Is betting against Donald Trump on NY casinos a smart idea?

** Originally posted at Binghamton Political Buzz **


Once again the persistent question of profitability of casino’s in New York State has been raised. This time by Donald Trump, on October 20, 2014, as reported by the Daily News. Mr. Trump believes that NY casinos will fail in the long-term , even as a rash of Atlantic City casinos are closing and plans to open casinos close to the New York border are being debated. Who is correct, Gov. Cuomo or Donald Trump?

To understand the chance of success it may be best to first understand the situation. In this year alone 3 Atlantic City casinos have closed (Revel, Showboat, and Trump Plaza) with another in danger of closing shortly (Trump Taj Mahal). The reasons vary to a degree, but all include 2 things: the national economy and competition in neighboring States.

Unlike almost any other industry, casinos are essentially a zero sum industry. In essence casinos take more out of communities than they put in – if they are successful. Casinos do not create a good that can be sold, and the number of jobs created is fixed once a casino is up and running. The goal of all casinos is the Las Vegas model. That is that the glamour and entertainment is attractive enough to pull tourists from other locations, thus increasing the pool of money that can be taken without destroying the local economy the casino is based in.

For more than 2 decades Atlantic City did exactly what Las Vegas has done. They pulled visitors on the East Coast via boxing matches and ease in travel (compared to Las Vegas). There is the benefit of a decent climate (for the northeast) and a beach in addition to entertainment venues. This was an ideal situation, until competition arrived.

First there was Foxwoods in Connecticut. Then came the changes in laws in neighboring States, including the creation of racinos (race tracks with limited additional gambling options) – like Tioga Downs in New York (opened in 2006). While the short-term shows increased revenues for virtually all locations (Tioga Downs had revenues double to $60 million from 2006 until fiscal 2013) the key is saturation. This lead to the currently ill-fate of Atlantic City, and the first signs of problems in other States.

Fiscal 2014, Tioga Downs had its first revenue decrease. Two long-term well established casinos in Atlantic City closed with a third expected to follow shortly. Even the most successful New York racino at Aqueduct in New York City – a very old and well-established race track with expanded gambling options since 2011, plus the draw of the City, and access to a massive pool of tourists – has experienced problems. Growth at Aqueduct  has slowed to 6.5% as of August 2014 (down from 14% growth), with the majority of revenues coming from the local community and not tourists.

“Resorts World has not been as successful tapping into the robust tourism industry in the Big Apple as it would have liked. The vast majority of its customers are locals from Brooklyn, Queens and Long Island.”

This reality of current environment does not take into account:

  1. Market saturation – additional casinos outside of Atlantic City, along the New York border such as the Meadowlands and Jersey City, are poised to open casinos. This does not count the 4 casinos planned in New York, nor expansions in other nearby States.
  2. A lackluster economy – For all the talk of recovery and improved economics, the total number of unemployed has remained relatively steady. Most of the recent reduction in the unemployment rate have come from not counting unemployed persons for varying reasons, not in an increase in employment (See our article – 6.1% Unemployment Rate: celebrate the headline, fear the facts)
  3. Impact to locals communities – even with the draw of New York City, the saturation of casinos is causing a greater reliance on local community revenues as a source for the casinos. While a diverse city like NYC has millions of people and generally a higher income per person, Upstate NY has neither the population nor the economic diversity on its side.

Given all the factors, and the reality of the economic environment facing casinos in New York and the Northeast, could Donald Trump be correct? Or is this the key to creating a vibrant business climate the Gov. Cuomo has boasted of in numerous commercials? Can gambling casinos save New York?

No, New York will never be saved by casinos. The math at the current time, and foreseeable future, indicate that the revenues. Given the relatively harsh winters (that numerous New Yorkers escape south to avoid every year), the lack of diversity in Upstate New York, the limited pool of discretionary dollars available, and high competition, casinos cannot be the savior to New York’s State deficit. For these same reasons local communities, that may gain a short-term bump due to curiosity and ease of travel, will not have meaningful long-term improvements.

“The problem is the whole country is becoming one big gambling casino, and many of them will die.” – Donald Trump, 10/20/14

In fact, it is a very real probability that at least some of the local communities in Upstate New York, will be harmed by the casinos. The limited pool of discretionary funds available in these areas may funnel into the casinos. Funds that will never reach back to the communities they came from, because that is the purpose of a gambling casino – if they are run to create a profit.

Without a massive, and highly unlikely, boost to the national economy Donald Trump is likely correct. Without a massive change in business friendliness (a reduction in the number of regulations and a decrease in personal and corporate taxes) for New York State, which is again highly unlikely, Donald Trump is likely correct. Considering all factors, the probability of success for New York casinos beyond 3 years of operation decrease for every continued year of operation, while adding to the burden of local communities.

“New Yorkers cannot gamble their way to prosperity; gambling is not a path to economic growth.” – Conservative Party Chairman Mike Long, 11/1/13

Casinos take in money, that is their purpose. For New York State to expect them to generate money could be called absurd. Donald Trump understands this well, and was successful for decades in the casino industry. Betting money says he is right again on New York.

About the Author

Michael Vass
Born in 1968, a political commentator for over a decade. Has traveled the U.S. and lived in Moscow and Tsblisi, A former stockbroker and 2014 Congressional candidate. Passionate about politics with emphasis on 1st and 2nd Amendments.

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