by Cody on July 13, 2020

MGM Springfield reopens casino, looks to renegotiate deal with city

Before going into a lockdown for approximately 4 months the MGM Springfield casino has had to deal with almost a year and a half of not really living up to its gambling revenue expectations. And the casino has been preparing to reopen today, on Monday and it has been sharing previews to the members of the 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 that will reopen will be nothing like the one before and that is because the casino is reopening in a changed environment where nothing is the same anymore. The industry group US Travel predicts that the domestic travel spending will be off by 40% in 2020. This is obviously a huge percentage and will take its toll on this casino, just like many others.

Seth Stratton, MGM’s vice president and general counsel, spoke about the challenges of reopening amid the pandemic during a tour for reporters. “It’s the biggest challenge our industry has ever faced. 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.” – said Stratton.

Meanwhile, MGM Springfield 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 due to different kinds of issues. Talks are on hold until both sides know how business will bounce back. But at the same time, the observers already sound pessimistic. The history of the casino leads them to one single possible outcome.

“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. But 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. This casino also promised to create 3,000 jobs. But early this year, the company had 2,500 employees. And as of this week, there are 700, with plans to call more people in as business ramps back up.

At the same time, MGM approached Springfield officials about renegotiating its host community agreement in March when it closed, according to City Solicitor Edward Pikula. But Pikula and Stratton said that those talks will have to wait until MGM Springfield has more amenities open and both the city and the company know more about how COVID-19 has impacted the business.

Meanwhile, the city receives from $24 million to $25 million annually from MGM Springfield, including community impact payments, development grants, and other sorts of payments according to the city’s host community agreement signed prior to development.

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