GAMING MARKET STUDY: STATE OF NEW YORK Prepared for the New York State Gaming Commission January 2021 Contents INTRODUCTION .................................................................................................................................1 1. ABOUT THIS REPORT.................................................................................................................................. 1 a. RFP Questions and Requirements .................................................................................................... 1 b. Primary Methods Used..................................................................................................................... 2 c. About Spectrum Gaming Group ....................................................................................................... 3 d. Common Terms and Definitions....................................................................................................... 5 2. SORTING PIECES OF NEW YORK’S COMPLEX GAMING PUZZLE ........................................................................... 6 a. Adapting to Shifting Environment .................................................................................................... 7 b. Gaming in New York: Emblematic and Unique ................................................................................ 8 c. Building Gaming’s Future.................................................................................................................. 9 A. IMPACTS OF COVID-19 PANDEMIC ............................................................................................... 11 1. ECONOMIC IMPACTS ON GAMING INDUSTRY ............................................................................................... 11 2. PANDEMIC AND RELEVANT HISTORIC EXPERIENCE ......................................................................................... 14 a. Leisure Industry Analogous Experiences ........................................................................................ 15 b. Relevant Experience ....................................................................................................................... 18 1) Terrorist Attacks, 2001...................................................................................................... 18 2) Hurricane Katrina, 2005 .................................................................................................... 20 3) Great Recession, 2007-2009 ............................................................................................. 20 4) Las Vegas Mass Shooting, 2017 ........................................................................................ 21 5) Conclusion ......................................................................................................................... 22 3. FORECASTING IMPACTS ............................................................................................................................ 23 a. Effect on Decline in Discretionary Spending .................................................................................. 23 1) COVID-19 Anxiety.............................................................................................................. 23 2) Great Recession Example .................................................................................................. 24 b. Modeling Assumptions, Projections ............................................................................................... 25 1) Capacity Reduction ........................................................................................................... 26 2) Reduction in Attendance, Average Spend per Visit .......................................................... 28 3) Marketing Spend Reduction ............................................................................................. 32 c. Results of Modeling ........................................................................................................................ 33 1) Mid Case Scenario ............................................................................................................. 35 2) Low Case Scenario ............................................................................................................ 36 3) High Case Scenario ............................................................................................................ 38 4) Conclusion ......................................................................................................................... 40 d. Implications .................................................................................................................................... 42 1) Potential Regarding Obligations and Debts ...................................................................... 42 2) Reinvestment, Marketing and Capital .............................................................................. 45 3) Restructuring .................................................................................................................... 45 4) Migration of the Gambler: Have They Returned? Will They Return? .............................. 46 B. OVERVIEW OF NEW YORK GAMING FACILITIES ............................................................................. 48 C. ECONOMIC IMPACT OF NEW YORK GAMING INDUSTRY ................................................................ 53 1. GAMING AND TOURISM ........................................................................................................................... 54 2. MODELING EXISTING GAMING .................................................................................................................. 56 a. Glossary ...................................................................................................................................... 56 b. Methodology .................................................................................................................................. 57 New York Gaming Study ii 3. IMPACTS OF EXISTING GAMING AND THE UPSTATE NEW YORK GAMING ACT .................................................... 58 D. FORECASTS FOR DOWNSTATE GAMING FACILITIES ....................................................................... 62 1. HISTORICAL OVERVIEW ............................................................................................................................ 62 2. BACKGROUND AND FORECAST SCENARIOS ................................................................................................... 63 3. EXPANDING GAMING IN THE DOWNSTATE MARKET ...................................................................................... 66 a. Regional Market Projection ............................................................................................................ 66 b. Tourism Gaming-Revenue Projection ............................................................................................ 67 c. GGR Summary for Downstate Gaming Market, 2025 .................................................................... 69 d. New Downstate Casino Impact on Incumbent Operators ............................................................. 71 e. Downstate Casino Gaming Tax Fiscal Impact ................................................................................. 72 f. New Downstate Casino Impact on GGR Repatriation ..................................................................... 73 g. Gaming-Revenue Source for New York Gaming Facilities .............................................................. 74 h. Speed to Market: Aggregate GGR with Only Converted VLT Facilities .......................................... 75 i. Projected Impact to Downstate Development of Expansion Elsewhere ........................................ 77 j. Facility Sizing Assumptions .............................................................................................................. 79 4. ORANGE COUNTY VLT FACILITY ................................................................................................................. 79 a. Regional Market Projection ............................................................................................................ 80 b. Tourist Market Projection .............................................................................................................. 82 c. Total Market Projection .................................................................................................................. 82 d. GGR Split by Slots and Tables ......................................................................................................... 83 e. Gaming Tax Implications ................................................................................................................ 84 f. Impact of Additional Competition................................................................................................... 84 g. Gaming Tax Implications of Meadowlands Casino on Downstate Market Inclusive of Orange County VLT Facility ............................................................................................................................. 86 h. Orange County VLT Facility Sizing .................................................................................................. 86 5. IMPLICATIONS OF A POTENTIAL SHINNECOCK CASINO .................................................................................... 86 6. DOWNSTATE MARKET PROJECTION CONCLUSION ........................................................................................