Game On! Clash of the Casino Titans
IN DECEMBER, WHEN FOXBORO’S board of selectmen voted 3–2 against allowing Bob Kraft and Las Vegas mogul Steve Wynn to build a $1 billion resort casino in town, you might have thought that was that. Ha! With millions and billions at stake, nothing dies easily. There’s still a path to gambling gold for Kraft and Wynn. And that means we’re all in for a good old-fashioned power struggle. The new gaming law allows for just one casino in the eastern part of Massachusetts, and some of the state’s — and the country’s — wealthiest and most influential people are lining up against one another for the rights to it. On one side are the owner of the Patriots and the man who practically invented modern Las Vegas. On the other are the execs behind Suffolk Downs — a group that boasts some of the deepest political connections in town, a Trump apprentice, and a hotshot Harvard Business School prof turned casino magnate. Rest assured — nobody’s going down without a fight.
Robert Kraft and Steve Wynn fight for Foxboro.
Gary Loveman, Joe O’Donnell, and Richard Fields push for Suffolk Downs slot machines.
A bird’s-eye view of how the casino chips may fall across Massachusetts.
So who really gets to make the big decision?
Illustration by John Ueland.
1. Robert Kraft, Owner, New England Patriots
Kraft has spent years turning the Patriots into winners, and Foxboro into his personal kingdom. He’s already built a new football stadium there, and in 2007 he added Patriot Place, the open-air shopping center complete with a movie theater and hotel. The only thing missing is a resort casino next door. NFL rules prohibit him from having an ownership stake, so he would have to lease his land to Wynn, who’d develop the casino on his own.
2. Steve Wynn, Chairman and CEO, Wynn Resorts
Wynn’s great innovation was realizing that luxury and decadence could draw customers just as well as the jingle of slot machines. From the theater he built at the Mirage for Siegfried and Roy to the multimillion-dollar art collection he amassed at the Bellagio (both properties he’s since sold) to the Ferrari-Maserati dealership in Wynn Las Vegas, his over-the-top designs are known for their opulence and attention to detail.
The Issue with Fickle Foxboro
Selectmen may have voted down the idea of a casino in Foxboro, but town manager Kevin Paicos says the action was nonbinding since it wasn’t in response to a formal proposal. It was more like a polite request that Wynn and Kraft please go away. Paicos says it’s his understanding that they will not. The next step is for the Foxboro duo to submit a formal application. The proposal will then have to clear the board of selectmen (where things are known to change — a September vote, for example, was 5–0 against allowing zoning for a casino. Kraft and Wynn have picked up a couple of votes since then, and perhaps more will follow in the months ahead.) Then they’ll need to win a townwide referendum. After that, two-thirds of town-meeting voters would have to vote to change zoning laws to allow for gaming. It’s a tall order, but not enough to stop Kraft and Wynn yet.
High Rolling: Wynn’s high-end style is fine in Vegas, where the gambling market is big enough that specializing in just its top level is profitable. But to be successful here, he’ll have to learn how to draw visitors from all walks of life. “Wynn tends to do a better job of cultivating the high-end gamblers, which is an expensive business to be in,” says University of Nevada Las Vegas gaming professor David Schwartz. He won’t have that luxury in Foxboro. Bottom Line: Wynn would be wise to scale things back, but it’s better to have too fancy a resort than one that skimps.
Temper Island: Wynn built a big chunk of the Vegas strip, but now runs only Wynn Las Vegas; its sister resort, Encore; and Wynn Macau. Over the years, he’s struggled to expand elsewhere in North America, striking out in Vancouver, New Orleans, and Connecticut, among other places. According to Bill Eadington, who studies gaming at the University of Nevada Reno, the brash Wynn “tends to implode, which is in many respects a cultural question. He’s got this phenomenal track record on actual performance; it’s really a challenge of, can he get through a competitive bid process without alienating the decision-makers?” Bottom Line: Wynn’s played it low-key in Foxboro so far, but give him enough time and he’ll likely shoot his mouth off.
Open Road: Simply put, a casino in Boston will make more money than one in Foxboro. “You’re going to see a revenue drop-off just based on proximity,” Eadington says. Then again, UMass Dartmouth’s Barrow says the infrastructure challenges in Foxboro aren’t as daunting as those in East Boston. Widening Route 1, or doing whatever needs to be done to ease Foxboro’s traffic flow, is simpler than dealing with dense Eastie. Bottom Line: This is a problem, since casinos are about money.
A Krafty Operator: Suffolk Downs may wield a ton of political clout, but Kraft is a heavyweight himself. When Governor Deval Patrick proposed a gaming bill back in 2007, Foxboro was included in the state’s southern zone. That was a big problem: Each region gets just one casino license, and Foxboro was in a zone where the license had been all but set aside for the Mashpee Wampanoag. But this time around, Foxboro was moved into the more-winnable eastern district. Why? How? The bill was formed behind closed doors, so it’s a mystery, even to Jay Barrows, the House rep for the town. “I don’t know where that came from,” he says. Bottom Line: One thing is for sure: Thanks to the switch, Kraft has a much better chance of getting a casino license.
The Big Question: 10,000 jobs?
Bob Kraft has built up plenty of credibility around here, but his partner Wynn’s estimate that a casino in Foxboro would create up to 10,000 jobs raises serious questions. Suffolk Downs, by contrast, says its facility would lead to 2,250 jobs. So what gives? “The numbers coming out of Foxboro are just wildly inflated,” UMass Dartmouth gaming expert Clyde Barrow says. To get to 10,000, he adds, “You’d have to have the biggest casino in the western hemisphere, and you’d have to have the entire Massachusetts market.” At best, Barrow says, Wynn could get to 5,000 jobs (and that’s assuming New Hampshire doesn’t legalize casino gambling). Mohegan Sun and Foxwoods employ roughly 20,000 people between them, but the 50,000-square-foot gambling space Wynn has proposed for Foxboro is substantially smaller than the ones at the Connecticut casinos.
1. Gary Loveman, Chairman, CEO & President, Caesars Entertainment
Stop us if you’ve heard the one about the MIT nerd hitting it big in Vegas…. After earning a Ph.D. in economics from the Institute in 1989, Loveman spent nine years teaching at Harvard Business School. Along the way, he started consulting for Harrah’s — later folded into Caesars — and somehow found himself running the show. Loveman continues to live in Wellesley, giving him both local ties and a hell of a commute.
2. Joe O’Donnell, Former Owner of Boston Culinary Group, Part-Owner of Suffolk Downs
If there’s anyone more politically wired around here, it’s news to us. The Boston Concessions mogul and 31 percent owner of Suffolk Downs is tight with Mayor Menino, which ought to be helpful in smoothing over Hizzona’s annoyance that Vornado Realty Trust — the real estate firm that ruined the Filene’s site in Downtown Crossing — owns a 20 percent stake in the East Boston track.
3. Richard Fields, Managing Partner, Suffolk Downs
The only thing that could make all this more fun is Donald Trump, right? Well, we’ll have to settle for a former Trump protégé. Once the Donald’s right-hand man on casinos (the two had a falling out that included a massive lawsuit), the New York real estate developer bought the largest ownership stake in Suffolk Downs (42 percent) in 2007, pretty much gambling that the track would someday become a gaming mecca.
Slots of Luck: “Slot machines are very important to us — they can be our salvation,” Suffolk Downs CEO Bob O’Malley said… in 1996. O’Malley may be long gone, but today the idea is the same: Horse racing is a dying industry, and a casino is likely the only thing that can save the old track and its 1,000 employees. Loveman’s been interested in opening a casino there since 2003, but it wasn’t until last April that Caesars bought 4 percent of the track (according to Suffolk) and struck a deal under which the company would operate the casino while Suffolk would retain control of its property development and licensing. Bottom Line: No casino means no future for Suffolk Downs.
Bread and Circus: Caesars, which runs some 50 casinos worldwide, caters to the mid-roller crowd. Originally the Harrah’s chain, it’s been content to be the big-box store of the gaming world ever since the ’90s, when it discovered that 80 percent of its revenue was coming from customers who spent a relatively paltry $100 to $499 per trip, but made many repeat trips, according to the book Winner Takes All by Christina Binkley. That insight has informed Harrah’s — now Caesars’ — direction ever since. But because any successful casino in Massachusetts would have to appeal to all segments of the market, Caesars would likely have to lure top-end customers, too. Bottom Line: Like Wynn, they’d have to adjust. But Caesars has a short track record of operating anything high-end.
The Card Sell: Harrah’s was the first casino company to develop a strong loyalty-rewards system. Its Total Rewards program plies regulars with goodies like free meals and hotel rooms. Though just about every casino has copied it, Caesars remains the industry leader, in part because customers can use their rewards cards across all of the chain’s properties. Bottom Line: The program is the key to Caesars’ low- and middle-roller strategy, and could help draw out-of-towners.
Eastie Revival?: Governor Patrick has said that he prizes economic development — job creation — over sheer revenue production. The priority, UMass Dartmouth’s Barrow says, is “making jobs available to people who can’t get jobs in the high tech, high-end professional services sector.” And while Foxboro is already a relatively well-off place, there’s plenty of room for development and growth in a long-neglected neighborhood like Eastie. Bottom Line: This may be Suffolk’s strongest argument.
The Big Question: What About the $22 billion debt carried by Caesars
The company states in its most recent report that “Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments.” Not good, especially since most of that debt comes due in 2015 and beyond, or about when the Suffolk Downs casino would be opening. In 2010 Caesars’ shaky outlook forced it to pull back from a planned IPO. Since the third quarter of 2008, the company has cut more than $887 million in costs, meaning layoffs (though executives, including Loveman, received $7.75 million in bonuses last year). Beyond the casino chain’s 4 percent ownership stake, Suffolk won’t disclose its financial arrangement with Caesars, so it’s unclear how the financial problems may affect a Boston casino’s operation. But none of this reflects well on Loveman and his team.
Considering that Massachusetts invented gerrymandering, our pols kept the casino geography surprisingly simple. The new gaming law splits the state into three zones: Region A in the east (from Boston to Worcester), Region B in the west (that netherworld beyond whatever’s beyond Worcester), and Region C in the south (around the Cape and South Shore). The law also authorizes a slots parlor, which can go anywhere, but each region can have just one casino. In the end, the fates of Suffolk Downs and Foxboro may well be tied to just where that slots parlor and the other casinos wind up.
Northern Exposure: Boston Area
One of Suffolk Downs’s biggest advantages may be its location — not just that it’s in Boston, but that it’s not in the southern part of the state. That’s because if the new casino winds up in Foxboro, it will mean a heavy concentration of the state’s gambling action in that part of Massachusetts. If all of the gambling houses end up along a southern axis in the state, residents in other regions might one day go north to potential casinos in New Hampshire instead. And, as UMass Dartmouth’s Barrow points out, the state’s goal is to spread the casinos out across Massachusetts.
Wampanoag Way: Fall River and Bridgewater Area
The casino law gives the Mashpee Wampanoag the exclusive right to bid on a casino in Region C (assuming they can get a deal hammered out by July 31, which is no sure thing), but the tribe has yet to announce where it wants to build. Rumored spots like Bridgewater and Fall River are both close to Foxboro (25 and 40 minutes by car, respectively), and, because the state would have little choice but to accept where the Mashpee want to go, that could spell trouble for Kraft and Wynn.
Hot to Slot: Raynham and Plainville Region
Raynham Park and Plainridge Racecourse (in Plainville) are both leading contenders for the lone slots license. And very close to Foxboro. Plainridge is just 10 minutes by car, and Raynham Park is about 20 minutes. Plainridge owner Gary Piontkowski says he could begin work pronto thanks to the $5 million-plus he recently spent on planning and permitting. Meanwhile, Raynham owner George Carney says, “I think I’ve got the best location in the state,” citing nearby Route 24 and I-495.
Wild West: Palmer and Brimfrield
With Mohegan Sun pitching a casino in Palmer and MGM Resorts proposing one in neighboring Brimfield, there’s a good chance the western-zone casino could wind up near the state’s southern border. And now that Hard Rock is signaling that it may abandon plans for Holyoke, the only other big player left out west is Ameristar, which is targeting Springfield — also, of course, near our southern border.
Three’s Company: Milford
Developer David Nunes’s ambitions for Milford are a bit more modest than those of his Region A rivals — the Foxboro and Suffolk Downs groups. He’s proposing a $600 million project, and would like nothing better than to play spoiler.
New England Dashes for Cash
New Hampshire: Outgoing Governor John Lynch opposes it, but the state legislature is considering legalizing two casinos, which would likely end up right on our border. It may not be this year or even next, but it’s probably a matter of when, not if, Granite State casinos become a reality.
Maine: The state’s first resort casino is expected to open this spring in Oxford, and a slots parlor in Bangor plans to add table games.
Rhode Island: A November ballot measure will ask voters to add table games to the Twin River “racino” in Lincoln. Meanwhile, some lawmakers are also pushing for a new casino in North Kingstown.
So who makes the big decision? It’s the five-member Massachusetts Gaming Commission, which will have wide latitude to set standards for the gaming license bids and then choose the winners.
1. Governor Patrick tapped Stephen Crosby to serve as chair of the commission. The other four members have yet to be named. A longtime political hand who’s served in both Republican and Democratic administrations in Massachusetts, Crosby’s worked most recently as dean of the McCormack Graduate School of Policy and Global Studies at UMass Boston. His selection was mostly praised, though he ruffled feathers last month by speaking (for no fee) at a forum on casinos sponsored by a Wynn lobbyist.
2. One of the commissioners must have experience in criminal investigation and law enforcement. This member will be selected by Attorney General Martha Coakley.
3. One must have experience in corporate finance and securities. This member will be picked by Treasurer Steve Grossman.
4. One must have experience with the legal and policy issues related to gaming. This member will be chosen collectively by the governor, the AG, and the treasurer.
5. One must have experience with regulation of or management in the casino industry. This member will be chosen collectively by the governor, the AG, and the treasurer.
Boston Mayor Tom Menino and Speaker of the House Robert DeLeo are two of the most powerful people in the state, and both desperately want to see a casino built at Suffolk Downs. Yet they now find themselves in a strange position: virtually powerless. Menino started talking about gaming at Suffolk Downs in the ’90s, and has lately stepped up his rhetoric. The jobs-and-revenue-hungry (and parochial) mayor noted recently that, down Route 1, “What you have is Mr. Wynn flying in, who hasn’t been in Foxboro ever before.” DeLeo has kept his statements more low-key since ramming the casino bill through the legislature. The speaker, though, is a longtime proponent of expanded gaming at Suffolk Downs, which is in his district (his father worked at the track). But since the gaming commission is appointed by the governor, the treasurer, and the attorney general, there’s not much Menino or DeLeo can do. Worse, Governor Patrick and Treasurer Steve Grossman both have close ties to Kraft. Suffolk Downs may still well get a casino, but from here on out, it won’t be because of any strings pulled by Hizzona or the speaker.
The Wild Cards
Sheldon Adelson: Right now, Adelson is the elephant not in the room. The Dorchester native is not only one of the richest people on earth (number 16 by Forbes’s count), but also the chairman and CEO of Las Vegas Sands, one of the world’s biggest gaming companies. While he’s yet to declare an interest in Massachusetts (Sands is, at present, making big plays in Asia and Miami), Adelson is known to harbor a burning hatred for Wynn, so don’t be surprised if he pops up with a plan, if only to keep his old enemy from profiting on his home turf.
David Nunes: You might not have heard much about him, but there’s a third bidder playing in the Boston area, and he hopes to steal the prize away from Kraft and Suffolk Downs. That’s developer David Nunes, who’s looking to bring gambling to Milford. He’s partnered with Bill Warner, owner of Warner Gaming, which operates five casinos (including the Hard Rock in Las Vegas). The biggest selling point for Nunes and his Crossroads Massachusetts LLC is location — near the intersection of I-495 and the Mass. Pike. The Colorado resident, however, isn’t as locally wired as his competitors.
Source URL: http://www.bostonmagazine.com/2012/01/game-on-clash-of-the-massachusetts-casino-titans/