Competition suggests loss of Detroit revenue
5/20/2012
Ohio's gamble could be Detroit's loss.
Some of the money gambled away at the slot machines and over gaming tables set to open in East Toledo nine days from today would have gone to the three Detroit casinos, according to a recent analysis by a global management consulting firm.
The report by McKinsey & Co. said gaming revenues for the casinos in Detroit will start decreasing as the competition from Ohio increases.
"After full roll-out of Ohio casinos, Detroit's casinos will no longer be the obvious gaming choice for day-trippers," the McKinsey report said.
Instead of heading north to the MGM Grand Detroit, MotorCity Casino Hotel, or Greektown Casino-Hotel — which get more than 80 percent of their revenue from visitors coming from within 150 miles of Detroit, including northern Ohio — people would instead stay in Ohio and try their luck here, the report suggested.
The Horseshoe Casino in Cleveland opened on May 14, and Hollywood Casino Toledo is slated to open at 2 p.m. May 29. Casinos in Columbus and Cincinnati will open later.
Yvette Monet, a MGM spokesman in Las Vegas, downplayed the competition expected from Ohio for the company's Detroit property and asked if the new Toledo casino would have more than slot machines.
"We experience competition in every market in which we operate, and Detroit is no exception," she said in a statement. "As the market leader, MGM Grand Detroit is well-positioned with our four-star and four-diamond award-winning hotel, spa, and restaurant offerings under one roof. Our MLife rewards program also offers guests who visit MGM Grand Detroit benefits at our leading resorts across the country, including our fabulous resorts on the Las Vegas Strip."
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The statement also said: "While we expect some guests from our market to visit the new casinos, we are confident in our long-proven ability to provide an exceptional experience to our guests."
Penn National Gaming, operator of two of the Ohio casinos, has indicated its properties will be stiff competition.
"Hollywood's luxurious design, modern grandeur, and extensive amenities offer guests a range of memorable experiences in an unparalleled, high-energy setting," the company said in a statement. "From the moment they walk in the door, guests are immersed in the Golden Age of Hollywood as elegant chandeliers and art deco columns accentuate the casino's classic design. The glitz and glamour of 1930s Hollywood is coupled with the latest video technology for players' entertainment and comfort. A giant video ribbon wall greets guests and projects movie trailers, vintage commercials, and even animation."
Hollywood Casino Toledo executives said the Detroit casinos will be Toledo's main competition. Penn National has started television and radio advertising campaigns in the Detroit area, in addition to Fort Wayne, Ind., and Toledo. The Detroit casinos have advertised in the Toledo market.
"That's a huge commitment from Toledo because that's still the 10th most expensive media market in the country," said Jason Birney, Hollywood Casino Toledo's vice president of marketing, regarding the Detroit media market.
"Obviously, the Detroit media market is a market that we cannot ignore," he said.
Hollywood Casino Toledo could generate $3.4 million in new tax revenue through the end of the year for the city of Toledo, said City Finance Director Patrick McLean. "I am not going to venture a prediction for next year until we see the revenue flow," Mr. McLean said.
The McKinsey & Co. report, first obtained by the Detroit Free Press, said the city of Detroit could see a decline of up to $30 million a year in casino tax revenues by 2015 because of competition from the Ohio casinos. It also said Detroit's gaming revenues will decrease because of increasing competition from casinos elsewhere.
Representatives from MotorCity Casino Hotel and Greektown Casino-Hotel did not return telephone calls and emails seeking comment.
The Detroit Regional Chamber declined to comment.
Frank Fantini, publisher of Fantini's Gaming Report, said he had not seen the report but said the McKinsey & Co. finding sounded slightly high.
"I thought it was a little high but not outside of the realm of possibility," Mr. Fantini said. "I do not know what percentage of Detroit gaming revenues come from Ohio or the Toledo metro area."
Staff writer Gabrielle Russon contributed to this report.
Contact Ignazio Messina at: imessina@theblade.com or 419-724-6171.