ALBANY, N.Y. (AP) -- The success of new upstate New York casinos proposed by Gov. Andrew Cuomo would depend heavily upon them drawing gamblers from other places in an already crowded Northeast market, analysts say.
Cuomo, in his State of the State address Wednesday, proposed that an expansion of gambling in New York begin with up to three casinos upstate, as opposed to the highly lucrative New York City market. Cuomo said there are 39 casinos in adjacent states and Canada, many that draw dollars from downstate gamblers.
"A major challenge for us -- and a major opportunity for us -- is to get that traffic from New York City to upstate New York," Cuomo said.
New York already has five Indian casinos and nine racinos, which offer video slots but no table games. The Legislature is expected to consider final passage this year of an amendment to the state constitution that would allow up to seven Las Vegas-style casinos beyond Indian land. If approved by lawmakers, voters could make a final decision in November.
An upstate magnet
Cuomo argues that upstate casinos could be a magnet to downstate gamblers who currently go to casinos in Atlantic City or to Foxwoods Resort Casino and Mohegan Sun casinos in Connecticut. The casinos would help revitalize the upstate economy, he said.
New York would be essentially be "keeping up with the Joneses" by following the lead of its neighbors in a largely saturated market, said Keith Foley, an analyst and senior vice president for Moody's Investors Service. He said the viability of a new casino depends on growing the market and capturing customers from elsewhere.
"You almost have no choice. It's almost foolish not to. But it's going to come at the expense of someone else at this point," Foley said.
While casinos in Pennsylvania and the Resorts World Casino New York City in Queens have done well recently, Foxwoods and Mohegan Sun have been slumping. Numbers out from New Jersey on Thursday show Atlantic City's casinos endured a sixth straight year of plunging revenues in 2012.
Catskills ‘an obvious area'
Analysts say location would be a major factor in the success of a new upstate casino since it would need to be close enough to large populations. Cuomo left the location question open. But he said Thursday that casino operators couldn't go to areas where Indian tribes have exclusivity, which may rule out the Rochester and Buffalo areas. And he said the Catskills -- little more than an hour from New York City -- "are an obvious area."
"It's a reasonable proposition that a well-run casino in the Catskills would, in fact, siphon off some business from Connecticut and Atlantic City," said Kent Gardner, chief economist with the Center for Governmental Research in Rochester.
Cuomo said New York City could get a casino in the second phase of his proposal. But he said the state will get better deals from upstate bidders if New York City isn't an initial option. Postponing a city casino proposal would also push the issue beyond this year's mayoral race in New York City, which could complicate passage of the constitutional amendment.
A chilly reception
Cuomo's proposal received a chilly reception from potential competitors in New York's gambling industry.
Gary Greenberg, a minority owner of Vernon Downs Hotel and Casino in central New York, said he did not see any benefit to New York racinos. He said converting existing racinos to casinos would provide a bigger economic boost.
And the leader of the Oneida Indians, who opened the state's first casino in central New York in 1993, said there are unanswered questions remaining about Cuomo's proposal.
"It is more important than ever that local communities be given assurances that they will have a voice in this process and that the state will not impose a gaming framework that will burden community resources and conflict with existing economic development," said Oneida Nation Representative Ray Halbritter.