Bridgeport Is Lost and Then Found Again

December 15, 2017 11:47 PM
  • Ken Adams, CDC Gaming Reports
December 15, 2017 11:47 PM
  • Ken Adams, CDC Gaming Reports

In November, during MGM’s third quarter earnings call, CEO James Murren announced a change in strategy for the corporation.  Murren said that after a very aggressive decade of expansion and construction, MGM would no longer be seeking opportunities in new markets, except in Japan.  If MGM does nothing more than open the two properties currently under construction, it will have accomplished a great deal since the end of the recession.  MGM has been the most active player in the gaming industry in the U. S.

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In just two years, MGM completed a $900 million purchase of Boyd’s 50 percent share of Borgata. It opened the billion-dollar MGM National Harbor in Maryland. and created a real estate investment trust.  MGM plced 11 of its properties in MGM Growth Properties LLC.  In 2018, it will open the $950 million MGM Springfield in Massachusetts, the $3.3 billion MGM Cotai Strip in Macau and a remodeled, rebranded $450 million Park MGM in Las Vegas.  In its latest round of buying and building MGM has spent about $7 billion.  Still with all of that, Las Vegas is MGM’s home; nine of MGM’s properties are there and the combined income of those nine makes up 53 percent of the company’s revenue.

More than any other major national/international gaming company, MGM is centered in Las Vegas.  The percentage of revenue generated by its Strip properties is far larger than its peers.  By comparison, Wynn gets only 28 percent of its revenue from Vegas and the Sands even less at 13 percent.  In absolute numbers the Sands produces $1.3 billion more from the Strip than MGM, but it is a much smaller percentage of that company’s total revenue.  Wynn and Sands derive the majority of their revenue from Asia.  MGM has more properties in this country than Sands and Wynn.   Las Vegas Sands has only one casino in Pennsylvania and Wynn will not have an American casino outside of Vegas until Wynn Boston Harbor opens in 2019.   The current ratio of Las Vegas revenue to total corporate revenue will change next year when MGM Cotai opens.  Even with another casino in Macau, Las Vegas will remain the core of MGM’s business.

Nationally, MGM appears to have accomplished its goal of becoming the dominant player in the country; although a rejuvenated Caesars and a merger between Pinnacle and Penn National could change that.  But, if MGM falls short of its original goal it will not be by much; and there have only been a couple of misfires along the way.  In 2011-12, Miami seemed up for grabs and MGM threw its hat in the ring.  In 2013, MGM expressed a strong interest in a license in New York, if it could be close to New York City.  And earlier in 2017, MGM was in discussion with Sands Las Vegas to buy Sands Bethlehem in Pennsylvania.  However, when it was clear that some form of expansion would come out of the Pennsylvania legislature’s budget debate, MGM opted out of Pennsylvania.  And during the debate in Connecticut over a potential new Indian casino, another city, Bridgeport, surfaced as a possible site for a new MGM.

For MGM, Bridgeport was a defensive move intended to protect its investment in Springfield.  Connecticut and Massachusetts are squares in a chess game being played by the Mashantucket Pequot and Mohegan tribes and MGM for control of the region’s casino customers.  When MGM was awarded a license for a casino in Springfield, the tribes operating Foxwoods and Mohegan Sun in Connecticut petitioned lawmakers to allow them to jointly build a casino on the Massachusetts border to protect their revenue.  Not surprisingly, the tribes received a positive response from lawmakers.  Between them, the tribes have paid billions of dollars into the Connecticut treasury; they agreed to pay the state 25 percent of slot revenue in exchange for permission to have slot machines and an exclusivity agreement.  For at least 15 years, the tribes prospered and Connecticut benefited and everyone was satisfied.  But with the expansion of gaming in Pennsylvania, New York and Maryland tribal revenues began dropping as rapidly as those in Atlantic City.  Both the state and the tribes have been impacted by gaming expansion in other states and both realized that Springfield would take significant revenues from Connecticut.  With the threat of an MGM just 70 miles away, the tribes decided it was time to fight back; they plan to build and operate jointly a casino to protect their revenue streams.

The tribes were successful in convincing lawmakers to give them permission to build a new casino, but have yet to receive permission from the feds.  When MGM realized it was going to be facing competition just a few miles from its as yet unopened casino, it sued Connecticut claiming it was unconstitutional to allow an uncontested licensee to open a casino in the state.  And then MGM began an aggressive campaign for a license in Bridgeport, Connecticut where they offered to build a $675 million resort and to pay the same tax rates as Foxwoods and Mohegan Sun.  The plan found many supporters in Bridgeport and those supporters were willing to go to the legislature next year to help plead MGM’s case.

Interestingly, when Murren made his strategic change announcement, Bridgeport appeared to have fallen through the cracks.  Its absence was confusing as in September and October, MGM representatives were still enthusiastically pitching their case to Bridgeport and Connecticut lawmakers.  So when James Murren said MGM was finished expanding and building new casinos, it shocked many people as they were simply caught off guard.  “Did he forget Bridgeport,” they wondered?  It was strange indeed.  The tribes seized on the opportunity to poke fun at MGM.  The people in Bridgeport felt betrayed.

The situation is no longer as confusing; Murren is back on the road in Connecticut lobbying for legislation to permit bidding on a license.  The legislature will not be in session until “the Wednesday after the first Monday in January, but Bridgeport and a casino license are certain to be on the agenda.  In the meantime, we will all be looking forward to the fourth quarter earnings call by MGM to find out about their new strategy.  Inquiring minds want to know about the city that was once so important, but somehow forgotten and then remembered and restored to its former importance.