Resorts World Catskills Owner Sinks to $58M Loss after 5 Months of Operation

On February 8th, the $1.2 billion Resorts World Catskills opened in Upstate New York on the site of the former Concord Hotel, a Jewish resort haven in the “Borscht Belt” until filing for bankruptcy and closing in 1998. While the area’s prime has long since passed, many developers believe that the way to revitalize the region is by building world-class casino resorts to attract guests, such as the ones currently found in New Jersey and Connecticut.

Unfortunately, that notion continues to remains as distant a prospect as possible after the New York State Gaming Commission released its latest results. According to the state’s gambling governing body, Empire Resorts, which owns Resorts World Catskills, lost $37.2 million in the second quarter ending June 30th, with the casino having now sunk to a $58 million loss during its first five months of operation.

Moody’s Downgrade

Ahead of its opening, Resorts World Catskills forecast that it would generate $250 million in annual revenue, including a daily return of $200 per slot machine and $1,500 per table game. That figure, however, is currently closer to just $111 per slots and $1,192 per table game, leading Moody’s Investor Service in June to revise the estimate to $150 million for this year, whilst also downgrading the venue and warning that its risk of default had increased.

Huge Challenge Ahead

While this had led an article published in the Times Herald-Record to conclude that the casino project’s future “viability is questionable”, Charlie Degliomini, executive VP of Empire Resorts, has tried to paint a more optimistic picture going forward. Explaining that more time was needed in order to penetrate the market, Degliomini commented last month that more of the casino resort’s amenities were now online, and that its multimedia marketing campaign had now been activate for some time.

He further pointed out that an additional $33 million was being spent adding new attractions to the venue, including an entertainment complex scheduled to open in December, complete with a mid-market hotel catering to more budget-conscious guests.

May Not Be Enough

In a recent U.S. Securities and Exchange Commission (SEC) filing, however, Empire Resorts admitted that all this may not be sufficient to save the project, stating:

“We cannot be certain that our business will generate sufficient cash flow from operations, that our anticipated earnings from the casino will be realized, or that future borrowings will be available under our existing debt arrangements or otherwise to enable us to service our indebtedness, make anticipated capital expenditures and satisfy working capital needs.”

In addition to the Resorts World Catskills, the company owns the Monticello Raceway racino also located in Sullivan County, a venue that has similarly been losing money for some time. All told, Empire Resorts has run up about $500 million in debt and long-term liabilities, meaning the firm has to pay $75 million per year in order to meet its annual debt and capital investment expenses.

Empire Resorts is 88% owned by Lim Kok Thay, a Malaysian Chinese billionaire businessman who is Chairman of Genting Group. While the company owns the property, it is operating under the Resorts World name through a license with Genting that includes a stipulation requiring it to keep the racetrack operational. That said, it is likely to become increasingly difficult for Empire Resorts to keep throwing money at these gambling businesses without starting to see some returns soon, and as Moody’s analyst Keith Foley explained recently:

“Without a rapid and significant increase in revenue, the company won’t be able to meet its interest obligations. At some point, the company may not be able to cover its current level of operating expenses.”

Missed Revenue Targets

After New York state gave the go-ahead for four commercial casinos to built in those areas not covered by the Indian gaming compact, firms applying for a casino license were then required to submit their revenue forecasts, all of which have since fallen dramatically short of their initial estimates.

In addition to difficulties being experienced by the Resorts World Catskills, earlier this year del Lago and Rivers felt compelled to make informal requests for economic relief from the state by way of tax or fee cuts. In the end, however, both were subsequently rejected, with Gov. Andrew Cuomo, calling them requests for a “bailout.” Meanwhile, Tioga Downs Casino Resort is currently underperforming its revenue forecast by around 25%.

According to gaming analysts, the Upstate New York’s casino market, the area lying north of the New York metropolitan area, is oversaturated, with efforts to attract Asian and Asian-American to its gaming facilities having failed spectacularly. While sports betting may offer a lifeline for these four casinos, there seems to be little sense of urgency from lawmakers who has allowed a 2016 New York law allowing them to operate sports books to sit in the legislature without being update during its most recent session.