TimesLeader.com

Mohegan Sun at Pocono Downs

October 12
Casino copes with SLOTS SLOWDOWN

Mohegan Sun CEO says company bracing for slow months ahead, readying for eventual economy rebound.

By Ron Bartizek rbartizek@timesleader.com
Business & Consumer Editor

PLAINS TWP. – Gambling industry veterans say that for the first time they’re on the losing side in an economic slowdown that is hurting casino business nationwide.

Gamblers filled the new Mohegan Sun at Pocono Downs casino on its opening day. Economic conditions and an erratic stock market have meant the casino’s 2,500 slot machines haven’t been as busy as expected.

S. John Wilkin/the times leader

Gambling revenue on the Las Vegas Strip fell by 7 percent in August to the lowest monthly total in more than two years. That followed a 15 percent drop in July. Atlantic City casinos have struggled all year in the face of both strapped customers and new competition in Pennsylvania.

Mohegan Sun at Pocono Downs has not escaped the slump in business; despite having twice as many slot machines in service, wagers declined by nearly 7 percent the week of Sept. 29-Oct. 5 compared to the same week a year ago.

“It’s discretionary dollars, we’re going to feel it,” acknowledged Downs chief executive Robert “Bobby” Soper.

“What we’re noticing is while our volumes (of people) are still fairly good,” they are risking “substantially less,” which he sees as a direct indicator of slack economic conditions.

The local casino is reflecting a trend that also has hit its parent facility, the Mohegan Sun in Connecticut, where a $735 million expansion has been halted for at least a year. Nearby competitor Foxwoods is laying off 700 employees – 6 percent of its workforce – and on Tuesday fired its chief executive.

On Wednesday, Split Rock Lodge, Kidder Township, Carbon County, asked the state Gaming Control Board to remove its application for one of two available licenses that allow vacation resorts to install up to 500 slot machines.

The financial benefit of gaming at Split Rock would have been “very marginal,” the resort said in a press release, and the company needs to be “both prudent and cautious.”

That describes Soper’s approach to the challenges facing Mohegan Sun at Pocono Downs as patrons watch their investment portfolios shrink and anticipate sharply higher heating bills.

“We’ll focus on the things we can control, such as limiting expenses and maintaining guest service,” he said. “When all is said and done you just weather the storm.”

On the revenue side, the local casino runs the “tightest” slots among Pennsylvania’s seven casinos, retaining about 9 percent of wagers compared to a statewide average of 7.5 percent during the fiscal year that started July 1.

The weakness began in the spring: “I think everybody felt a little pinch earlier this year,” Soper said. An expected spike in business that followed the July 17 opening of a $208 million permanent casino withered by September, when wagering increased by less than 10 percent compared to 2007. The new casino holds nearly 2,500 slot machines; 1,200 were operating last year in the temporary facility.

Financial turmoil that hit the headlines late in September, including a 778-point drop in the Dow Jones industrial average on Sept. 29, had a more immediate effect.

“I think that was alarming to a lot of people,” Soper said. There may have been a direct effect on some gamblers’ bank accounts, but “it was also psychological.”

Soper said the slowdown has not affected employment or ongoing projects, such as a new banquet hall that will open later this month in space formerly occupied by the temporary casino’s food court. “We’re moving forward with that,” he said. “We’re going to make other improvements there that will expose our property more and will pay dividends” when the economy turns around.

The new casino includes several restaurants, clubs and retail shops that help cushion the effect of weakness in gambling.

“The more well-rounded a property is the more avenues it has to attract customers,” said Joe Weinert, senior vice president of industry consultant Spectrum Gaming Group.

The Mohegans operate the buffet, a sushi restaurant, two bars and a logo merchandise shop in the Downs casino; they collect rent from the other 10 eating places and three retail stores. Unlike gambling revenues, which are taxed at 55 percent, other income is subject to normal business rates.

Weinert said that Pennsylvania’s young casinos are still in a growth mode, but “we predict that growth is going to slow. The casino industry will follow the larger economic picture.”

A deeper slump could affect homeowners if tax receipts slip; gambling taxes contributed to approximately $170 per household in property tax relief this year. Right now the portion of the gambling tax dedicated to property tax relief is holding up and at $969.5 million is 3.3 percent ahead of projections made in April, said spokeswoman Susan Hooper of the Governor’s Budget Office.

One Downs restaurant has responded to diners’ thinner wallets with a new menu item.

“We’re doing great,” said Jeffrey Metz, president of the Metz Group, which operates a Ruth’s Chris Steak House in the Mohegan Sun at Pocono Downs casino.

But, “because economy is tough I created a value menu. It’s all about value right now.”

When it opened, the restaurant advertised a two meals for $89 special. Now, a salad, entr�e and side dish go for $35.95.

Metz said many of his customers are not gamblers but come for a high-end dining experience at the chain with locations mostly in metropolitan areas.

As he adjusts to a new economic reality, Soper is looking on the bright side. “From our standpoint there is a silver lining;” potentially competitive casino projects are sidelined by a lack of capital for expansion.

“The downside is we opened in a poor market condition. The upside is when the market eventually improves we’ll be ready to go.”

Ron Bartizek, Times Leader business editor, may be reached at 970-7157.