Del Lago faced significant resistance from Tyre-area residents before building the resort.
The Del Lago Casino is generating less revenue than expected in its first year of operation. In fact, if the new resort does not increase its revenues by $100 million in 2018, Moody’s Investor Service its concerned about its debt structure.
Located in the city of Tyre in Seneca County, the casino is facing major financial troubles, due to its inability to cover development debts according to a major credit agency. When the New York Gaming Commission’s panel on casino applications chose 3 winners in December 2014, the siting panel chose local New York State developers, instead of the big Las Vegas casino companies or international operators like Genting Group. That decision appears to have produced an ownership group in the Del Lago resort which does not have proper resources.
One reason Del Lago is struggling is its revenues are far under the benchmarks stated by ownership when it was applying for a license. Startup projections often are too optimistic, but a company needs the resources to weather the debt burden of construction and startup.
Del Lago’s underwhelming performance has caused Moody’s to lower the casino’s bond rating and gave it a negative rating outlook. Moody’s does however believe the casino can pay on its debt for, at least for another year, but the business needs to increase over that span of time.
“Substantially Slower than Expected”
Keith Foley, a Moody’s senior vice president, mentioned in a statement Wednesday, “Given del Lago’s current performance, Moody’s is of the view that without a substantial improvement in revenue, del Lago will not be able to achieve a level of performance that can support its existing debt capital structure.”
The report by Moody’s Investors Service raised concerns about the Del Lago resort, which opened last February and that cost $440 million. Del Lago was the largest of three upstate casinos that opened around this time last year, so its troubles are concerning for the entire set of New York casinos which were approved in December 2015.
Del Lago has 1,956 slot machines and 99 gaming tables, which includes 14 poker tables. It has 205 hotel room and an adjoining spa open only in the summer. The casino complex also has several restaurants, while the resort started hosting concerts in The Vine entertainment center. Non-gaming revenues are an increasing portion of most 21st Century casino resorts, because it helps diversify and draw in family groups, where some members of the group gamble and others shop.
Underperforming Projections
Underperformance is the key issue. The Albany Bureau for the USA Today Network came out with a statement in October estimating that del Lago was looking like it would be at least $100 million off from its projections. The casino’s original revenue goal was $263 million generated in its first year.
The Albany Bureau report also showed that, out of the three new casinos, Del Lago was doing the worst.
Moody’s came out with a review close to the Bureau’s, stating it had expected del Lago to reach a first-year net revenue of about $250 million. The real number is likely to be closer to $150 million.
Keith Foley’s Report
In the report, Keith Foley wrote, “Despite the fact that del Lago Resort Casino opened on time and on budget and has substantially grown total gaming revenues generated in its primary market area, the property’s revenue ramp-up is well below Moody’s expectations.”
The Del Lago casino also hit another record low in December 2017. The net win — data which measures the amount of money left in the machines after payouts to winners — measured exceedingly low. The December net win totaled only about $130 per its 1,956 slot machines. That is the lowest it has been since the doors opened, at a time when the revenues should be showing a month-to-month increase.
New York State Casinos
Del Lago is not the only one performing poorly. The Rivers Casino in Schenectady was at $207 per day, while the Tioga Downs casino located in the Southern Tier was at $171 per day back in December.
The Del Lago casino, owned by Rochester mall mogul Thomas Wilmot and operated by gaming company JNB, was quick to defend their performance. JNB pointed out the benefits it brought to the region, such as the jobs and economic development. The company also mentioned that building a clientele happens with time. While it is true that a customer base is built over time, few would expect $100 million jump in Year 2 of the project.
The general manager of Del Lago, Jeff Babinski, said in a statement back in September, “From many aspects, del Lago Resort & Casino has been a wonderful success story in less than nine months….While our revenue in the first eight months has been below projections, we are confident that we are moving in the right direction.”
New York Market Saturation
Del Lago beat out two other bidders in the Finger Lakes/Southern Tier region for a gaming license in December 2014. The new casino didn’t come into an open market. The competition was heavy for the gambling market in the Buffalo area.
The region has three Seneca Nation casinos and three racetracks with video-lottery terminals. The Finger Lakes Racetrack that was less than 30 miles to the west.
Once Del Lago received its license, a number of events changed the economic picture. Syracuse area Finger Lakes and Vernon Downs both received lower tax rates for their racinos.
The Yellow Brick Road
The Oneida Indian Nation, which owns the Turning Stone casino near Syracuse, added the Yellow Brick Road Casino in 2015. The Yellow Brick Road Casino was a direct response to the new casinos, and was built as both a firewall against lost revenues from Turning Stone. Yellow Brick Road also was built close enough to siphon off revenues from the new rival.
The picture could get worse. This coming March 1, the Point Place casino is set to open. That prompted Moody’s to suggest “the highly competitive nature of the market” might impede del Lago’s “ability to support its capital structure.”
The Moody’s report continued, “There are five gambling facilities, including four racinos and one Native American full scale casino within 100 miles of del Lago’s location.”
