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Area Auto Dealers Optimistic About Year Ahead

By
Rob Pion
Autos Special Coverage

Drive Time

Rob Pion

Rob Pion says the customer experience has become more important in a competitive marketplace for dealers.

 

 

 

Auto dealers have seen it all over the past few years, from soaring costs for vehicles, parts, and labor to inventory shortages to a rapid rise in interest rates.

But they’ve adjusted and adapted, they say — and so have consumers.

“We’re still doing all right. There still seems to be plenty of traffic and activity out there,” said Rob Pion, general manager of Bob Pion Buick GMC in Chicopee. “I would say there was a period last year where people really started to get rate-conscious, but that has passed to some extent. We’ve seen rates start to come down as well as people just kind of accepting it. I mean, it’s not our rate; the Fed sets the rate.”

Despite those concerns, Pion added, “2023 was a great year for us. GMC’s got a couple new products and redesigns coming out, and Buick’s got a number of redesigns coming out. We’re going to have almost a completely new set of models by this time next year. So there’s a lot happening. The used-car market has somewhat stabilized, too, and think that’s going to continue to stabilize throughout ’24. But right now, the public still seems to be out there buying and looking for vehicles.”

Especially on the new-car side, “everything’s kind of back to where things were,” said Mike Filomeno, general manager of Marcotte Ford. “The inventories are really good; products are coming in quickly. Prices are still up there, though, based on supply and demand.”

Manufacturers recognize the dual crunch of rising costs and rising interest rates, however, said Mike Marcotte, president of the dealership. “When interest rates rose last year, Ford started putting programs on the new vehicles again, like the 1.9% or lower interest rates that help with the financial changes going on. The market is definitely starting to react to that.”

Pion has seen similar moves. “Throughout the year — and it’s still continuing — GM has had some aggressive financing rates out there. We’re not seeing the big rebates of years past, but depending on credit approvals, we’ve seen 3.9%, 2.9%, they even went down to 0.9% for a little bit for 36 months. So there has been some help from the factory on that side of things. Not the big cash rebates that we saw in years past, but certainly interest-rate relief.”

Carla Cosenzi, president of TommyCar Auto Group, said business has been strong, and she’s seeing positive trends across her family of six dealerships.

“We’re not seeing the big rebates of years past, but depending on credit approvals, we’ve seen 3.9%, 2.9%, they even went down to 0.9% for a little bit for 36 months.”

“Despite inflation affecting costs of parts and services, consumers understand the situation,” she told BusinessWest. “Manufacturers are offering more aggressive lease incentives, which our customers are taking advantage of, leading to increased business. Certain manufacturers like Volkswagen, Nissan, and Hyundai are also offering 0% financing to consumers.”

That’s in addition to TommyCar’s internal loyalty program, which allows customers to earn up to 15% back on every dollar spent in the service department, which can be used toward their next vehicle purchase.

Meanwhile, “our inventory levels for both new and used vehicles are returning to normal,” Cosenzi noted. “We’ve seen an increase in our used inventory levels, primarily due to steady trade-ins and our aggressive buy-back offers, which have helped us maintain a steady supply of used cars. We’re optimistic about the year ahead.”

 

Back in Stock

Marcotte said his dealership, like many others, dipped to around half of normal inventory in the wake of the pandemic. “But now we’re back to good levels. I’m so glad we can offer gas, diesel, hybrid, and now electric vehicles, which are 8% of the market right now. We’re in every segment.”

Used-car inventories were one of the biggest stories in auto sales across the U.S. over the past few years, as shortages led to soaring values. That situation has stabilized (not necessarily to car owners’ benefit; see story on page 22), but dealers are breathing easier when it comes to what they can put on their lots.

“We’re a big Ford certified pre-owned dealership,” Filomeno said, “and there’s still demand for a good used car out there. A lot of people have been holding on to their cars for the last five years and repairing them because there wasn’t a vehicle for them to buy, so now they’re trying to trade those vehicles in.”

Marcotte Ford’s mobile service vans

Marcotte Ford’s mobile service vans have been a popular customer perk.

Pion agreed, noting that inventory has rebounded, for both new and used vehicles, and across the spectrum, from cars to SUVs to trucks.

“Some of the specialty trucks, especially the heavy-duty trucks, things of that nature, are still difficult to get. It could be anywhere from 12 weeks to 8 months to get it. But people have also become a little more accustomed to that today, too. They don’t expect things tomorrow. They kind of know what it’s like, so they’re willing to wait a little longer.

“Specific trucks are still hard to get,” he went on. “If you come in here and you want a black one with a black interior with the 22-inch wheels with this type of engine … that could still be a hard truck to get. If you came in here and said, ‘hey, Rob, I want a pickup truck. I don’t need to have a big engine, I’m going to use it mostly for my family, some landscaping on the weekends, just around the house’ … I have that. So that purchaser who isn’t incredibly specific about their needs can walk in and be serviced pretty quickly. But that business owner that only wants the white truck for their company? That can be tough.”

The used-car market has continued to favor sellers, Pion added, “and I think it’s created a desire in some people to keep their vehicles longer. In the service department, we definitely see larger repair bills than we have in the past because people are keeping their vehicles longer.”

Another big shift in auto sales continues to be the proliferation of electric vehicles (EVs), a trend that TommyCar has embraced.

“We’ve been a strong electric-vehicle dealer and continue to be one of the top electric-vehicle dealers,” Cosenzi said. “Electric vehicles are more affordable than ever, thanks to federal and state rebates, along with manufacturer incentives.”

While some new EVs, like the Volvo EX90 and EX30 models, require pre-orders due to their popularity and limited availability, others can easily be found on lots, including the Volkswagen ID.4, Hyundai Ioniq 5 and 6, and Nissan Ariya.

“Once people are in the EVs, they’re going to buy another EV. I love the EV. That’s my next purchase.”

Marcotte Ford boasts three EVs — the Mach-E, the F-150 Lightning, and the E-Transit — and “they’re bringing a different shopper than we normally see, with different trade-ins. So it’s bringing a new face, a new customer, into the dealership,” Marcotte said. This evolution is also why the dealership installed four high-speed EV chargers on its lot last year.

“We see people from all over New England coming through here on the weekends. They’ll charge up before going skiing,” he said. “Our employees, if they buy, can charge right here. Customers can come here to charge.”

Marcotte said EV adoption is still increasing, but not as quickly as before, and Ford has changed its production level based on that trend, but the company still envisions a strong future for electrics.

Carla Cosenzi

Carla Cosenzi says interest-rate incentives, the return of healthy inventory levels, and solid options in electric vehicles have all boosted sales.

“Once people are in the EVs, they’re going to buy another EV. I love the EV. That’s my next purchase,” he told BusinessWest, noting that some drivers are more comfortable driving hybrid vehicles first, and many of those will eventually move to all-electric as well. “So it’s good we can offer every option to customers.”

Many drivers, he added, are waiting to feel more confident about charging stations becoming more widespread. “So once there’s more infrastructure, I think that anxiety will go away a little bit.”

Whether they’re buying electric, hybrid, or traditional vehicles, today’s drivers tend to be interested in certain bells and whistles, Cosenzi said.

“Customers are seeking vehicles with advanced high-tech features such as adaptive cruise control, lane-keeping assist, automatic emergency braking, large touchscreens, smartphone integration, and voice recognition,” she noted. “These trends reflect a desire for practical, safe, convenient, and sustainable vehicles with the latest technology.”

 

Out and About

Still, at the end of the day, customers still appreciate a positive experience when purchasing a vehicle, Pion said.

“These brands mean everything to us,” he said, noting that he’s now the only Buick dealership within an hour’s drive. “I just hope that we can offer an experience where people want to be here and be a part of the family. That’s how we try to treat everybody and differentiate ourselves. I try to meet and talk to as many of my customers throughout the day as I can because it’s important to me.”

Marcotte agreed the customer experience is critical. One intriguing development at his dealership has been the introduction of five mobile service vehicles that will drive to a home or business and service a car on the spot.

“It’s bringing the convenience to the customer, and we know time is so valuable, and want to get them up and running,” Marcotte said, noting that the program has been a positive for Ford. “It’s a whole brand differentiator, and not all manufacturers are up on this. So we keep focusing on the guest experience, giving them every option, and now you can be at your home while we do the oil change, or keep your business up and running. We’ve had really great feedback from the customers.”

2024 Economic Outlook

By
Cover Story Economic Outlook

There’s Uncertainty, but Also General Optimism About the Year Ahead

Brooke Thomson says the Business Confidence Index issued each month by Associated Industries of Massachusetts (AIM), does a fairly effective job of conveying what business owners are thinking.

When the index is consistently below 50, it indicates general pessimism about the economy in general. Conversly, when it’s above 50 and trending north of that mark, it conveys overall optimism and, as the name on the index indicates, confidence about what is to come.

And … when the index is right around 50 and hovering there, as it has been for the past several months, well, that generallly communicates the sentiment that business owners aren’t exactly sure what to think, and are, by and large, neither overly optimistic nor pessimistic, said Thomson, who took the reins as CEO of AIM on Jan. 1.

“What this tells me is that there’s a moderating that’s happening,” she told BusinessWest. “The good thing that you can draw from the index is that when you see it around 50 for several months in a row, there’s some consistency, which is critical for business to be successful; uncertainty is the worst thing that you can see in business. But it also indicates to me that businesses aren’t quite sure if we’re headed to a good place or a bad place. Businesses need to have a sense of being able to forecast wh at’s coming in order to adjust.”

This general state of not knowing what to think extends to economists and economic-development leaders as well, meaning that uncertainty is perhaps the prevailing sentiment heading into a year that promises to be an intriguing one in many ways and on many levels, including a presidential race that will likely consume the nation and its business community.

Bob Nakosteen

“I think growth will slow down in 2024, and there’s less than a 50-50 chance of going into a mild recession, with the emphasis on mild.”

But despite this uncertainty, there is strong sentiment that many of the positive forces seen in a better-than-expected 2023 — from job growth to still-robust consumer spending to falling inflation — will continue into next year.

“I think growth will slow down in 2024, and there’s less than a 50-50 chance of going into a mild recession, with the emphasis on mild,” said Bob Nakosteen, a semi-retired professor of Economics at UMass Amherst. “I don’t expect anything seriously negative to happen; I personally think the economy will be relatively healthy all through 2024.”

Beyond the presidential race, there will be many other things to watch in the year ahead, eveything from interest rates and inflation (and the broad impact of both) to the ongoing workforce crisis and efforts to stem that tide; from global turmoil and the impact it may have on various sectors of the economy to initiatives to address an ongoing housing shortage in this region and beyond; from continual changes in where and how people (and the impact of all this on commercial real estate and individual cities and towns) to those two letters that convey both enormous promise and great concern: AI.

For its 2024 Economic Outlook, BusinessWest talked with several business and economic leaders about these and other topics. Their comments add exclamation points to what we generally knew already — that 2024 will be an important year, one of both challenge and opportunity.

 

 

The Indicators Are Indicating…

Historically, Nakosteen told BusinessWest, the Fed tries — that’s tries — to keep a low profile in presidential-election years, and especially after the primaries are over. Elaborating, he said the Fed generally tries to keep from influencing a race with monetary policy, including sharp increases or decreases in interest rates.

And he expects that pattern to continue in 2024 while acknowledging that “anything could happen.”

And while that broad sentiment applies to the general economy as well, the prevailing opinion, if there is such a thing, is that the mostly tepid growth in GDP — roughly 2% in quarters 1 and 2, but then nearly 6% in Q3 — will continue into 2024, with only a modest chance of the country slipping into a recession, especially if interest rates start coming down, as the Fed has hinted. Sort of.

Tom Senecal

Tom Senecal

“All indications are that inflation is coming under control, which has caused the Federal Reserve to pause on interest-rate increases.”

Overall, 2023 was, in many ways, better than some economists projected, with the country able to skirt a recession despite aggressive efforts to tame inflation through interest-rate hikes. Nakosteen said the overriding reason for this was that, with the notable exception of housing, consumers were still willing to spend, and with supply chains righting themselves, there was plenty for them to spend on.

“In effect, supply created demand and kept things moving,” he said, adding that there are plenty of other positive notes in 2023. Indeed, Wall Street recorded a solid year, with the S&P 500 up a robust 23% over the past year, heading into the final week. Meanwhile, the country continues to add jobs — roughly 240,000 per month, on average, over the past year — and unemployment remains low at 3.8%.

On the downside, the housing market cratered, and banks started to suffer from a combination of a depressed housing market, a slower commercial-lending environment, and having to pay more than 5% interest on deposits when they had been paying close to zero. However, housing starts surged nearly 15% in November, providing still more evidence that the Fed is engineering a soft landing, with another 2% growth projected for the fourth quarter.

The $64,000 question, obviously, is whether the momentum seen on these various fronts can continue into 2024.

Rick Sullivan

Rick Sullivan

“Overall, I’m optimistic that the pieces are coming together, and that we’ll see more progress in 2024.”

Nakosteen, as always, said he is not equipped with a crystal ball, and forecasting is difficult given the many unknowns. But he offered this:

“It takes interest rates many, many months, if not years, to work their way through the channels to affect the economy. And some of that is still happening, and that’s causing a slowdown,” he said, noting the decline from Q3 to what is projected for Q4. “But there is nothing approaching recession; the job market is still very healthy, and that’s the key signal that will tell us if we’re heading into a recession.”

 

Points of Interest

As he looks ahead to 2024, Tom Senecal, president and CEO of Holyoke-based PeoplesBank, said he believes the momentum generated on inflation and interest rates — meaning the pause orchestrated by the Federal Reserve as inflation started to ease throughout the year — will likely continue into 2024, although there are no certainties.

“All indications are that inflation is coming under control, which has caused the Federal Reserve to pause on interest-rate increases,” he said. “At worst, we are hoping for no further increases, which should help the housing and commercial real-estate markets. At best, some predict lower rates, and, quite frankly, many consider equity markets to be overreacting to this potentially good news. We’re not out of the woods yet, but hopefully we are in for a soft landing as recessionary fears seem to be easing.”

Elaborating, Senecal said that much hinges on inflation and the needle continuing to move in the right direction.

Brooke Thomson

Brooke Thomson

“It’s imperative that policymakers send the right signals through their actions that we’re going to continue on this course of enhancing our competitiveness and promoting economic stability.”

“Everything points to price stability, and as long as price stability continues, we should see a stabilization of interest rates,” he explained. “As long as interest rates stay high on mortgages, the housing market will continue to have a ripple effect throughout our economy. Not only are housing sales down, but all economic activity related to homebuying and construction has been severely impacted.

“Several national economists and the Federal Reserve are expressing caution and a non-commitment about the direction of interest rates,” he went on. “Equity markets seemed to react extremely quickly to the interest-rate pause as good news. I am not so sure that we will see any change in interest rates. I think rates will remain stable throughout the year because the Federal Reserve is extremely cautious in any move, up or down, until they have clear signs that the economy, inflation, and employment are back to pre-pandemic levels.”

Overall, Senecal sees improvement on the residential real-estate market, but some lingering challenges, many of them pandemic-related.

“With the recent Federal Reserve pause, and the market’s reaction to that, it has started to impact long-term interest rates on mortgages coming down almost three-quarters of a percentage point,” he noted. “I would expect and hope the impact on the residential real-estate market come spring will have a positive effect on inventory and therefore increase residential RE purchases and inventory.”

Meanwhile, he added, “commercial office-space markets will continue to see a continuing decline as the effects of the pandemic on lease maturities will continue to impact commercial real-estate values. Because Western Mass is heavily concentrated in the medical and educational markets, neither of which are severely impacted by these interest-rate economic changes, I fully expect Western Mass. to remain economically stable throughout 2024.”

 

Progress Report

It’s called the CHIPS and Science Act. This is a federal statute signed into law by President Biden in August 2022 that authorizes roughly $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the U.S., and also includes $39 billion in subsidies for chip manufacturing on U.S. soil, along with 25% investment-tax credits for costs of manufacturing equipment and $13 billion for semiconductor research and workforce training.

Rick Sullivan, president and CEO of the Western Massachusetts Economic Development Council, said provisions of the CHIPS Act require that companies in the supply chain be U.S.-based. And this has translated into some intriguing early-stage talks between the EDC and some international companies.

Sam Hanmer

“Insurance isn’t sexy. It isn’t high-tech, it isn’t Wall Street, it’s just … not sexy, so young people aren’t interested in it, and the ones who are interested are aging out.”

“Not only is there onshoring being discussed, but there’s also some foreign investment from different companies, European mostly, that are looking to get a foothold; they’re at least looking,” he said, adding that, between developable land on which to build and precision manufacturers that could be acquired, there is plenty within the 413 to show them. “It’s an opportunity I haven’t seen in the past seven or eight years.”

And this fairly recent development is one reason why Sullivan is rather optimistic about 2024 and what it holds for the region.

Other reasons include everything from progress on the workforce front (see related item below), with area colleges and universities seeing a boost in enrollment as well as new programs and initiatives to put workers in the pipeline for various sectors, to headway in the preparation of a new growth strategy for the region, to some new businesses in different, and promising, sectors.

Businesses like CleanCrop Technologies in Holyoke, which boasts technology that “redefines food and agriculture efficiency.”

“This is a company that came out of UMass, it’s growing significantly, and it’s getting the attention of some multi-national companies in terms of potential investment,” said Sullivan, adding that there are other companies in what he called the “clean-tech realm” that are emerging and offering great promise for that sector. “Overall, I’m optimistic that the pieces are coming together, and that we’ll see more progress in 2024.”

 

The State We’re In

Thomson told BusinessWest that the tax cut orchestrated by the Healey administration in 2023 was a welcome signal that the state might actually get it when it comes to the high cost of living and doing business in the Commonwealth and the need to take steps to make it more competitive.

She hopes there will be more of these to come in 2024 because the state still has a long way to go when it comes to being competitive with North Carolina’s Research Triangle and other regions like it.

“It’s imperative that policymakers send the right signals through their actions that we’re going to continue on this course of enhancing our competitiveness and promoting economic stability,” she said. “We’re really at an inflection point.”

George Timmons

George Timmons

“It’s about how you respond to the populations that you have on your campus and ensuring that they have the resources and the support they need to be successful.”

There continues to be an outmigration from Massachusetts, said Thomson, noting that the so-called ‘millionaire’s tax’ certainly has something to do with this. But the larger issue is simple affordability, she went on, adding that many young professionals feel priced out by the Bay State, and especially the broad area east of Worcester.

Housing is a huge issue, she said, adding that the state needs to prioritize efforts to create housing on many different levels, from affordable to what would be considered starter homes for young professionals. But it’s not the only issue, she noted, adding that overall affordability also includes transportation and childcare, which are also very high in this state.

“The outmigration numbers worry me because they indicate that the biggest population group that we’re losing are these 25- to 36-year-olds,” she said. “These are the people who maybe came here for college and then concluded that it’s too expensive to stay here.”

Finding ways to keep them here, Thomson added, will go a long way toward easing the workforce issues that are impacting every business sector and in some ways stunting their growth.

 

‘Workforce, Workforce, Workforce’

As he talked with BusinessWest about his sector and efforts to attract and retain talent, Sam Hanmer hit upon an uncomfortable truth.

“Insurance isn’t sexy,” said Hanmer, president of the Chicopee-based Rush Insurance Group, with Rush being his mother’s maiden name. “It isn’t high-tech, it isn’t Wall Street, it’s just … not sexy, so young people aren’t interested in it, and the ones who are interested are aging out. Let’s be honest, insurance has been an ugly word forever — you have to have thick skin to be in this game because no one wants to talk to you.”

With that, he summed up the ongoing challenge of attracting and maintaining a workforce today, hitting on two of the key points: Baby Boomers are retiring, and it’s becoming increasingly difficult to hire their successors, especially in insurance.

“If you have that skillset, you’re in an environment where you can change jobs and get a pretty significant pay increase,” he said, referring to seasoned insurance professionals. “In order to get that skillset — and the number of people who possess it is diminishing — employers have to pay up for it, and that squeezes everyone.”

But even those business sectors that would be considered sexy continue to struggle on this front, with many of those we spoke with summing up 2023, and the overriding issue for 2024, with three simple words: “workforce, workforce, workforce.”

Susan Kasa

Susan Kasa

“Commercial aerospace had come to a virtual standstill for many suppliers, and they had to reinvent the wheel for themselves. But we’re starting to see a comeback to pre-pandemic levels.”

Hanmer was one of them, noting that, in his sector and many others, ‘virtual assistants,’ technology, and especially AI hold the promise of removing the human element, meaning hired help, from some backroom functions, the broad realm of customer service, and “helping customers understand what they’re buying.”

In the meantime, though, Hanmer and those in many other sectors are focusing their efforts on educating young people about what could be promising careers, including those in that non-sexy realm known as insurance, and grooming them for this work.

“We’re going to start looking at young, inexperienced people who have a desire to potentially have a good-paying job in insurance, because these are good-paying jobs, and you just can’t get people to fill them,” he explained. “So we’re going to have to start growing them from a younger age, and, hopefully, they’ll stick around.”

With that, again, he spoke for business owners across virtually every sector.

 

School of Thought

It will be called the Adult Learner Success Center.

This is a new initiative at Holyoke Community College (HCC), that, as the name suggests, has been created to help adult learners — non-traditional students generally in the their mid-20s and older — achieve success, however they choose to define it.

“It will help address the specific needs of the adult leader, and we’re really excited about it,” said George Timmons, who took the helm as HCC’s president this past summer. “It’s about how you respond to the populations that you have on your campus and ensuring that they have the resources and the support they need to be successful.”

And the program says a lot about the state of higher education as the caldendar turns to 2024.

Indeed, with the passage of the MassReconnect program, which provides free community college to eligible individuals 25 and older, these institutions have seen a much-needed boost in enrollment (4% at HCC, for example) that is also changing the demographic on their campuses.

While enrollment has edged higher at community-colleges and other institutions in 2023, overall enrollment and financial challenges persist, said Timmons, citing the announced closing of the College of St. Rose in Albany, N.Y., after more than a century of operation, providing more evidence — not that any was needed — that these are difficult and somewhat perilous times in higher education.

“It’s still real when you think about the challenges facing colleges and universities, especially in the Northeast, where the birth rates are signficantly less than they were years ago, putting fewer students in the pipeline,” he said, noting that, on a different spectrum, there are an estimated 700,000 people in the Bay State who have attended college but not finished what they started.

This represents a tremendous opportunity for community colleges, he said, adding that this focus on the adult learner and helping them achieve success will be among the many key issues to watch in 2024.

 

Making Things Happen

Susan Kasa, president of Boulevard Machine & Gear in Westfield, said that, a year ago, her shop was able to shut down the week between Christmas and New Year’s Day, a non-traditional break that was enjoyed by employees and managers alike.

So much so that the plan was to do it again, she said, adding that it just wasn’t possible to do so this year.

“Right now, we have so much demand that we will be open that week and plugging along,” she said in an interview prior to the holidays, adding that this demand comes in the form of a high volume of orders, a number of them in the expedited category, that cover most all of the customer groups served by this precision manufacturer.

That includes what Kasa calls ‘outer space,’ meaning everything from satellites to the rockets taking billionaires and their clients to the edge of space; from defense to aerospace.

This surge in orders reflects many of the issues that will define 2024, from turmoil in the Middle East, Ukraine, and other hotspots to a resurgence in airline travel — all of which is positively impacting precision manufacturers, and there are many of them in the 413, who serve original equipment manufacturers in those markets.

Indeed, on the space and defense sides of the ledger, Boulevard is currently handing orders for parts for everything from the satellites that track incoming missiles to the Apache helicopter, and all indications are that the pace of activity will only increase in 2024 and probably beyond.

“We’ve been delivering parts in this last quarter of the year, and the numbers are very strong right through 2032,” she said, ading that L3Harris, the Florida-based defense contractor that specializes in microwave weaponry, surveillance solutions, and electronic warfare, has become one of Boulevard’s larger customers for outer space, satellite, and aerospace work.

This upward trajectory in orders, which led to the hiring of three new machinists in 2023, also includes aerospace, she said, adding that a pronounced lull in that sector, resulting from the grounding of the Boeing 737 Max, a sharp decrease in air travel during the pandemic, and other factors, is now to be discussed with the past tense.

“Commercial aerospace had come to a virtual standstill for many suppliers, and they had to reinvent the wheel for themselves,” Kasa said. “But we’re starting to see a comeback to pre-pandemic levels. We’re finally getting back to normal; orders are resuming, and they’re taking all this inventory that may have been sitting for a while. With both Boeing and Airbus, they’re seeing orders come in, and they’re large orders.”

 

Economy Shows Progress, but Workforce Remains a Challenge

By
Economic Outlook

Reasons for Optimism — and Concern

[email protected]

 

Chris Geehern says there’s been a slight but significant uptick in the Business Confidence Index issued each month by Associated Industries of Massachusetts (AIM).

That increase is one of the many reasons why he and others are … wait for it … cautiously optimistic as the calendar turns to 2023. That phrase has been put to heavy use in recent years and recent months, especially with so much uncertainty regarding the economy due to forces ranging from COVID to inflation to an ongoing workforce crisis.

“If the workforce grows 1.5% and the number of jobs grows by 21% or 22%, as they’re projecting, we have a problem — a big problem.”

Chris Geehern

Chris Geehern

But as the state and region put 2022 in the rear view and focus on a year with even more uncertainty, there are some reasons for optimism, said Geehern, executive vice president of AIM, and that is reflected in the numbers he’s seeing.

“Our members seem pretty confident about the prospects for their own companies,” he said. “And they are reasonably confident about the state and national economies. There are certainly lingering concerns about interest rates and about whether there will be a soft landing or not. But, by and large, we’re finding that Massachusetts companies are resilient, and they seem to be navigating this kind of economic cycle pretty well right now.”

Elaborating, he said unemployment remains comparatively low, and the state’s economy grew in the third quarter, albeit slowly, after two quarters of negative growth — another positive sign. “So, by and large, employers don’t seem to be deeply concerned by the short-term economic cycle.”

Bob Nakosteen, a semi-retired Economics professor at UMass Amherst, agreed. He told BusinessWest that, in addition to growing optimism, inflation is starting to cool, a sign that the Fed’s decision to aggressively raise interest rates may — that’s may — be working. It could also be a harbinger of lower rate hikes in the future, which would certainly help business owners and consumers alike.

“And I think inflation is already a lot lower than is being reported,” said Nakosteen. “The month-to-month figures are pretty low … I think inflation is going to drop, maybe not dramatically, but considerably in the next few reporting periods.”

Elaborating, he said ‘dramatically’ would be a drop to the 2% target set by the Fed (at its height, inflation was closer to 8%), while ‘considerably’ would be to the 3% to 4% range, which is what he expects.

“And if that’s the case, then the Fed is going to ease off on interest rates,” he said, adding that such actions should bolster the stock market and the economy as a whole as the dramatic increases in the cost of borrowing start to ease.

Meanwhile, there are other signs that the picture is improving and the odds for recession in 2023 are moving lower, said Nakosteen, adding that the labor market remains quite strong, and the Atlanta Federal Reserve’s projections for GDP in the fourth quarter are for 3.2% growth — this on top of what has been a strong Christmas season for retailers.

“The signals just aren’t there for a serious recession — or even for a recession at all.”

Bob Nakosteen

Bob Nakosteen

“I think that economic growth is going to slow down, and if we do get into a recession, it will be a mild one,” he said, adding quickly that his track record with projections is decent but not spectacular. “What continues to amaze me is the strength of the labor market; unemployment is still at or just over 3% both nationally and in this state, and in Western Mass. as well. “The signals just aren’t there for a serious recession — or even for a recession at all.”

But while there is cause for some optimism, there are many concerns as well, especially when it comes to the workforce.

Indeed, in 2022, it became obvious to most in business that the problems seen in 2021 when it came to companies being able to fill positions with qualified help were certainly not temporary in nature. They persisted into 2022, and in some cases were exacerbated.

Now, there is what Geehern, summing up the thoughts of AIM’s members, called “deep concern” about what has become a workforce crisis in this state.

“‘I can’t find the people I need to make my business grow’ has become part of the vernacular in this state,” he said, noting that, as part of the Business Confidence Index survey, AIM asks an open-ended question, along the lines of ‘what are you worried about?’

And, increasingly, owners of businesses large and small are worried about workforce.

“I would say that 75% to 80% of the responses to that question every month have to do with talent acquisition, talent retention, and the availability of workers,” he said. “And the concern is that this isn’t the function of an economic cycle; it’s really a deep, structural inflection point for the Massachusetts economy.”

As he explained why, Geehern cited some rather alarming statistics from the Massachusetts Department of Economic Research, which projects that the number of jobs in Massachusetts will grow by 22% between now and 2030. Meanwhile, projections from various economists indicate that the state’s workforce will grow 1.5% by 2030.

“If the workforce grows 1.5% and the number of jobs grows by 21% or 22%, as they’re projecting, we have a problem — a big problem,” Geehern said. “This was going on anyway — it’s partially a function of demographics — but it’s been exacerbated by the newfound independence that remote work has given to employees.”

Given this unsettling math, Geerhern said there are things the state and individual employers must do to make themselves more attractive — not just to businesses, but to workers on all levels.

“Traditionally, we’ve focused on what creates the environment where businesses can start and grow in Massachusetts, and we’re still committed to that,” he said. “But at the same time, we also recognize that you have to create a quality of life that makes people — workers — want to live here in Massachusetts. And that means looking at the cost of living.

“Massachusetts ranks number one in terms of childcare costs, we have the second-highest housing costs, and the fourth-worst traffic congestion — I don’t know how they measure that, but they do,” he went on. “What we’re looking at is a significant outmigration of people from Massachusetts to other areas of the country; a Massachusetts Taxpayers Association report showed that, over the past three decades, there’s been an outmigration of 750,000 people from Massachusetts, and that trend has actually accelerated post-pandemic.”

In some cases, people are leaving the state for lower-cost areas, but keeping their jobs here, a byproduct of the remote-work phenomenon. Moving forward, Geehern said in conclusion, the state has to make itself an attractive place to do business and to live and work — because failure to do so will worsen an already-difficult situation and made it even harder for business owners to sleep at night.

 

 

Springfield Thunderbirds Aim Higher in Team’s Fourth Season

By
Sports & Leisure

Raising Their Game

Team President Nathan Costa

When the Springfield Thunderbirds hit the ice for the first time three years ago, its management team heard plenty of skepticism about whether hockey could truly thrive and grow beyond a certain ceiling in the city. While there’s still plenty of room for growth in ticket sales, attendance surged last season to a two-decade high, with Saturday nights in particular routinely selling out. In short, there’s a lot of optimism inside the Thunderbirds offices — and a refusal to get complacent.

If Springfield is in the midst of a renaissance, Nathan Costa says, the Springfield Thunderbirds are a large part of the reason — even if not everyone thought they could be.

“I told the staff recently, ‘I think we’ve been able to do this because we came in with a chip on our shoulder.’ We wanted to prove we could do it here and that, if we did it the right way, it could work,” said Costa, the team’s president. “When we first came in, a lot of people said, ‘teams haven’t always had success here — what’s different about you guys?’”

At the start of their fourth season in Springfield, the Thunderbirds — the American Hockey League (AHL) affiliate of the Florida Panthers — have slowly raised what was, in some eyes, a low bar when Costa and a team of local investors brought hockey back to Springfield in 2016 following the departure of the Falcons.

Perhaps most strikingly, the team averaged more than 5,000 fans per night last season — a number no Springfield hockey team had achieved in more than two decades.

“At first, there were low expectations for the marketplace, and it was easier to meet those expectations,” Costa told BusinessWest two weeks before the team begins its 2019-20 home campaign on Oct. 5. “Now we’ve set a high bar. We need to work with the same urgency we’ve always had to keep this moving forward.”

This year’s squad hits the ice for a practice session last week.

Above Costa’s office door is painted the number 6,793. That’s the sellout number at the MassMutual Center, and it’s a number the team reached on about a dozen occasions last season, mostly Saturday nights. With a friendlier home schedule this year (more on that in a bit), the goal is to record even more sellouts and get that average attendance closer to 6,000 than 5,000 — and Costa thinks it’s reachable.

“In the past, you could always walk up and buy a ticket here. Now, if you don’t get a package, or you don’t get a ticket early on, especially for those Saturday nights in the second half of the season, you can’t find a ticket. And that’s what we wanted to create,” he said. “But it’s not easy to do.”

Last year, preparations to host the AHL All-Star Classic (a significant feather in the franchise’s cap) knocked out home games the weekend before, traditionally one of the league’s busier weekends, cutting down the total number of weekend dates. But for the 2019-20 season, the Thunderbirds will host 15 Saturday-night and 14 Friday-night tilts, as well as four Sunday-afternoon games, in all accounting for 33 of the schedule’s 38 home games.

“At first, there were low expectations for the marketplace, and it was easier to meet those expectations. Now we’ve set a high bar. We need to work with the same urgency we’ve always had to keep this moving forward.”

Still, “we’re continuing to put an emphasis on getting to the point where we’re filling the building every single night,” Costa said, adding that season-ticket sales have increased every year. So have the team’s fortunes on the ice, as it posted a winning record last year, although it has missed the playoffs all three years.

“The Panthers had quite a few injuries, so they called up a number of our players around the all-star break, which was challenging on the hockey side,” he explained. “But on the business side, we continue to do what we’ve talked about from the very beginning, which is focus on the family-fun, entertainment aspects of coming to games.

“People want to see a winning product, obviously — especially in this market, where people are spoiled with winning teams,” he went on. “So we’re hoping that comes with time. But we’re also trying to lay a foundation where we’re providing a professional, awesome experience here in the arena, and I think we’re doing that and creating events and promotions people are connecting with.”

From the start, Costa and his team tackled some common gripes from the Falcons’ tenure, including lowering concession prices, negotiating a deal for free parking in the neighboring garage, building a richer schedule of promotions — even ramping up video production to make sure season-ticket holders are watching fresh videos on the big screens as the season moves along.

Being granted last year’s all-star events was a signal, he said, that the AHL recognized what was happening and how fans were responding. So were a series of league awards last year, from Costa being named outstanding executive to honors for the team’s digital-media presence and marketing efforts.

“The All-Star Classic was an absolute home run — it raised our profile locally and within the AHL,” Costa said. “Springfield wasn’t necessarily viewed as a place where you could see best practices or have a full building, but now, we’ve changed the perception of Western Mass. among the AHL board and really rejuvenated the city from their perspective.”

And the perspective of others as well — about 5,000 a night.

Lacing ’em Up

When the Portland Pirates left Maine for Springfield three years ago, the City of Homes was no doubt on the rise, but pieces were still falling into place downtown, and the MGM Springfield casino was still more than two years from opening.

“That was a challenge, when there wasn’t as much life and things going on,” Costa said. “We really wanted to face a lot of the hurdles that we heard about head-on, much of which was parking, safety, or that it costs too much to come to a game. We were trying to bring people downtown.”

Some of those concerns were more reputation than reality, he added. “I’ve worked downtown more than 10 years, and I’ve never not felt safe. And I think that perception is gone now. We don’t hear it at all anymore. It is a testament to the city.”

Part of that change is the simple fact of more feet on the street, especially at night.

“There’s a lot more going on. Restaurants are buzzing. People are walking around. There’s life, there’s energy. The city was primed for that,” he said, crediting entities like MGM and the Springfield Business Improvement District and efforts in the realms of public safety and downtown beautification.

Still, selling a new team to the public after the Falcons took flight was a challenge initially. “But we were confident in our business plan and stuck to what worked in other AHL cities; we stuck to providing value to ticket holders and in the arena. The league started feeling good about us, and it’s steadily grown over three years.”

The franchise is always feeling out new promotions, although a few have become regular events, including 3-2-1 Fridays ($3 beers, $2 hot dogs, and $1 sodas) and a Friday-night concert series; March’s Pink in the Rink event to celebrate breast-cancer survivors and raise funds for treatment and research; and December’s Teddy Bear Toss, where fans bring stuffed animals and throw them on the ice after the home team’s first goal, to be collected and donated to underprivileged children.

Visits from David Ortiz and Pedro Martinez have proven hugely popular as well, and while the team doesn’t have someone of quite that stature stopping by this year, it has planned four guest appearances, including former Florida Panther goalie Roberto Luongo in November; Mike Eruzione from the 1980 U.S. Olympic hockey team in February, marking the 40th anniversary of the Miracle on Ice; and Brian Scalabrine from the Celtics’ 2008 NBA championship team in March.

The fourth guest is a little more outside the box: actor Leslie David Baker, who played Stanley Hudson in the hit TV show The Office, will visit in December for what the team is labeling its Office Holiday Party, inviting local businesses to basically celebrate the season at the MassMutual Center, watch a game, and meet Baker.

“We’re trying to provide more value to ticket holders, and letting them know we continue to invest in the game experience,” Costa said.

Another returning promotion is a Blast from the Past night in January, when the team reverts to 1990-era Springfield Indians jerseys, celebrating the 30th anniversary of that team’s Calder Cup win.

“We’re trying to tap into that old nostalgia; that’s a fun part of what we do,” Costa said, noting that the team still owns the Springfield Indians trademark. “We made the decision not to rebrand to that when we purchased the franchise. But using it here once in a while is fun, and we can create an event around it that people look forward to.

“I think we’ve done a good job of recognizing the past but also creating our own brand,” he went on. “We obviously still hear about the Indians quite a bit — there’s a lot of romanticizing around the Indians, and obviously they had some really good, successful years — but it wasn’t all roses during that time. They had their ups and downs.”

The goal with the Thunderbirds, obviously, is to have far more of the former than the latter.

“There’s been a tendency in the past to have a negative viewpoint about downtown Springfield,” he told BusinessWest. “We want create a positive experience. It’s a perfect size city for AHL franchise. Now we have to keep that trajectory moving forward and continue to sell tickets and show value. The minute we take our foot off the gas, our business is going to suffer.”

Community Goals

The Thunderbirds have been equally aggressive about community involvement, Costa said, with Boomer, the team’s mascot, making more than 200 appearances a year at businesses, schools, and organizations, and each player making at least three appearances as well, in addition to team events. The franchise has also developed a charitable foundation and youth-oriented outreaches like a reading program, a kids club, and a partnership that creates positive connections between area youth and the Springfield Police.

“Being here in this marketplace, there’s a duty for us to give back and truly be a part of the community,” Costa said. “So a lot of this stuff is focused on giving back and doing the right thing by our community in general.”

He’s gratified by the growth of the brand and the deepening of its civic roots, but admits he’s driven somewhat by anxiety and fear of failure, and still carries that chip on his shoulder from the early days. He also credits a hardworking staff willing to roll up their sleeves, hit the phones and the streets, and do the often-tedious work it takes to increase ticket sales and awareness of what’s happening on the ice.

“It’s awesome to see how the community has surrounded us and supported what we’re trying to do,” he said. “But we’ve never said, ‘hey, let’s just open the arena and see who comes out.’ We’ve always been proactive about getting out and telling our story. Now, we’re so well-positioned that, if the team has some success on the ice, it’s ready to take off. It’s palpable. If you come on a Saturday night, you can feel the energy.”

With so many entertainment options available — and a deep mesh of TV programming that makes it easier for families to just stay home — Costa and his team certainly aren’t letting up on the gas. In short, that number 6,793 continues to drive them.

“There’s nowhere else to go but up,” he said. “If we keep doing the things we’re doing, it will happen, and I think we’re seeing that now — that doing the right thing and working hard will lead to success.”

Joseph Bednar can be reached at [email protected]

Some Reasons for Optimism at MGM

By
Opinion

Opinion

‘How are they doing?’

That’s the question that seemingly everyone is asking these days, with the ‘they’ obviously being MGM Springfield, the $960 million resort casino complex in Springfield’s South End. Everyone wants to know how they’re doing because this is the biggest business development in this part of the state in who knows how long, the expectations were and are sky-high, and the stakes — for MGM, the state, the city, and the region — are equally high.

And people want to know because, well, it’s not clear just how well they’re doing so far. The revenue numbers, meaning GGR (gross gambling revenues), are not on pace to come close to what MGM told the state they would be for the first year of operation at this facility — just over $400 million. Indeed, over the first six months or so of operation, MGM Springfield was averaging just over $20 million per month. You can do the math.

But beyond the revenues, there are other signs that perhaps this casino is not performing as well as all or most us thought it would and hope it will.

Going all the way back to opening day, the traffic, the lines to get in, the crowds of people downtown just haven’t materialized. Yes, there have been some big days (usually Saturday nights) when it’s difficult to maneuver around downtown Springfield, but not as many as we were led to believe.

Thus the question, ‘how are they doing?’

It’s a difficult question to answer because there are many ways to answer it, and aside from those really qualified to answer that query, no one truly knows.

More to the point, and Mike Mathis said this to BusinessWest for a recent interview, it’s still early in the game when it comes to both gaming in Massachusetts and MGM Springfield, and perhaps much too early to be drawing conclusions about how MGM will fare even this year, let alone in the years to come.

He’s right. These early months can tell us something about how MGM Springfield is going to perform over the long term, but they’re not going to tell us everything. Several of these first months have come in late fall and winter, a typically slow period in this region for both business and tourism.

Meanwhile, MGM Springfield is still very much in the process of trying to figure out what works in this market and what doesn’t, and how to achieve maximum efficiency for this multi-faceted operation. Mathis and others at MGM call this period ‘ramping up,’ and they project it might take three years to get all the way up the ramp.

But there are many reasons for optimism, starting with a change of season and the likelihood that MGM will make far better use of its vast and unique outdoor facilities. There’s also the emerging ROAR! Comedy Club and a multi-year partnership agreement recently inked with the Boston Red Sox that will make MGM Springfield the team’s ‘official and exclusive resort casino’ (replacing Foxwoods in Connecticut) and home to its January Winter Weekend.

Finally, when it comes to the ‘how are they doing?’ question, the most important aspect of the answer relates not to revenues for the state‚ although those are important, but impact on the city of Springfield and the surrounding region.

In the years and then months leading up to the casino’s opening, area officials — and those of us at BusinessWest — said MGM was going to be big piece of the puzzle, not the entire picture. It was going to be a big contributor to the overall vibrancy in the region, but just one of many potential contributors.

Overall, we expected the casino to be a catalyst, not a cure-all, a force that would help put Springfield on the map and help bring people to that spot that on the map.

Maybe all the revenues are not as solid as we hoped they would be, but thus far, the casino is doing most everything we anticipated it might do.

At MGM Springfield, Revenues Are Slow, but Optimism Abounds

By
Mike Mathis, foreground, with recently promoted MGM employees
Cover Story

A Six-month Checkup

Mike Mathis, foreground, with recently promoted MGM employees

Mike Mathis, foreground, with recently promoted MGM employees, from left: Marissa Dombkowski, Bill Blake, and Nickolaos Panteleakis.

A half-year after opening its doors, MGM Springfield is well behind its stated goals and expectations for gross gaming revenues, or GGR, and the numbers have been declining each month since the fall. But the winter months are traditionally the slowest in this industry, said Mike Mathis, president and COO of the resort, and the company is still ramping up its operation. Overall, he said, there are a number of positive indicators.

‘Ramping.’

That’s the word you hear quite frequently from MGM’s leaders as they talk about the $950 million property in Springfield’s South End. Jim Murren, president and CEO of MGM Resorts International, used it early and often in a conference call with stock analysts last month following the release of MGM’s fourth-quarter earnings in 2018.

And Mike Mathis, president and COO of MGM Springfield, leaned on it as he talked with BusinessWest late last month, six months after the facility opened its doors. With casinos like this one, Mathis said, the ramping-up process, if you will, goes on for three years or so and is quite involved.

It entails watching, listening, learning, and adapting, all with the goals of growing visitation and, therefore, the bottom line, while also improving efficiency and making the operation in question more profitable.

“I think it’s premature to judge us, or anyone, on a partial data set; it’s a little early to say we’re going to underperform or overperform for our first year.”

“In the context of a new resort, it’s commonly understood within the industry that there’s a three-year stabilization period — a ramp period to stabilization,” he explained. “Three years serves as a benchmark. You’ve been through a few different seasonality rotations, you see the different ranges of weather, you see the different ranges of how holidays land, whether they land on weekends or midweek — you get all those different scenarios.

“You’re also building up your database,” he went on. “Seeing how your competition’s reacting to what you’re doing — how are they activating their property. You get a feel over a couple of years — did we do well that weekend because the competition didn’t have much going on? Or did we suffer because they put in a big act to counter that weekend? That all shakes out over two or three years.”

These references to ramping up are being generated by questions about revenues at MGM Springfield, and, more specifically, about why they are not approaching the numbers the company projected to the Mass. Gaming Commission.

‘Slower’ is the operative word being used with regard to revenues, and it fits if one considers MGM’s projections of $418 million in annual gross gaming revenue (GGR) in its first year of operation, or $34.8 million per month. Indeed, the company recorded $21.58 million in GGR in December, and just $19.7 million in January (February’s numbers will not be released for a few weeks). GGR for November was $21.2 million, the number was $22.2 for October, and in September, it was $26.95 million.

Mathis, while certainly acknowledging that the numbers are lower than projected, at least for the winter months, told BusinessWest that the $418 million projection given to the Gaming Commission was made several years ago, and that the landscape has changed in some ways since then.

Mike Mathis says the winter months are traditionally the slowest for casinos

Mike Mathis says the winter months are traditionally the slowest for casinos in the Northeast, and he is optimistic that visitation will climb as the mercury does.

Meanwhile … it’s early, said Mathis, referring to the fact that the casino has only been open for six months, and a few of those months (January, February, and early December, before the holidays) are among the slowest for casinos, especially those in the Northeast.

“I think it’s premature to judge us, or anyone, on a partial data set; it’s a little early to say we’re going to underperform or overperform for our first year,” he told BusinessWest. “If you look at our August and September numbers, we would have exceeded our expectations. And going into the winter months … that’s the low end of the season.”

And, overall, the casino is still ramping.

That means it’s still learning, collecting data, watching patterns develop, and adapting to what the data shows. As he said earlier, it’s an involved process that involves a number of factors, including the weather. Make that especially the weather.

Mathis said he and his team are tuned into the forecasts, because one thing he’s noticed thus far — and this counts as one of the surprises on his list — is that, despite a reputation for being hardy, people in New England are apparently easily scared off from traveling in snow — or even forecasts of same.

“We thought New England would be hardier than what we’ve seen on some of these snow days,” he said with a laugh. “We’ve had a little bit of experience with snow in Detroit and Atlantic City, but I think every market is unique, and we’re learning some of the patterns and behaviors.

“And it’s not just snow,” he went on, sounding much like area golf-course operators when they talk about rain and how it impacts them. “It’s what type of snow and what time of day it hits and what day of the week it hits. Weather forecasts have become an important tool for operating and planning; it’s been a very interesting learning curve.”

One that extends, as he said, well beyond snow, and into other realms such as where people are visiting from, how often they visit, which games they play, which restaurants they frequent, and much more.

Overall, and as might be expected, Mathis is optimistic that the monthly numbers for GGR will improve as the weather gets better and the casino can make much better use of its outdoor facilities with concerts — Aerosmith is coming for the first-anniversary celebration — and other activities.

But looming over MGM Springfield, in a big way, is the opening of a competing casino in Everett, slated for sometime this summer. Mathis said that development will further alter the landscape and certainly add new wrinkles to the ramping process.

Driven by Data

Mathis told BusinessWest that this first six months of operation have been a learning experience on all kinds of levels, and this, too, was to be expected, because gaming is still relatively new to Massachusetts (Plainridge Park Casino, a slots facility, opened in the fall of 2017), and while those at MGM had expectations, they didn’t know exactly what to expect.

What have they learned? For starters, they’ve learned that visitors much prefer the weekend to the weekdays. And while that sounds obvious, the disparity in the numbers is eye-opening.

“I’m surprised at how weekend-centric the business has been — the difference between weekends and weekdays is pretty dramatic,” Mathis noted, adding that, with the former, visitation averages roughly 18,000 to 20,000 a day, while with the latter, it’s closer to 10,000.

This disparity is far greater than it is in Las Vegas and with most other MGM properties, said Mathis, adding that one big reason for this is a still-ramping (there’s that word again) meeting and convention business in Greater Springfield.

Mike Mathis says the ROAR! Comedy Club has become a solid attraction for MGM Springfield

Mike Mathis says the ROAR! Comedy Club has become a solid attraction for MGM Springfield and a vehicle for bringing new audiences to the resort.

“We have the ability to impact those numbers midweek by putting more convention groups in the MassMutual Center, getting more citywide events, and getting more entertainment mid-week, which we plan on ramping up,” he explained. “There’s ways to impact that midweek business to the benefit of the entire downtown.”

What else have they learned? There’s that aversion to traveling in snow that was mentioned earlier. That was in evidence a few weeks back. The weekend before Presidents Day was one of the best the casino had since it opened, said Mathis, crediting MGM’s ROAR! comedy shows and a host of other things happening downtown and elsewhere, including two Thunderbirds games and a camping and RV show at the Big E, for the surge, one that contributed to one of the few real traffic jams recorded since the property opened.

But the holiday itself (a day off for the vast majority of workers in this region) was considerably slower, and Mathis believes that the few inches of snow that fell overnight had a lot to do with this. Of course, Monday is also a weekday.

What else? Well, to date, MGM Springfield is “underperforming” (Mathis’ word) when it comes to attracting people from Central Mass. Indeed, while the casino does well in drawing people from Upstate New York, New Hampshire, Vermont, and Connecticut (the I-91 corridor), the numbers from the central part of the state are less impressive, which, if you take the glass-is-half-full approach, which Mathis does, means there’s considerable room for growth.

“We’re trying to understand the phenomenon of east-west travel on the Pike, frankly,” he explained. “I think there’s a bias to go north-south — I think that might be the more the traditional traffic pattern, and that’s what the data shows — but we’re also doing well with Boston.

“The good news about how this data shakes out is that there’s upside opportunity for us in Central Mass.,” he went on. “And this might blunt the impact of the Everett casino.”

There have been a few other surprises, including the number of people making their first visit six months after the ceremonial ribbon was cut.

“I’m still surprised by how many people I’m meeting on the floor who are seeing it for the first time,” he said. “Our team has been at this since 2012, so sometimes I feel that anybody who was interested in coming would have come in the first month or two. But there are people hitting the floor every day who are brand new, and for whatever reason have decided that this is the weekend they want to check it out.”

A Laughing Matter

While much of the media’s focus has been on GGR and the hard fact that the numbers are not where they were projected to be, Mathis said there are a number of positive developments to note as the casino passes that six-month mile marker. Here are several he listed:

• The data clearly shows that the opening of MGM Springfield has grown the overall gambling market in this broad region, he said, adding that this becomes clear when one does some simple math and looks at MGM’s revenues and the declining numbers for competitors. The former is larger than the aggregate of the latter, which translates into growth, which bodes well for all players.

“I think one of the good things about new properties coming into the market is it keeps everybody in a position of having to keep up.”

“I’ve met countless customers on our floor who have said that MGM Springfield is their first casino gaming experience, and there’s a few reasons for that,” he said. “Some say they were in Las Vegas, they’re Mlife members, and they’d been to a convention or show, but didn’t happen to go into the casino on that trip; with this in their backyard, they thought they’d give it a try. Others will say they like our non-smoking gaming environment and had never gone into another casino because they didn’t want the smoke; that’s a real competitive advantage for us.”

• The ROAR! Comedy Club has been a solid addition to the MGM lineup, helping to drive visitation, especially during some of the slower months on the calendar. Located in the historic Armory, the shows have drawn consistent crowds, said Mathis, adding that, as the calendar turns to spring and then summer, the team at MGM Springfield will look to maximize its outdoor facilities with a full slate of entertainment to be announced in the coming weeks.

“In talking with the comedians, they say we’re now the buzz within that community — it’s a cool venue, something all the comics want to play on their East Coast rotation,” he told BusinessWest. “it’s a great way to expose the building to different customers.”

• The team continues to find new ways to leverage its many facilities at the casino, said Mathis, noting that it has added entertainment in its ballrooms — Sinbad recently performed two sold-out shows — and the staff continually looks for new opportunities.

“We’re doing a lot of fun activations in different parts of the resort,” he explained. “We want to make sure we understand the booking patterns for convention and meeting groups, and when we see holes, it’s like an empty airplane seat; how do you fill it, and how do you bring new customers to the resort?”

• The hotel and food and beverage side of the casino operation has been exceeding expectations, said Mathis, adding that, among other things, a recently added weekend brunch at Cal Mare restaurant has helped grow that side of the equation.

“Our hotel and restaurant business has been extremely strong, and we thought that would be the case, because there’s good, local lodging and F&B in the market, but perhaps not to a Vegas standard, and we believe we’ve brought a Vegas standard to this market. We’ve exceeded occupancy, and we’ve exceeded our average daily rate.”

• But despite this success, there has been some spillover to other area businesses in this sector, and this is by design, said Mathis, noting that the hotel, with 252 rooms, is not particularly large, and the dining options, while growing (groundbreaking on a Wahlburgers is slated for later this year), leave plenty of opportunities for other eateries in the downtown.

“One of the reasons we sized the hotel the way we did was that we wanted to make sure that developments like ours have a spillover effect to other businesses,” he said. “And we wanted to make sure that came true. Some restaurant owners, including the Caputo family at Red Rose, have been quoted as saying that their business is up 20%, and people are expanding and extending hours.”

• Likewise, the numbers regarding the workforce have been generally positive, said Mathis. He estimated a 35% churn rate since the facility opened its doors, and noted that, while this might sound high to business owners and managers in other sectors, it’s in line with industry norms and actually lower than in many other areas.

Meanwhile, the targets for hiring Springfield residents, veterans, women, and minorities have all been met or exceeded, and many employees have already moved up the ladder since the casino opened its doors.

“I got the stat the other day … I think we’ve had 200 or so promotions since day one, and 30% of those are Springfield residents,” he noted. “Nothing makes me prouder than to see a line-level employee on day one who’s now wearing a suit in a supervisory management role. And it’s happening.”

As examples, he cited three employees who joined him for photos later in the day: Bill Blake, formerly graphic supervisor and now creative manager; Nickolaos Panteleakis, formerly Front Services manager (where he handled many front desk duties) and now director of Front Services; and Marissa Dombkowski, who has been promoted twice already — she started as an HR communications specialist, moved up to Entertainment Marketing coordinator, and is now Marketing manager for the MassMutual Center.

Overall, and to recap, Mathis reiterated that ramping up is, indeed, a three-year process, one that involves a serious learning curve on many different levels.

“I tell my team all the time, ‘if it were easy, everyone would do it,’” he said of casino operations in general. “That’s why we’re here — to manage through, collect data, and be smarter every day as we collect data and finetune the business.”

Driving Force

Mathis was one of those people caught in that traffic jam on the Saturday of Presidents Day weekend.

He told BusinessWest that it took him more than 45 minutes to get to an event downtown from his home in Longmeadow, normally a 15-minute drive. But unlike most others, he certainly wasn’t complaining.

“I’ve never been happer to be in stand-still traffic,” he said, adding that, while it has always been MGM’s goal to minimize such disruption, he’ll gladly take more nights like that in the weeks and months to come.

And he predicts he’ll be getting more as that ramping process continues.

George O’Brien can be reached at [email protected]

MGM One of Many Factors Spurring Optimism for Tourism Sector

By
John Doleva shows off the Basketball Hall of Fame’s renovated theater, one of many improvements at the hall.
Economic Outlook

Right Place, Right Time

John Doleva shows off the Basketball Hall of Fame’s renovated theater, one of many improvements at the hall.

John Doleva shows off the Basketball Hall of Fame’s renovated theater, one of many improvements at the hall.

They call it the ‘need period.’

There are probably other names for it, but that’s how those at the Greater Springfield Convention & Visitors Bureau (GSCVB) refer to the post-holiday winter stretch in this region.

And that phrase pretty much sums it up. Area tourist attractions and hospitality-related businesses are indeed needy at that time — far more than at any other season in this region. Traditionally, it’s a time to hold on and, if you’re a ski-related business, hope for snow or enough cold weather to make some.

But as the calendar prepares to change over to 2019 — and, yes, the needy season for many tourism-related businesses in the 413 — there is hope and optimism, at least much more than is the norm.

This needy season, MGM Springfield will be open, and five months into its work to refine and continuously improve its mix of products and services. And there will also be the American Hockey League (AHL) All-Star Game, coming to Springfield for the first time in a long time on Jan. 28 (actually, there is a whole weekend’s worth of activities). There will be a revamped Basketball Hall of Fame, a few new hotels, and some targeted marketing on the part of the GSCVB to let everyone know about everything going on in this area.

“The last half of 2018 has been great, and we’re very optimistic — our outlook for tourism is really positive for 2019. Certainly, MGM is a factor — it’s a huge factor, it’s a game changer — but it’s just part of the story.”

So maybe the need period won’t be quite as needy as it has been.

And if the outlook for the traditionally slow winter months is brighter, the same — and more — can be said for the year ahead, said Mary Kay Wydra, president of the Greater Springfield Convention & Visitors Bureau, noting that expectations, based in large part on the last few quarters of 2018 and especially the results after MGM opened on Aug. 24, are quite high for the year ahead.

“The last half of 2018 has been great, and we’re very optimistic — our outlook for tourism is really positive for 2019,” she told BusinessWest. “Certainly, MGM is a factor — it’s a huge factor, it’s a game changer — but it’s just part of the story.”

Elaborating, she said MGM is helping to spur new development in this sector — one new hotel, a Holiday Inn Express, opened in downtown Springfield in 2018, and another, a Courtyard by Marriott, is set to open on Riverdale Street in West Springfield — while also filling more existing rooms and driving rates higher.

Indeed, occupancy rates in area hotels rose to 68.5% in October (the latest data available), up nearly 2% from that same month in 2017, and in August, they were up 5% (to 72.6%) over the year prior.

Meanwhile, room revenue was up 4.6% in October, from $113 a night on average in this region to $119 a night, and in August, it went up 7.2%.

And, as noted, MGM is just one of the reasons for optimism and a bright outlook in this sector, Wydra said. Others include the renovated hoop hall, yearly new additions at Six Flags, and the awesome drawing power of the Dr. Seuss museum on the Quadrangle.

An architect’s rendering of the renovated third-floor mezzanine at the Basketball Hall of Fame, which includes the tributes to the inductees.

An architect’s rendering of the renovated third-floor mezzanine at the Basketball Hall of Fame, which includes the tributes to the inductees.

For 2019, the outlook is for the needle to keep moving in the right direction, she said, noting that some new meetings and conventions have been booked (more on that later); Eastec, the massive manufacturing trade show, will be making its biennial pilgrimage to this region (specifically the Big E); the Babe Ruth World Series will again return to Westfield; and the AHL All-Star weekend will get things off to a solid start.

John Doleva, president of the Basketball Hall of Fame and a member of the executive board of the GSCVB, agreed.

“With MGM now in the marketplace and being active, there does appear to be a lift, much more of an excited spirit by those that are in the business,” he noted. “Everybody is saying that, at some level, their business is up, their interest in visitation is up — there is a general feeling of optimism.”

Getting a Bounce

Doleva told BusinessWest that MGM opened its doors toward the tail end of peak season for the hoop hall — the summer vacation months. Therefore, it’s too early to quantify the impact of the casino on attendance there.

But the expectations for the next peak season are quite high, he went on, adding that many MGM customers return several times, and the hope — and expectation — is that, on one or several of those return trips, guests will extend their visit far beyond the casino’s grounds.

“Once people return a few times, they’re going to be looking for other things to do,” he said. “I definitely feel a sense of excitement and anticipation, and I’m definitely looking forward to next summer when it’s the high-travel season, and really get a gauge for what the potential MGM crossover customer is.

“Conversely, there are probably individuals that would probably have the Hall of Fame on their list of things to do,” he went on, “and now that there’s more of a critical mass, with MGM right across the street, I think we rise up on their to-do list.”

But MGM’s arrival is only one reason for soaring expectations at the hall, said Doleva, adding that the facility is in the middle of an ambitious renovation project that is already yielding dividends.

Indeed, phase one of the project included an extensive makeover of the lobby area and the hall’s theater, and those steps have helped inspire a significant increase in bookings for meetings and events.

Mary Kay Wydra says 2019 is shaping up as a very solid year for the region’s tourism industry.

Mary Kay Wydra says 2019 is shaping up as a very solid year for the region’s tourism industry.

“Our renovations have led to a great number of facility rentals for events that are happening in our theater, our new lobby, and Center Court,” he said, adding that the hall was averaging 175 rentals a year, and will log close to 240 for 2018. “Before, the theater wasn’t a hidden gem, it was just hidden; it was like a junior-high-school auditorium — it was dark, it was gray, it had no life. Now, it’s a great place to have a meeting or presentation like a product launch.”

Phase 2 of the project, which includes a renovation of the third-floor mezzanine, where the Hall of Fame plaques are, and considerable work on the roof of the sphere, will commence “any minute now,” said Doleva, adding that the work should improve visitation numbers, but, even more importantly, revenue and profitability.

The improved numbers for the hall — and the optimism there concerning the year ahead — are a microcosm of the broader tourism sector, said Wydra, adding that a number of collaborating factors point toward what could be a special year — and a solid long-term outlook.

It starts with the All-Star Game. The game itself is on a Monday night, but there is a whole weekend’s worth of activities planned, including the ‘classic skills competition’ the night before.

“Even with the average daily rate going up and occupancy growing, we still have that need period — which is true for all of Massachusetts,” she noted. “When you have an event like the All-Star Game in January, that really helps the hotels and restaurants.”

Additional momentum is expected in May with the arrival of EASTEC, considered to be New England’s premier manufacturing exposition. The three-day event drew more than 13,000 attendees last year, many of whom patronized area restaurants and clubs, said Wydra, adding that MGM Springfield only adds to the list of entertainment and hospitality options for attendees.

The Babe Ruth World Series is another solid addition to the year’s lineup, she noted, adding that the teams coming into the area, and their parents, frequent a number of area attractions catering to families.

Analysts say MGM Springfield has a far-reaching impact on the region’s tourism sector, including higher occupancy rates at area hotels and higher room rates.

Analysts say MGM Springfield has a far-reaching impact on the region’s tourism sector, including higher occupancy rates at area hotels and higher room rates.

Meanwhile, the region continues to attract a diverse portfolio of meetings and conventions, said Alicia Szenda, director of sales for the GSCVB, adding that MGM Springfield provides another attractive selling point for the 413, which can already boast a host of amenities, accessibility, and affordable hotel rates.

In June, the National Assoc. of Watch and Clock Collectors will stage its 75th annual national convention at the Big E, she said, an event that is expected to bring 2,000 people to the region. And later in the summer, the Professional Fire Fighters of Massachusetts will bring more than 900 people to downtown Springfield.

Those attending these conventions and the many others slated during the year now have a growing list of things to do in this region, said Wydra, who mentioned MGM, obviously, but also the revamped Hall of Fame; Six Flags, which continues to add new attractions yearly (a Cyborg ride is on tap for 2019); and the Dr. Seuss museum, which is drawing people from across the country and around the world.

“The Seuss factor is huge,” said Wydra. “It’s a big reason why visitation is up in this region. Seuss is a recognizable brand, and the museum delivers on the brand, and they keep reinventing that product.”

Staying Power

This ‘Seuss factor’ is just one of a number of powerful forces coming together to bring the outlook for tourism in this region to perhaps the highest plane it’s seen.

Pieces of the puzzle continue to fall into place, and together, they point to Western Mass. becoming a true destination.

As noted, even the ‘need period’ is looking less needy. The rest of the year? The sky’s the limit.

George O’Brien can be reached at [email protected]

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