort saw a 4.6 percent decline in its slot business in July.

With the new focus, Foxwoods and Mohegan appear to have reached a good spot in the newly competitive Northeast market. Further expense cuts, however, will depend on how well their Massachusetts ventures pay off.

“If their bids fail, they will face continuing deterioration in gaming revenue,” wrote Moody's analyst Peter Trombetta in a research note last week. “If they are selected, they would see their business prospects brighten considerably.”

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