Wynn Resorts (WYNN -1.42%) and MGM Resorts (MGM 0.02%) have won the two gaming licenses available in Massachusetts, but before they spend billions on their new resorts the voters of Massachusetts have one last say on the future of gaming in the state. A ballot referendum in November could overturn the law that allowed gaming in the first place, and with casinos going bankrupt down the coast in Atlantic City, New Jersey, public sentiment could be turning negative.
At stake is Wynn Resorts' $1.6 billion resort in the Boston suburb of Everett, Massachusetts and MGM Resorts' $800 million resort in Springfield, Massachusetts.
Wynn Resorts' $1.6 billion resort just outside of Boston could be in trouble in November's gaming referendum. Image source: Wynn Resorts.
Many sides to the debate
The legalization of gaming can be a contentious debate no matter where it's taking place, and the current landscape of the industry makes it especially troubling. Atlantic City has seen gaming revenue fall 42% from 2007 to 2013 and as declines continue casinos are closing left and right.
Regional casinos from Mississippi to Iowa to Detroit are also struggling as competition increases across the country. What's left behind as these resorts and casinos decline and go bankrupt is an economic wasteland. At the end of the day, casinos often don't have the desired impact of boosting economic activity.
But investors in regional gaming companies and constituents in these areas need to consider that regional casinos are more a product of their environment than they are a destination for outsiders, particularly today. Atlantic City legalized gaming to help deal with economic hardship in the late 1970s, as did cities like Detroit, Kansas City, Missouri, Biloxi, Mississippi, and Bethlehem, Pennsylvania in following years. Some of these destinations were a regional draw for a while, but as gaming has spread across the country it hasn't been necessary to drive hundreds of miles to find a casino, reducing demand and leaving only the local consumers, who were in rough economic times to start with.
If Wynn Resorts loses its bid in Massachusetts it still has a huge opportunity building Wynn Palace in Macau. Image Source: Wynn Resorts.
Massachusetts is in a different position than most of these cities and states, so making comparisons between gaming struggles across the country and the future of gaming in Boston, for example, is tough. The state isn't in dire straights economically and would hypothetically be serving a higher end market than many of these regional gaming hotspots, particularly in the Boston area. So, gaming in Massachusetts would be different than the failures we've seen in Atlantic City and elsewhere for both investors and residents.
The dynamic from both sides is complex, but for investors, the future of these two resorts will be decided by voters in November.
What it means for gaming companies
While building new resorts in Everett, Massachusetts and Springfield, Massachusetts would be beneficial for Wynn Resorts and MGM Resorts respectively, neither project will be a game changer for them. Most of their growth and earnings is concentrated in Macau with some contribution from Las Vegas, so Massachusetts will be more of a brand builder than a necessary profit center.
Losing either project wouldn't be a deal breaker from an investment standpoint and may actually reduce risks in their businesses. Building casinos in Massachusetts isn't a slam dunk, like Asia is, and both companies have bigger and better bets to make there.
