Rolling the Dice

Rolling the Dice

Coverage of casino licensing and the gambling referendum

Wynn CEO: Encore spending levels will decline

Wynn CEO: Encore spending levels will decline

Daily operating cost of hotel/casino estimated at $1.45m

THE CHIEF EXECUTIVE of Wynn Resorts signaled on Wednesday that the company needs to rein in costs at the Encore Boston Harbor in Everett, with the casino and hotel reporting a nearly $41.7 million operating loss for the three-month period ending September 30.

During a conference call with financial analysts after the release of the company’s third quarter report, CEO Matt Maddox said Encore Boston Harbor was still ramping up operations and tweaking its business model. But, in response to a financial analyst’s question, Maddox also said there is a need to rein in spending. One analyst estimated Encore Boston Harbor is spending $1.45 million a day to run the property, and wondered if there was some cushion in that number that could be reduced .

“I don’t want to say there’s plenty of cushion, but clearly when you open a property you have more staff than you end up needing when you operate in a very efficient way,” Maddox said. “I would think the $1.4 million will definitely be on a downward trajectory in 2020.”

Craig Billings, the president and chief financial officer of the company, said the $1.4 million daily cost would definitely be the peak amount.

The $2.6 billion Everett casino originally talked about hiring close to 5,500 employees, but that number is believed to be well below 5,000 now.

Overall, Wynn Resorts reported a net loss of $3.5 million for the three-month period ending September 30, compared to net income of $156.1 million during the same three-month period in 2018. Earnings before interest, taxes, depreciation, and amortization was $396.9 million, down 21.3 percent from a year ago. Earnings before interest, taxes, depreciation, and amortization was $7.7 million at Encore Boston Harbor.

The Everett casino has generally been pleased with its table game operations but dissatisfied with its slot machine performance. The third quarter numbers were in sync with those sentiments. Encore Boston Harbor’s table game win per unit per day was $5,631, which was higher than the $3,927 number reported for the company’s Las Vegas casinos. However, the slot machine win per unit per day was $219 in Everett, which was significantly lower than the Las Vegas number of $355.

The third quarter was the first full quarter for Encore Boston Harbor, which opened on June 23. Operating revenue was $175.8 million, consisting of $114.9 million in casino revenues and $60.9 million in revenue from hotel, beverage, entertainment, and retail operations. The room occupancy rate at the hotel was just under 70 percent. One of the company’s financial charts indicated Encore Boston Harbor had a $41.7 million operating loss during the quarter.

Maddox told the financial analysts that the company hopes to launch a sports betting operation in New Jersey in early 2020 and then roll it out across the country. He said the company hopes to deploy it in Massachusetts, calling it a “game-changer.” He said Encore Boston Harbor is currently building out a sports bar that could eventually become a sports book.

Maddox again brought up the 11 acres the company owns across the street from the casino. “Many developers have been talking to us about partnerships where we could have new hotels, retail, etc.,” he said. ““We’ve been thinking about that more as landlords and partners as opposed to outright developers, but first we’re going to ramp up Encore Boston Harbor and then we’re going to watch the neighborhood build up.”

To entice customers, Encore discounts trips to casino

To entice customers, Encore discounts trips to casino

Free buses for loyalty members, practically free ferry rides

SINCE ITS JUNE OPENING, Encore Boston Harbor has slashed the cost of travel to the Everett casino, first offering free parking and now adding free bus service to some and steeply discounted boat travel to all.

At the same time, the casino has lagged behind in its revenue projections, putting it on pace to reach $600 million in gross gaming revenue in its first full year of operation, a far cry from its $1 billion goal. The moves announced Monday appear designed to entice more gamblers to the $2.6 billion Wynn Resorts development on the banks of the Mystic River.

While the change has been in the works for some time, the new free bus and expanded ferry service was the first big announcement by Encore President Brian Gullbrants, who was promoted to the top position last week, replacing Robert DeSalvio.

“Due to the incredible success we’ve seen with our free self-parking, we have decided to expand our complimentary offerings to our mass transit options as well,” Gullbrants said in a statement Monday. “We hope this continues to show our patrons how thankful we are to be Greater Boston’s hometown casino.”

Customers who sign up for Wynn’s Red Card loyalty program will now be able to take free buses to the casino to and from three Massachusetts locations – Millbury, Rockland, and Gillette Stadium in Foxborough –as well as Londonderry, New Hampshire. Seats aren’t guaranteed for travelers taking advantage of the complimentary bus service. Red Card members who want to reserve will need to pay the regular $7 fare.

When it first opened, Encore offered its own maritime travel service for $7 each way to and from the casino’s pier on the Mystic River to locations in Boston on the harbor. On Monday, Encore announced it would add new ferry service to East Boston, and deeply discount travel aboard its fleet of vessels, which look more like sleek motor yachts than traditional ferries.

The cost of traveling to the casino will remain $7, but patrons will receive a $7 food and beverage credit in exchange, and the boat trip back from the casino will be free of charge. So for anyone planning to dine at the casino, the boat trip there and back would be essentially free.

The new East Boston stop will pick up near The Eddy, a luxury housing development that advertises studio apartments starting at $2,000 per month. With the addition of the East Boston stop, Encore’s boats will run along two routes every 30 to 35 minutes rather than the one route with service every 20 to 30 minutes. Heading into the colder months, the ferry service will also start a couple hours later in the day, with the first runs setting off at 11:45 a.m. and at noon.

The casino transformed a polluted empty lot into a major destination, but the resulting traffic that residents of Charlestown feared hasn’t quite materialized.

However, Rosie Salisbury, a spokesperson for Encore, said the free parking incentive has been successful, and the gambling giant plans to offer more perks for customers enrolled in its loyalty program.

“We saw an overwhelmingly positive response when we implemented free self-parking to our guests and made the decision to expand the complimentary offering to our other mass transit options,” Salisbury said by email. “The water taxi is an important component to our traffic mitigation plan, so we adjusted rates to meet the demand of our guests.  The complimentary motor coach offering to our Red Card members is just another great perk of being a player at Encore and we will continually roll out exclusive benefits to these members.”

Encore is required to report its gross gambling revenue figures to the state – which takes a 25 percent cut – but the casino has been more veiled about the actual attendance at the resort, which is the second casino in Massachusetts and the first in the Boston area.

Henry showed interest in Wynn property

Henry showed interest in Wynn property

Discussed possibilities for 11 acres near casino

WYNN RESORTS has held some preliminary discussions with John Henry, the owner of the Boston Red Sox and the Boston Globe, about working jointly on the development of property the casino operator owns across the street from Encore Boston Harbor, according to two people familiar with the discussions.

The discussions were held some time ago and didn’t immediately gain traction because Encore Boston Harbor was just opening and Wynn officials still believe it’s too early to move ahead with development of the surplus property. Still, the discussions suggest Henry, who together with others expressed interest in buying the casino in 2018 and again in 2019, remains interested in gaining some sort of foothold in the area.

A Globe spokeswoman said an inquiry about the discussions had nothing to do with the newspaper so she declined to provide any comment. She declined to make Henry available.

Michael Weaver, a spokesman for Wynn Resorts, said CEO Matt Maddox has told financial analysts that the company has received inquiries from many companies interested in doing projects on the land across the street from the casino. “We haven’t disclosed who they are,” he said.

Wynn Resorts has made no secret of its desire to develop roughly 11 acres it has acquired near the casino. It showcased the property in a recent presentation to analysts and Maddox spoke enthusiastically about the development potential at a press conference just prior to the casino’s opening in June.

“We want to work with the city to create an entertainment district,” Maddox said at the time. “It’s not all going to be our company – Wynn. We want to work with lots of local developers, potentially other hoteliers, convention centers, etc. But our idea, along with the mayor’s, is to continue to redevelop the area so it’s known as the entertainment district in the Northeast.”

Wynn brings in new managers in Everett

Wynn brings in new managers in Everett

New president hired, 2 others join casino

WYNN RESORTS shuffled its top management team at Encore Boston Harbor on Wednesday, removing president Robert DeSalvio and elevating Brian Guilbrants, the head of food and beverage, to replace him.

Rumors have circulated for months that DeSalvio was not going to be the long term leader of the hotel and casino in Everett and that Wynn Resorts CEO Matt Maddox had concerns about the way Encore Boston Harbor was being led.

The company reported revenues for September on Tuesday and the numbers were well below what Wynn Resorts has been projecting, although company officials said it may take three years to ramp up to forecasted revenue levels. The company recently did away with parking fees at Encore Boston Harbor, another bid to entice more customers to the facility.

A company press release said that DeSalvio decided to step down after five years of leading the Wynn team in Boston and orchestrating the opening of the facility in June. In addition to Guilbrants, Maddox said he was bringing in veteran casino executive Jenny Holaday to be the executive vice president of operations and Boston native Eric Kraus to take over as vice president of communications and public affairs.

Guilbrants has extensive experience in the Wynn organization. He led the opening of the hotel at Encore Las Vegas in 2008 and assumed oversight of both the Encore and Wynn hotels in Las Vegas in 2011. Prior to joining Wynn, Guilbrants held various positions with the Ritz-Carlton Hotel company.

Kraus has strong connections in Boston. According to the company press release, he led global corporate communications and public affairs for The Gillette Company. He also worked as executive vice president of Clean Harbors Inc. in Norwell.

September casino revenues lackluster

September casino revenues lackluster

Encore on pace to take in $600m over course of year

ENCORE BOSTON HARBOR reported $150 million in gross gaming revenue from July through September, putting the Everett casino on pace to bring in roughly $600 million over its first full year of operation if current trends continue.

The new numbers released on Tuesday suggest Wynn Resorts has a long way to go to reach its “base case” goal of $1 billion in annual operating revenues and even its “low case” target of $900 million. Company officials said in a July presentation to investors it may take three years to ramp up to those levels.

For September, the latest month available, total slot and table game revenue dropped to $49 million from $52.5 million the month before. For the first time, table game revenues tapered off on a month-to-month basis, falling 16 percent to $27 million in September. Slot machine revenue hit its highest level yet at Encore in September, rising 8 percent over August numbers to $21.9 million.

The news was not good at the state’s two other casino properties – MGM Resorts in Springfield and Plainridge Park Casino in Plainville.

MGM saw its total slot and table game revenue fall in September to nearly $19.9 million, the lowest level since January and the second-lowest monthly level since the casino opened in August 2018.

Plainridge Park, a slots-only casino, saw total revenues slip to $11.5 million in September, the lowest level since December 2015. September revenues were the second-lowest ever since Plainridge opened in June 2015.

The state collected a total of nearly $22.9 million in tax revenues in September from the three facilities — $12.2 million from Encore, nearly $5.7 million from Plainridge Park, and $4.97 million from MGM.

Encore dispenses with self-parking fees

Encore dispenses with self-parking fees

With casino traffic manageable, hefty charges eliminated

ENCORE BOSTON HARBOR is now letting its customers self-park for free at the Everett casino, dispensing with the hefty charges that had been in place since its June opening — $22 for the first six hours and $42 for up to 24 hours.

In a statement, Encore Boston Harbor President Robert DeSalvio characterized the introduction of free self-parking as a new amenity for guests, but the move also suggests the casino found the fees were discouraging guests from coming to the facility.

Five years ago, when Wynn Resorts was seeking its Massachusetts casino license, traffic was one of the biggest concerns. Casino officials at the time indicated they would do everything they could – including implementing parking fees – to encourage guests to visit the facility without driving. But since the opening of Encore Boston Harbor traffic has not been a problem.

The casino experimented with doing away with self-parking fees at the beginning of August, and decided to dispense with them entirely as of Friday. A spokeswoman said the feedback the casino received after the initial test was “overwhelmingly positive.”

Casinos in Las Vegas began moving to self-parking charges several years ago to boost revenues, but the two Wynn Resorts properties in Vegas reversed course and dispensed with the fees in May.

Encore Boston Harbor has approximately 2,900 parking spaces at its Everett hotel and casino.

What casino traffic?

What casino traffic?

The feared congestion at Encore hasn’t materialized

FIVE YEARS AGO, when the Massachusetts Gaming Commission awarded a license to a proposed casino on the banks of the Mystic River in Everett, traffic was one of the most pressing concerns.

The area was already heavily congested, and the conventional wisdom was that plunking a huge casino down near Sullivan Square would make matters much worse.

James McHugh, a former judge who served on the commission, said traffic was a very significant factor in the debate over the Wynn Resorts proposal in Everett. In fact, he voted to award the license to Mohegan Sun even though he thought Wynn had the better proposal because he was concerned the friction between Wynn and surrounding communities over traffic and other issues could prevent the casino from ever getting built. (see page 172 of transcript)

It almost looked like he was right. Boston Mayor Marty Walsh led the way, but Somerville Mayor Joseph Curtatone and Attorney General Maura Healey both grumbled about the traffic that would engulf the area. Eventually, they all came around or gave up, with Walsh signing a treaty of sorts with Steve Wynn.

And then a funny thing happened. With the politicians out of the way, traffic experts working for the state, the city of Boston, and Wynn Resorts put their heads together and came up with a traffic mitigation plan that appears to be working.

The Encore Boston Harbor casino has been open for three months, and traffic has not been a problem.

Everett Police Chief Steven Mazzie credits the road work in the area, most of it paid for by Wynn Resorts. And he says traffic has been manageable because visitors to the casino don’t tend to come during the morning and evening rush hours, so traffic in the area is spread out over the course of the day.

“The morning commute is the morning commute, it’s always been there. But it seems like it flows better,” Mazzie said. “Everyone I talk to, a lot of them say traffic has improved.”

The local Charlestown newspaper, the Patriot-Bridge, reached the same conclusion. “Few could have predicted that Encore would open and there would barely be a blip on the screen of the traffic situation in Charlestown, but it has been the case.”

Robert DeSalvio, the president of Encore Boston Harbor, is singing the same tune. “We’ve had no traffic issues since opening,” he told the Gaming Commission on September 12. “The entire traffic plan has worked.”

McHugh, who lives in Charlestown, says he has to agree with the assessment that traffic is not a problem in and around Sullivan Square and may even be better than it was before the casino arrived. Still, McHugh doesn’t think the no vote he cast or the traffic concerns he raised five years ago were a mistake. Once the political infighting ended, he said, the search for solutions began.

“The focus on the traffic problem galvanized people,” he said. “Government works.”

Slots slip, table game revenues keep rising at Encore

Slots slip, table game revenues keep rising at Encore

Overall, Everett casino sees 8 percent gain

SLOT MACHINE REVENUES at Encore Boston Harbor remained lackluster in August, while revenue from table games continued to surge.

Numbers released by the Massachusetts Gaming Commission on Monday indicated gross slot revenues at Encore were $20.2 million in August, down 4.4 percent compared to July. Assuming 3,100 slot machines at the casino, the daily revenue per machine dropped from $220 in July to $210 in August. That’s well below the revenue per machine at Foxwoods in Connecticut, which averaged $371 in August.

Even as slots revenue declined, the Encore casino in Everett continued to show surprising strength with its table games. Table game gross revenue in August was $32.3 million, up $4.8 million, or 17.6 percent, from July.

Overall, slots and table game revenue at Encore rose 8 percent to $52.5 million in August, of which $13.1 million went to the state in the form of taxes.

The other two gaming facilities in Massachusetts – MGM Resorts in Springfield and Plainridge Park Casino in Plainville – brought in a combined $33 million in August, of which $11.2 million went to the state.

The split between table game and slot machine revenue at Encore was 61-36 percent. At MGM, it was just the opposite, with 75 percent of the revenue coming from slot machines and 25 percent from table games.

Chicago casino magnate: "You lose me."

Chicago casino magnate: “You lose me.”

Gaming commission delivers blow to Brockton casino proposal

THE BILLIONAIRE CASINO developer who has been pushing for years to build a casino in Brockton suggested that he will drop his efforts after the Massachusetts Gaming Commission determined Thursday that it will not reconsider its 2016 denial of his Brockton casino bid.

Neil Bluhm, the chairman of Mass. Gaming and Entertainment, told the Gaming Commission that he has spent millions of dollars on studies and planning in hopes of building a casino at the Brockton Fairgrounds. But with a vote to deny his request to reconsider an earlier denial looming, Bluhm told the commission they would be effectively ending his interest in vying for a Massachusetts casino license.

“To vote that you are not going to reopen this under any circumstance, I don’t know how I can continue to hang in here on behalf of Brockton. I’ve spent millions of dollars,” Bluhm said. “To deny this request, I think you lose me. I can’t hang around. I’ve been doing this for more than five years.”

The Gaming Commission met Thursday to clear up a variety of issues associated with the still-unassigned casino license for the southeastern part of the state, known to the commission as Region C. More than a year ago, Bluhm’s Mass. Gaming and Entertainment requested that the commission “agree to reconsider MG&E’s application without reopening the [licensing] process more broadly.”

The commission on Thursday heard from its lawyers and lawyers for MG&E to determine whether the regulators have the authority to reconsider a previous licensing decision and then whether “there are sufficient grounds in this case, whether they exist to properly exercise that authority,” Chairwoman Cathy Judd-Stein said.

By a 3-1 vote, the commission ruled that it does have the power to reconsider its past licensing decisions but that there were not sufficient grounds to reopen MG&E’s specific proposal and reconsider the 2016 license denial.

Commissioners were concerned that by reopening the years-old MG&E proposal, the commission would be preventing other interested parties from applying for the license given some of the changes to the gaming and business landscape since the commission’s 2016 ruling. Commissioner Enrique Zuniga was the lone ‘no’ vote and he expressed an interest in gauging interest from other developers before deciding whether to consider MG&E’s proposal on its own.

Bluhm and his attorneys from Goodwin Proctor argued for the same.

“I don’t honestly know how long you expect us to be hanging around here for Brockton,” the Chicago casino magnate said. “I don’t see why you can’t vote that you have the authority to reconsider and then for a period of time see what interest there is for others to potentially bid on this. And then, if you have no interest, then you can go back and make your decision.”

The commission’s lawyers and those representing MG&E were in agreement that the commission has the authority to reconsider its decisions, but one commission lawyer warned the regulators against establishing a precedent in which rulings routinely change after they are made.

“The power to reconsider must be sparingly used if administrative decisions are to have resolving force on which persons can rely; meaning that, obviously, once a decision is made you don’t want to go around changing decisions people have come to rely upon unless there is a good reason,” deputy general counsel Todd Grossman said.

The mayor of Brockton, who attended Thursday’s meeting with Bluhm and others, told commissioners that his city often feels like it gets the short end of the stick when Massachusetts makes economic development decisions.

“We from the southeastern part of the state feel that Massachusetts ends around [Route] 128 and the rest of us are left with crumbs, we get crumbs, and we don’t have the ability to do much for ourselves because we often feel the state doesn’t do much to help us out,” Brockton Mayor Moises Rodrigues said. “Any time an opportunity shows up or presents itself, for some odd reason the upper part of the state gets it, the western part of the state gets it, Boston gets it, and we are left with absolutely nothing.”

He added, “there is a severe miscarriage of justice when it comes to providing the fourth largest community in Massachusetts with resources and opportunities, that’s all we’re asking for. I implore you, even though you’re sitting here saying you don’t want to reopen this because there probably could be some additional competition coming down the pipeline.”

Judd-Stein noted the commission’s vote Thursday does not preclude MG&E or any other developer from seeking the Region C license if or when the commission decides to embark upon a new bidding process for that license.

Of concern in Region C when the commission rejected the Brockton proposal from MG&E by a 4-1 vote was the possibility of the Brockton casino competing with the Mashpee Wampanoag tribe’s planned $1 billion First Light Resort and Casino in Taunton, less than 20 miles from the site of the planned Brockton casino.

Since the commission denied the MG&E/Rush Street proposal, the decision to grant the tribe land in trust on which the tribe planned to construct the casino has been reversed and the future of the tribe’s plan remains in doubt.

“The situation that existed when this commission made its decision with that 800-pound elephant in the room has changed dramatically and that 800-pound elephant has shrunk to the point of disappearance,” David Apfel, one of MG&E’s lawyers from Goodwin Proctor, said.

In its ruling from 2016, the commission wrote that it determined MG&E’s application demonstrated that it had not “thought broadly and creatively about creating an innovative and unique gaming establishment that will create a synergy with, and provide a significant and lasting benefit to, the residents of the host community, the surrounding communities, the region and the Commonwealth of Massachusetts, and will deliver an overall experience that draws both residents and tourists to the gaming establishment and the Commonwealth of Massachusetts.”

At the time, then-Chairman Stephen Crosby said, “Bottom line, I end up feeling like this does not meet the standards that are required to make the decision. I think that I come down on the side that this does not warrant an award.”

Commissioner Bruce Stebbins said in 2016 he had “some concerns about the strength of this application” and said he didn’t “want to make an award of a license to an application that, in my estimation, is just not up to the level of excellence that I would expect.”

Wareham gaming proposal gets cool reception

Wareham gaming proposal gets cool reception

Local senator not on board; Rosenberg urges caution

A QUINCY DEVELOPER with an interesting Wareham racino proposal called on the Legislature to revisit the state’s gaming statute, but early feedback from Beacon Hill and one of the drafters of the law suggested the idea was unlikely to gain any traction any time soon, if at all.

Thomas O’Connell, a developer who previously built the Marina Bay Complex and Granite Links Golf Club in Quincy, on Tuesday unveiled his $300 million proposal for Wareham Park just off of Route 25. The park, on the site of a sand pit, would feature a new thoroughbred race course with a 1-mile track, a new ballpark for the local Cape Cod League team, a 171-room hotel, and a sports field complex for local teams. O’Connell said the park would revive thoroughbred horse racing in Massachusetts and employ 1,000 full-time employees.

O’Connell said he needed two key extras to make the project work, a new interchange to the property off of Route 25 and a state license for a slots parlor that would be attached to the track. The slots parlor is a big ask, since the state’s current gaming law permits only three resort-style casinos – one out west (MGM in Springfield), one in Greater Boston (Wynn Resorts in Everett), and one in southeastern Massachusetts – and one slots parlor (Plainridge Park in Plainville).

O’Connell wants the Legislature to tweak the law to give the Massachusetts Gaming Commission more flexibility in determining what type of facility should go in southeastern Massachusetts, allowing for the possibility of a second slots parlor.

“The market has changed since the casino law was written,” O’Connell said at a press conference in the ballroom at Granite Links. He predicted a resort-style casino would never get built in the southeastern Massachusetts region because the market is already saturated.

“The only thing that would be accomplished with that is there would be a destabilization and cannibalization of the existing license holders, and that makes no sense,” he said.

Notos Group, the company O’Connell created to advance the Wareham Park project, has retained two lobbying firms – Preti Strategies and Considine & Furey LLC.

The Massachusetts Gaming Commission is currently trying to decide what to do with a request to revisit a casino proposal from Mass Gaming & Entertainment for Brockton, but at some point in the near future it will probably have to step back, update its analysis of the Massachusetts casino market, and decide what course of action to take in southeastern Massachusetts.

Stan Rosenberg, the former state senator who drafted the original gaming law, said O’Connell’s pitch to Beacon Hill raises a host of complicated issues. First off, no casino has been approved for southeastern Massachusetts yet because everyone is still waiting to see if the Mashpee Wampanoag tribe will gain the necessary federal approvals to open a casino in Taunton. That process has dragged on for years, but regulators are wary of moving ahead with a commercial casino as long as there is a possibility of a tribal facility; no one wants to end up with two resort-style casinos in the same region.

Rosenberg also warned that anything could happen once the Legislature starts debating changes to the casino law. A Worcester lawmaker is already pushing for a casino in that area, and once the debate begins it’s unclear what will emerge.

“You open that statute up and it is going to be another full-blown casino debate in Massachusetts,” Rosenberg said. “I would say proceed with extreme caution.”

Sen. Marc Pacheco of Taunton, whose district includes the property where O’Connell wants to build, said he would not be supporting the project. He said the Legislature should follow through on the gaming law’s original plan and develop a resort-style casino in southeastern Massachusetts before doing any tinkering.

“There is plenty of room in the market for a destination casino in Region C,” Pacheco said, using the regulatory term for southeastern Massachusetts. He dismissed O’Connell’s analysis suggesting the market is saturated already. “He’s saying what he needs to say for his own interests,” the senator said.

Pacheco said southeastern Massachusetts shouldn’t settle for a slots parlor, which requires a minimum investment of $125 million, as opposed to the $500 million minimum investment required for a resort-style casino . “We don’t want to be in a position where southeastern Massachusetts gets the leftovers – again,” he said.