UNCASVILLE, Conn. – The economic meltdown has hit the country’s two largest casinos.
On Sept. 22, the Mohegan Tribe announced that it will postpone the final phase of its $925 million expansion project at Mohegan Sun for at least a year due to the worsening economic climate.
On Sept. 30, the Mashantucket Pequot Tribal Nation, owner of Foxwoods Resort Casino, announced it would lay off approximately 700 employees in the coming weeks. A week later, the nation’s tribal council announced it has eliminated the position of CEO responsible for oversight over its business operations.
While the Indian gaming industry reaped around $26 billion in 2007 – a 5 percent increase over the previous year – gaming revenues began to falter earlier this year across the country; and both of the Connecticut casinos have seen sizeable reductions in their slot revenues over this year.
The Mohegan Tribe opened Casino of the Wind, the first phase of its Project Horizon expansion, at the end of August, less than a month before announcing the postponement of the rest of the project. The new 64,000-square-foot casino reintroduced poker to the Mohegan Sun with a 42-table poker room and more than 650 slot machines and 28 table games.
Project Horizon was scheduled for completion in the fall of 2010. Plans included a 39-story hotel tower, a 1,500-seat House of Blues music hall, a 22,000-square-foot spa, and additional retail and restaurant space. The total budget for the final phases was to be $734 million.
“Given increasing uncertainty in the regional and national economy, we have decided that the most prudent course of action for the [Mohegan Tribal Gaming Authority] at this time is to suspend work on the Earth Expansion, which will strengthen our balance sheet,” said Mitchell Grossinger Etess, the authority’s president and CEO. “We continue to believe in the long-term prospects of our business and the Northeast gaming market and expect to resume development at Mohegan Sun when market conditions improve over a sustained period.”
The project will be reassessed in about a year.
The postponement has a ripple effect on the state’s economy. The tribe had planned to hire about 1,500 new employees for the entire Project Horizon expansion. About 300 employees were hired for the new casino.
The state’s tradesmen are also affected. Last spring, the tribe signed a project labor agreement with the New London-Norwich Building and Construction Trades Council guaranteeing that only union labor would be used. The project expected around 2,500 construction jobs.
The gaming authority issued a statement saying it is in discussions with Bank of America and some of its lenders to work out amendments to their agreements.
The 700 layoffs at Mashantucket represent 6 percent of the 11,000 employees and follow the layoffs of around 200 employees in June. The tribal council approved the reduction plan submitted by senior management.
“As is happening to so many organizations, the economic issues facing our nation and regional consumer economy have negatively impacted our revenue growth. Although it has taken a few months, the recession’s impact can now be clearly seen in our industry,” Tribal Council Chairman Michael Thomas said in a prepared statement.
“Unfortunately, the time has arrived when we must face the difficult decision and align our payroll costs with current revenue levels. We will do everything that we can to minimize the effect of this decision on our team members and on our customers.”
The council also approved the elimination of the CEO position, which had been held by Patricia Irvin for less than a year. Her job during that time was to develop and execute business and diversification strategies for the tribe, according to a news release.
“It was a difficult decision but, we felt, a necessary one given our recent decisions to realign our expense structure in response to the current economic environment,” Thomas said. “We undertook a thorough review of our business position and the need to bring our expenses in line with reduced business volume.”
Both Mohegan Sun and Foxwoods have seen a decline in slot revenues this year. The state takes 25 percent off the top of the tribe’s slot revenues, receiving around $440 million a year from both tribes combined. The state, which is expected to receive around $20 million less from the casinos this year, is already facing a $306 billion deficit.