Despite economy, revenue gain outpaces Vegas, Atlantic City
Jaclyn Trop / The Detroit News
MGM Grand Detroit, the
Part of the success of Michigan's largest casino comes from providing a first-class experience — with the coveted four-diamond rating by AAA Michigan and a Forbes Travel Guide four-star rating for its hotel. It is the main driver of Detroit's casino market, which last year outpaced the larger and more well-known destinations of Atlantic City, N.J., and Las Vegas.
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The casino, part of the 18 properties owned by MGM Resorts International, led Detroit's three casinos in 2010 with a 6.3 percent gain in revenue to $582 million. MotorCity Casino Hotel's revenues were flat at $446 million, while Greektown Casino Hotel eked out a 1 percent increase to $350 million.
MGM is "like the Yankees of the casino world," said Tom Nelson, an independent gaming regulation consultant in Manitou Springs, Colo. "They can get the top talent, and they know how to use it."
As part of the MGM Grand family, the Detroit casino has the resources, the brand and the know-how to attract customers, Nelson said. The gaming corporation honed its skills competing in Las Vegas, the world's toughest gaming market, to become a multinational company with experienced, hard-charging executives, he said.
Detroit's two other casinos "certainly don't have that world reach that MGM has," said David Lorenz, spokesman for Pure Michigan, the state's tourism campaign. MGM "lends a feel of opulence, luxury and entertainment," he said.
Together, Detroit's gaming trio reported a 2.9 percent rise in revenue to $1.4 billion last year, following a 1.5 percent drop in 2009.
The performance put Detroit ahead of its sluggish counterparts Las Vegas and Atlantic City, destinations that rely more on tourism and were hard hit during the recession when visitors cut back on travel and entertainment. Revenue in Atlantic City plunged 9.6 percent to $3.6 billion, according to Frank Fantini, editor and publisher of Fantini's Gaming Report in Dover, Del. Gaming income in Nevada remained flat with a 0.1 percent rise to $10.4 billion.
MGM Grand Detroit comprised 8.7 percent of MGM Resort International's revenues last year, said David Katz, an analyst who follows the gaming industry at Jefferies & Co. in New York. Two-thirds of the company's revenues come from Las Vegas, with the rest distributed across properties in Biloxi and Tunica, Miss., and Macau, China. Detroit's property contributes to MGM International's overall profitability, but "it is not a key driver of the stock," Katz added.
Detroit's gaming gain last year sets the stage for an even better 2011, say a casino executive and gambling analysts, as the Michigan economy improves and prepares for a surge in business travel and conventions. Hotel bookings rose 14 percent throughout Metro Detroit last year, and another increase this year is expected.
"Once people start feeling better, they'll go out and treat themselves," said Steven Zanella, general manager and top executive at MGM Grand Detroit. "If people aren't feeling good, they're not going to entertain themselves."
More jobs will spur consumer confidence, which will lead to spending at the casino, he said.
MGM enjoys a solid reputation even among non-gamblers for its pools, spas, entertainment and restaurants, which include Wolfgang Puck Grille, Bourbon Steak and Saltwater by celebrity chef Michael Mina, analysts said.
The January numbers confirm the optimism. Revenue for the three casinos overall rose 3.3 percent compared with the same time a year ago.
MotorCity and the MGM Grand led the expansion with gains of 7.7 percent and 2.6 percent, respectively, while Greektown declined 1.2 percent.
MotorCity — which claimed 34 percent of the market in January, compared with MGM's 42 percent — has become a more formidable challenger during the past five months.
MotorCity's strong January performance built on gains it posted in the last four months of 2010, when its revenue grew 6.4 percent compared with the September-December period in 2009.
The rebound is part of a general recovery for the gaming industry that began last summer, Fantini said.
But MGM still pulled in $10 million more in revenue than MotorCity in January, Nelson pointed out. "I would say that's a better indicator of size."
Detroit's casinos are a destination for tourists, business travelers and Michiganians who wouldn't otherwise come downtown in search of evening entertainment, said Michael O'Callaghan, executive vice president and chief operating officer of the Detroit Metro Convention & Visitors Bureau.
"It's fun, it's exciting, it's new, it's glamorous and it's glitzy," O'Callaghan said.
MGM Grand Detroit helped set the tone in 1999 by getting a running start over its Detroit competitors as the first to open its temporary, and then permanent, casino.
"They were the first horse to cross the finish line in a three-horse race," said Nelson, who monitored the construction of the temporary casinos as part of the Michigan Gaming Control Board.
It is tied to a strong international company that owns several of Las Vegas' most luxurious casinos, including the Mirage, Bellagio and MGM, said Bill Thompson, a professor at the University of Nevada, Las Vegas. And unlike Greektown, MGM International has avoided severe financial problems, besides its financing of CityCenter Las Vegas, a financially troubled condominium and entertainment development that required an investment by the Dubai government to complete.
The brand's new player loyalty program, called M Life, has also been a boon, lifting revenue once it was unrolled in the second half of last year, Fantini said. The program is more sophisticated than its predecessor and more effective in cross-marketing, he said.
"Thus, Michigan, Ohio and Illinois players who go to MGM properties in Las Vegas can now be more effectively marketed for its Detroit casino," Fantini said.
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