SPRINGFIELD — Two years ago, the media tours of MGM Springfield focused on the decor — Edison bulbs in the light fixtures, dark woodwork to carry on the antique look — and local touches of Springfield memorabilia on display in a $960 million casino decades in the making.
This week, the MGM media tour focused on handwashing stations, places where customers can grab a free but mandatory face mask, and plexiglass shields that make some gaming tables look like salad bars.
The casino reopens Monday following a four-month shutdown because of the coronavirus pandemic, and before that a year and a half of not living up to gambling revenue expectations.
MGM Springfield is preparing to open to the public Monday after weekend previews for members of its M life Rewards program. Only about a third of the casino’s amenities and none of its hotel rooms will be open, at least at first.
The casino is reopening into a changed environment. The industry group US Travel predicts domestic travel spending will be off by 40% in 2020.
“It’s the biggest challenge our industry has ever faced,” said Seth Stratton, MGM’s vice president and general counsel, speaking during that tour for reporters.
“I don’t know what customers will show up,” he said. “That said, we are working very hard to welcome them back in a safe environment.”
7/9/2020 -Springfield- Seth Stratton, MGM Springfield vice president and general counsel, talks about new sanitizing measures in place on the property. MGM Springfield will reopen to the public on Monday. (Don Treeger / The Republican)
Meanwhile, MGM is also reopening negotiations with the city, looking to reduce, or at least delay, payments it’s obligated to make under a host community agreement. Talks are on hold until both sides know how business will bounce back.
Observers sound pessimistic.
"It's underperformed during regular times. Now it's going to be even more difficult," said Richard McGowan, associate professor in the finance department at the Carroll School of Management at Boston College.
Before the casino opened in August 2018, MGM told the state and the city it would bring in an average of $34.8 million a month in gross gaming revenue from slot machines and table games like poker. Instead, the average over its first 18 full months was $21.5 million. The peak was $26.9 million in September 2018, its first full month of operation.
MGM also had promised to create 3,000 jobs here. Early this year, the company had 2,500 employees. As of this week there are 700, with plans to call more people in as business ramps back up.
McGowan, who has studied and written about the gambling industry, predicted that with an overcrowded casino market in the Northeast and the dominance of Encore Boston Harbor, that the future looks dire for the state’s other two casinos.
He said the Plainridge Park Casino, on Interstate 495 near the Rhode Island border, could close. The slots parlor, which started business in 2015 as Massachusetts’ first legal gambling facility, reopened July 8 from its coronavirus shutdown.
MGM could sell the Springfield casino to a smaller operator that would downsize the property, McGowan said.
“For them to operate at one-third of their capacity — they are facing a really, really difficult situation. No doubt about it,” McGowan said.
The business model of casinos is that half the revenue comes from gambling while the other half comes from restaurants, the hotel, retail and ancillary businesses on the property.
But most restaurants at MGM are closed or operating at reduced capacity. Tap, the casino’s popular sports bar, expanded its patio but has had to take out seating, cutting capacity to 90 from 120.
“They are really going to have to up the ante in entertainment,” McGowan said. “That’s the problem, you can’t use entertainment as a draw.”
Live entertainment, a tried-and-true way for casinos to draw crowds and money, is mostly canceled at casinos in Massachusetts and elsewhere because of coronavirus concerns. MGM Springfield’ next scheduled show is comedian Marlon Wayans in October.
“Almost all their revenue is going to be gambling,” McGowan said. “It’s going to be day hoppers. Period. It’s going to be people from the area.”
For one thing, it has been hard for MGM Springfield to outdraw Encore since the Greater Boston casino opened in June 2019. For another thing, the coronavirus pandemic has travelers staying off airplanes and looking to visit attractions that are within an easy drive.
The Naismith Memorial Basketball Hall of Fame, which reopened this week, said it is focusing marketing efforts on potential visitors who are less than a few hours’ drive away.
McGowan said the most critical issue for MGM and for all casinos is whether potential customers have confidence they will be able to visit in a safe way.
New cases of COVID-19 continue to decline in Massachusetts, with 152 reported Friday by the Department of Public Health. The state has seen a total of 105,290 confirmed cases and 8,081 deaths.
But cases are on the rise nationwide, with more than $3 million cases and 132,855 deaths to date.
Casino customers, McGowan said, will want to see workers cleaning touch screens and other surfaces. The need to see that if someone gets up from a slot machine, a staffer comes right away to sanitize it. Customers need to see masks in use. Or they won’t feel comfortable staying or gaming.
Chris Kelley, president and CEO of MGM Springfield, seemed intent on sending that message as he spoke with reporters this week.
“So the focus today is on people,” Kelley said. “It’s on building trust with our guests.”
Renegotiating deal
MGM approached Springfield officials about renegotiating its host community agreement in March when it closed, according to City Solicitor Edward Pikula.
Pikula and Stratton said those talks will wait until MGM Springfield has more amenities open and both the city and the company know more about how COVID-19 has impacted business.
“At this point, we don’t have enough data to make informed decisions,” Pikula wrote in an emailed response to questions.
Stratton didn’t go into any further detail.
“It’s an ongoing collaboration,” he said.
Neither did Kelley.
“I think the city’s been a great partner,” he said. “And that will continue.”
7/9/2020 -Springfield- Many slot machines are now turned off on the gaming floor of the MGM Springfield casino to allow for social distancing. . MGM Springfield will reopen to the public on Monday. (Don Treeger / The Republican)
On April 1, MGM made a payment to the city of $5.5 million toward the $7.7 million owed under the host community agreement.
City Assessor Richard Allen said MGM made in full a $6.15 million payment to the state in March under a different section of its agreement. It’s the urban redevelopment excise payment, and the state has since forwarded the money to the city. The money was due March 15, just as the coronavirus crisis was beginning.
The city receives $24 million to $25 million annually from MGM Springfield, including payments in lieu of taxes, community impact payments and development grants, according to the city’s host community agreement signed prior to development.
City Council President Justin Hurst said Friday that he expects the city to be paid in full all the revenue called for in the agreement.
Related Content:
- No poker, no roulette: Massachusetts Gaming Commission talks reopening rules for reopening for MGM Springfield, Encore Boston Harbor, Plainridge Park
- More coronavirus pandemic news and data
- MGM Springfield reopens Monday; Here’s how the casino plans to provide a safe experience amid the pandemic