Casino Mogul Should Have Known Profits Would Miss Projections
The owner of Tioga Downs—one of the three new Vegas-style casinos that have opened in upstate New York in the past two years—is claiming that if he had known how little money his upgraded casino would make, he would not have built it.
Casino mogul Jeff Gural obtained a state license in 2016 to expand the Tioga Downs racino into a full-fledged casino. Gural, who also owns the Vernon Downs racino, reportedly spent $200 million on the transition. According to PoliticoPro.com, the upgraded Tioga Downs has earned $68.5 million in its first 12 months of operation. The problem? Tioga Downs predicted that it would earn $103 million during that period. The other two new casinos—del Lago Casino and Rivers Casino—have also fallen short of expectations. These numbers matter because Gov. Andrew Cuomo’s deeply ill-advised 2013 casino amendment was marketed as a rich source of revenue for state and local governments; now that the new casinos aren’t hitting their targets, governments are not reaping the benefits that they expected from upstate casino expansion. Furthermore, if the casinos continue to underperform, it is possible—and even likely—that they will seek help from the state to stay afloat.
For his part, Mr. Gural is blaming “outside consultants” for the wildly erroneous prediction that Tioga Downs submitted to the state in connection with its casino license application. “‘I think they just had the wrong projections,’ [Gural] said in an interview. ‘I did not overestimate intentionally. To be honest, if I had the right projections, I wouldn’t have built the project.’”
Mr. Gural isn’t entitled to any sympathy. Before Tioga Downs was expanded, there was ample research showing that the casino market in the northeastern United States was saturated and that new casinos in the region were unlikely to be profitable. Back in 2013, when the casino amendment was being considered, New Yorkers for Constitutional Freedoms issued the following warning: “While no financial windfall could ever justify the State of New York in legalizing casino gambling and enabling its destructive effects, the State of New York should consider the fact that most states have overestimated the tax revenue that casino gambling will yield them.” During the same time period, New Yorker’s Family Research Foundation noted that casinos in Delaware, New Jersey, and Rhode Island had received government bailouts due to their lack of profitability. Mr. Gural, along with New York’s other casino developers, have no excuse for misjudging the market. Given that their predatory enterprises entice New Yorkers to gamble their money away, it is somehow appropriate that the casino developers are not profiting as well as they had hoped.
While Resorts World Catskills is scheduled to open this year, PoliticoPro.com notes that “there is a moratorium on further [casino] expansion” in New York until 2021; at that time, up to three licenses for downstate casinos could be issued. Strangely, Mr. Gural believes that if the upstate casinos “continue to falter, that would make it more, not less, likely [that] the state would authorize [more casino licenses in 2021].” Responding to casino saturation by opening three new casinos would be a colossally foolish move.