• by Gary Leopold , Columnist, June 3, 2013

Foxwoods Resort Casino is fighting for its life as it confronts declining revenues, a huge debt burden and the prospect of even more competition. What was once one of the gaming world’s greatest success stories is now desperately looking to find a way to breathe new life into a property that seems to have outlived its long-standing tagline, “The Wonder of It All.”

The word on the street is that Foxwoods is going through changes in its marketing team, as well as an ad agency review, all in an attempt to recapture its dwindling market share. It’s the latest development in its ongoing slugfest with the nearby Mohegan Sun casino and a growing list of gaming competitors in markets like Rhode Island and New York that are all siphoning away customers.

If Foxwoods’ marketing challenge wasn’t already tough enough, think about what happens when you mix in the potential for three new casinos and a slots parlor that have been approved by the neighboring state of Massachusetts—a market that represents 45% of New England’s population and 50% of its disposable income. More importantly, it’s estimated that 30% of all the business to Connecticut casinos is coming from Bay State residents, comprising more than 100,000 trips and spending of $40–50 million.

There’s also a plan to expand the casino in Saratoga, N.Y., and that state’s governor has put forward an aggressive proposal to add three more “destination” casinos upstate as a means to drive tax revenues and create jobs.

As if all that’s not daunting enough, casinos are also being discussed for Maine and New Hampshire, as their respective legislatures look to drive revenue and cringe at the thought of having their residents spend dollars at ever-closer casinos in neighboring states.

The only good news is that many of these projects are still years away from being built and most still have to go through laborious rounds of government and legal review, which is never a quick process.

While there’s no question that the rise of another gaming venue has the potential to lead to revenue windfalls (the Aqueduct “racino” is said to have had over $11 billion wagered and raised over $684 million for New York City in the first year alone), one has to question where the tipping point is, and whether the continuing growth of casino supply isn’t outpacing market demand.

As populous and affluent as the Northeast market is, you have to wonder how many massive casinos the region can absorb and how realistic it is to expect the kinds of returns in tax dollars, jobs and economic impact that are being predicted. After all, it does give you pause when someone like Sheldon Adelson finds the situation untenable.

How much business is there that can be generated that’s new or incremental versus the growing reality that a good chunk of what these gaming venues are going to be doing is splintering the existing revenue pie and largely stealing share from one another.

With a sizable part of the market being driven by convenience gamblers, who tend to play at whatever casino is closest to their home, the lure of ever-more convenient venues automatically shifts their choice. And no great marketing effort is likely to overcome that reality on a consistent basis.

So, as Foxwoods looks to hire a new agency and reshape its story, it’s hard to imagine that it’ll ever come close to replicating the incredible success it enjoyed in the early ’90s when it opened and provided a fresh and exciting alternative to Atlantic City.

To understand the potential impact of new casinos opening up in populous markets, one needs only to look at Atlantic City and the hit it appears to be taking with the opening of casinos in nearby Philadelphia. The New Jersey State Division of Gambling reported that April 2013 revenues in Atlantic City were down 14% over the same period the year before, and table games declined over 14%.

Just as telling is the teetering $2 billion Revel project in Atlantic City, which collapsed into bankruptcy shortly after opening, and reported a 40% decline in revenues from its opening month a year earlier. With 6.8 million square feet of space, 1,898 guest rooms, 14 restaurants, a 31,000-square-foot spa, two concert venues, two nightclubs and 130,000 square feet of gambling floors, it certainly fills the bill as a destination casino. But even the recent economic recovery hasn’t been able to produce the volume of customers and bets that is required to fill the coffers of all the current facilities, never mind those that might be in the pipeline.

Now is the time to more realistically calibrate where business is coming from and examine whether the investment in a bevy of new destination resorts in the Northeast can be sustained once the market boasts such a diverse and abundant array of gaming venues. Perhaps projects can be more effectively scaled and phased in over time, ensuring that they survive and thrive.

Like all games of chance, there will no doubt be winners and losers. Maybe it will even be possible for everyone to be “successful” as long as success is tied to realistic expectations and supported by market realities.

However, if developers and states in the Northeast aren’t careful, they may quickly find themselves like Foxwoods — once called, “The Wonder of the Connecticut Woods” — now left wondering where all the gamblers will come from.