MGM Departure: Stokes Concern on Resorts World New York Casino Resort Outlook

This departure raises vital questions about the financial viability of Resorts World New York, a casino resort situated in Queens, especially considering the mixed performance of other properties owned by Genting.

Key Concerns Raised

• Operator Genting’s Struggles with Other Ventures: Genting has been grappling with modest returns at its North American venues, including Resorts World Catskills and Resorts World Las Vegas.
• High Tax Rates: Genting’s plans for New York include some of the highest tax rates in the industry, raising doubts about profitability.
• Regulatory Environment: The changes to licensing terms, cutting potential permit durations from 30 years to just 15 years, have added to MGM’s decision to withdraw.

Analysts are questioning if Genting’s approach to these proposed permits makes sense. As noted by Nomura analyst Tushar Mohata, the recent performance of resorts in Genting’s portfolio could indicate an unwise investment in expanding Resorts World NYC.

Financial Proposals from Genting

Genting announced a potential investment of $5.5 billion to turn its Queens facility into a Las Vegas-style resort, which does not include an additional $2 billion allocated for community benefits. This proposed expenditure significantly eclipses prior investment in other properties, raising eyebrows among industry veterans.

Genting’s High-Stake Bid

MGM’s exit signals a deeper issue within the competition. Genting’s supplemental bid includes:

• A $600 million license fee, exceeding the minimum of $500 million.
• Tax rates at 56% for slot games and 30% for table games, which are notably high when compared to industry averages.

This aggressive bid indicates Genting’s willingness to risk high expenditures in a climate of intense competition, especially with MGM stepping back.

Geographic Considerations for Genting

The proximity of the proposed $8 billion Metropolitan Park project, led by Steve Cohen and Hard Rock International, poses additional competition for Genting. Located just 10 miles from Resorts World New York, this new venue could siphon off traffic and patronage.

Analysts suggest that while the project promises to bring substantial economic benefits, it also presents a significant threat to the viability of existing venues like Resorts World.
In conclusion, Genting’s ability to manage this expansion while balancing the competition and financial pressures will be critical in the coming years.

Summary

The decision of MGM to withdraw from the New York City casino bids has sent shockwaves through the industry, particularly concerning the future of Resorts World New York. With Genting proposing a massive investment and navigating challenging financial landscapes, the coming times will be crucial for reshaping how casinos operate in the New York market.