With competition crowding out opportunities for growth in the Northeast, Connecticut’s two casinos are broadening their horizons overseas in search of new markets.
Mohegan Sun is seeking to operate in Japan, and Foxwoods is opening a casino in Puerto Rico.
Oshidori International Development Godogaisha, a Japanese company established to develop a casino resort in Nagasaki, and Mohegan Gaming and Entertainment announced in late January a partnership for a joint bid for a resort license in Nagasaki.
“It’s one of the largest and most developed economies in the world and one of the last economies that does not have this particular entertainment,” said Mario Kontomerkos, chief executive officer of Mohegan Gaming and Entertainment.
The Asian gaming market also is the fastest growing in the world, he said. Commercial casinos operate in Macao, the Philippines and Singapore, while China is off-limits, Kontomerkos said.
Oshidori would be responsible for development costs, and Mohegan Gaming and Entertainment, which was approached because of its expertise and “brand strength,” would advise on management, operations and political affairs, he said.
“We think it’s an ideal approach,” Kontomerkos said.
With a hotel, meeting space, casino, arena and food and beverage areas, “it’s even larger potentially than what you have in Connecticut,” he said.
In a two-step process that’s expected to play out through the end of the year, the project will first be selected among five competitors and the winning bidder and Nagasaki Prefecture would then bid for one of three licenses before Japan’s central government. Financial terms have not been disclosed.
Mohegan Gaming and Entertainment, the parent company of Mohegan Sun, operates 10 casino and entertainment properties, including two in Canada, an entertainment resort being developed in Incheon, South Korea, and another development in Athens, Greece.
Foxwoods and LionGrove LLC, a hospitality investment firm, announced Jan. 26 their intention to reopen the casino at the Fairmont El San Juan Hotel as the Foxwoods El San Juan Casino in Carolina, Puerto Rico. It’s set to open by the end of the year and will be the first venture by Foxwoods outside the continental U.S.
The project’s partners invested $120 million, with the casino’s portion at $15 million, said Rodney Butler, chairman of the Mashantucket Pequot Tribal Nation, which owns Foxwoods.
“We’ve been looking domestically and internationally for years,” he said. “Some didn’t make sense. Others fell apart. This is not new. It’s certainly not related to the pandemic.”
“It’s a great fix for our business model,” Butler said.
Foxwoods partners with the Bahamas resort Atlantis and Norwegian Cruise Line that can send visitors to Puerto Rico, he said.
“It’s natural. Everyone wants to get away in the winter,” Butler said.
As a U.S. territory with connections to many communities in U.S. cities, “Puerto Rico makes so much sense,” he said.
Keith Foley, senior vice president at Moody’s Investors Service, said the casinos face “few and far opportunities” in the U.S.
“You really don’t have a choice if you want to grow,” he said. “You’re not going to grow in Connecticut. It seems like the opportunities are overseas.”
Foley called entry into overseas markets “high risk, high reward.”
“When these companies go in, they don’t want to go into small places,” he said. “It’s a lot of risk, a lot of capital.”
Similar to what Foxwoods is doing, casinos “ideally are looking for projects overseas where they can leverage what they know,” Foley said.
The tribes have suspended any Connecticut expansion plans, including a proposed East Windsor casino that they would jointly operate, as they negotiate with Gov. Ned Lamont to run online gambling. The plan would need approval from the General Assembly.
Looking to expand overseas is not related to the pandemic, which has cut slots revenue significantly as casinos limit the number of customers to slow the spread of the virus. Even before COVID-19 wrecked entertainment businesses such as theaters, arenas and casinos, Foxwoods and Mohegan Sun struggled as regional competition ballooned with new casinos in Massachusetts and New York City.
In addition, consumer spending declined during the Great Recession and failed to fully return during the weak recovery.