What Happens in Detroit ...
Will Draw Conventioneers,
Or so MGM Mirage Hopes --
Despite Local Economic Woes
By TAMARA AUDI
September 26, 2007
DETROIT -- The 17th floor luxury corner suite of the MGM Grand Detroit, MGM Mirage's new casino hotel, features sleek decor in chocolate tones, a 15-inch plasma screen television embedded into the bathroom mirror and a panoramic view of a wounded city: deserted streets; an abandoned baseball stadium; a once-grand train station plainly rotting in the distance.
Much harder to see is why MGM Mirage would spend $800 million to build a one million-square-foot luxury hotel and casino smack in the middle of a region plagued by a continually struggling automotive industry and a collapsing economy.
The answer: Gambling companies have historically proven they can turn profits in sluggish economies like Atlantic City and the Gulf Coast -- and Detroit is no different. Since its opening here in 1999, the MGM Mirage's existing casino -- which will close as the other opens -- has made money. Even as the city's population dwindled and the state's unemployment rate climbed to 7.4%, the current MGM Grand's revenue rose to $489 million in 2006 from $366 million in 2001.
And the company hopes to draw additional revenue from another source: the conference-and-convention business.
For Las Vegas, conventions and conferences have become industry pillars, helping to fill casino hotels and restaurants midweek. Harrah's Entertainment Inc., for instance, saw its Vegas conference-and-convention business boom after a company initiative to woo conference planners with speedier and upgraded services.
MGM's Detroit property is an attempt to build on its conference business outside of Vegas, using its vast customer database to tap its clients closer to where they live, like the eastern seaboard, said MGM's president and chief operating officer, Jim Murren.
Still, in Detroit, some hurdles stand in MGM's way. As workers put finishing touches on the massive art deco-style complex -- set to open on Oct. 2 -- Michigan legislators continue to consider an Oct. 1 shut-down of all three of the city's casinos because of a $1.75 billion state budget deficit that could make it impossible to pay state employees, including gambling regulators. Without state regulators, city casinos cannot legally operate. Adding more possible reason for concern: Monday, General Motors workers walked off the job in a contract dispute with the auto maker.
Just days before the opening, however, MGM officials were oozing optimism, pointing out the wall-length fireplace in the hotel's art-filled hotel lounge, the bunches of fresh-cut lilies at the check-in desk and the no-expense-spared penthouse furnishings.
"You have to exceed expectations, and that's what we've wanted to do here," said MGM Grand Detroit's executive vice president Tony Brolick, sweeping his hand through a sleek Wolfgang Puck restaurant with blanched deer antlers suspended from a sky-high ceiling.
The new property is a striking departure from MGM Mirage's current Detroit property, a smoky gambling den filled with retirees parked on dingy furnishings, operating in a former Internal Revenue Service building. The existing casino, which doesn't maintain a hotel, will be closed two days before the new MGM Grand opens to allow officials time to transfer employees and operations to the new property.
The city of Detroit, for one, will be rooting for the MGM Grand. Casinos are a billion-dollar-a-year business in Detroit, steadily plowing tens of millions into state and city coffers. Casinos pay a 24% revenue tax, or about a million dollars a day, split evenly between the state and city.
But the city also stands to gain jobs, tourist dollars and a momentum with the addition of three 400-room hotels. Each of the city's three casinos agreed to build a hotel once Detroit worked out permanent location sites. After the hurdles were finally cleared, MGM began building its new property in 2005.
MotorCity Casino, owned locally by Marian Ilitch, 74 years old, who with her husband, Mike, owns the Detroit Red Wings hockey team and Little Caesar Enterprises Inc., is completing a $275 million expansion and hotel project. The hotel is expected to open this year. The Greektown Casino, owned by a tribe of Chippewa Indians in Michigan, will spend $200 million on its hotel-and-expansion project, scheduled to be complete in 2008.
Nearby Windsor, Ontario, a five-minute drive from Detroit, boasts a massive, brightly lit riverfront casino-hotel that markets heavily in the Detroit-area. More competition comes from American Indian casinos dotted across the state.
But the market at issue, as MGM Mirage sees it, includes a 300-mile radius of potential overnight clients across the region, stretching into Ohio and Illinois.
"When analysts come in they look at the backyard and they don't look at the full market," says Mr. Brolick.
A decision was made early on, MGM Mirage officials say, to introduce a new property that would far outdo anything in the area and establish MGM Mirage dominant in the region.
Well-known designers were hired; alabaster was ordered. The MGM property is built in the style of the "new" Vegas, which has sought to remake itself in a less-cheesy image, dropping theme-park development and loud color schemes in favor of cutting-edge architecture and subdued luxury to attract a higher income business and leisure crowd. A swank nightspot attached to a poker room has a bar made of solid ice, taking its cues from a bar in Vegas's Mandalay Bay hotel, also owned by MGM Mirage. The three main restaurants -- one by Wolfgang Puck and two by Michael Mina -- boast private features like dining rooms with chilled glass walls that double as wine racks.
MGM Mirage officials hope all the amenities catch the attention of conference planners on the East Coast and across the Midwest. They are marketing the MGM Grand Detroit's 30,000 square-feet of meeting space as an affordable alternative to pricier cities. They plan to allay concerns about limited activities in the city by selling the property as an all-inclusive resort.
But MGM and city officials also note that Detroit, despite its problems, is in something of a development boom, with new luxury hotels and condos going up in the city's downtown area, and recent success as host of the 2006 Super Bowl and World Series.
To look at all the casino expansion in Detroit "you'd never know Detroit was in a recession," said Leon Paesani, a card dealer and union steward at MGM Grand, where dealers belong to the UAW. "This is a perfect industry. They do well when times are good, and they do well when times are bad."
Will Draw Conventioneers,
Or so MGM Mirage Hopes --
Despite Local Economic Woes
By TAMARA AUDI
September 26, 2007
DETROIT -- The 17th floor luxury corner suite of the MGM Grand Detroit, MGM Mirage's new casino hotel, features sleek decor in chocolate tones, a 15-inch plasma screen television embedded into the bathroom mirror and a panoramic view of a wounded city: deserted streets; an abandoned baseball stadium; a once-grand train station plainly rotting in the distance.
Much harder to see is why MGM Mirage would spend $800 million to build a one million-square-foot luxury hotel and casino smack in the middle of a region plagued by a continually struggling automotive industry and a collapsing economy.
The answer: Gambling companies have historically proven they can turn profits in sluggish economies like Atlantic City and the Gulf Coast -- and Detroit is no different. Since its opening here in 1999, the MGM Mirage's existing casino -- which will close as the other opens -- has made money. Even as the city's population dwindled and the state's unemployment rate climbed to 7.4%, the current MGM Grand's revenue rose to $489 million in 2006 from $366 million in 2001.
And the company hopes to draw additional revenue from another source: the conference-and-convention business.
For Las Vegas, conventions and conferences have become industry pillars, helping to fill casino hotels and restaurants midweek. Harrah's Entertainment Inc., for instance, saw its Vegas conference-and-convention business boom after a company initiative to woo conference planners with speedier and upgraded services.
MGM's Detroit property is an attempt to build on its conference business outside of Vegas, using its vast customer database to tap its clients closer to where they live, like the eastern seaboard, said MGM's president and chief operating officer, Jim Murren.
Still, in Detroit, some hurdles stand in MGM's way. As workers put finishing touches on the massive art deco-style complex -- set to open on Oct. 2 -- Michigan legislators continue to consider an Oct. 1 shut-down of all three of the city's casinos because of a $1.75 billion state budget deficit that could make it impossible to pay state employees, including gambling regulators. Without state regulators, city casinos cannot legally operate. Adding more possible reason for concern: Monday, General Motors workers walked off the job in a contract dispute with the auto maker.
Just days before the opening, however, MGM officials were oozing optimism, pointing out the wall-length fireplace in the hotel's art-filled hotel lounge, the bunches of fresh-cut lilies at the check-in desk and the no-expense-spared penthouse furnishings.
"You have to exceed expectations, and that's what we've wanted to do here," said MGM Grand Detroit's executive vice president Tony Brolick, sweeping his hand through a sleek Wolfgang Puck restaurant with blanched deer antlers suspended from a sky-high ceiling.
The new property is a striking departure from MGM Mirage's current Detroit property, a smoky gambling den filled with retirees parked on dingy furnishings, operating in a former Internal Revenue Service building. The existing casino, which doesn't maintain a hotel, will be closed two days before the new MGM Grand opens to allow officials time to transfer employees and operations to the new property.
The city of Detroit, for one, will be rooting for the MGM Grand. Casinos are a billion-dollar-a-year business in Detroit, steadily plowing tens of millions into state and city coffers. Casinos pay a 24% revenue tax, or about a million dollars a day, split evenly between the state and city.
But the city also stands to gain jobs, tourist dollars and a momentum with the addition of three 400-room hotels. Each of the city's three casinos agreed to build a hotel once Detroit worked out permanent location sites. After the hurdles were finally cleared, MGM began building its new property in 2005.
MotorCity Casino, owned locally by Marian Ilitch, 74 years old, who with her husband, Mike, owns the Detroit Red Wings hockey team and Little Caesar Enterprises Inc., is completing a $275 million expansion and hotel project. The hotel is expected to open this year. The Greektown Casino, owned by a tribe of Chippewa Indians in Michigan, will spend $200 million on its hotel-and-expansion project, scheduled to be complete in 2008.
Nearby Windsor, Ontario, a five-minute drive from Detroit, boasts a massive, brightly lit riverfront casino-hotel that markets heavily in the Detroit-area. More competition comes from American Indian casinos dotted across the state.
But the market at issue, as MGM Mirage sees it, includes a 300-mile radius of potential overnight clients across the region, stretching into Ohio and Illinois.
"When analysts come in they look at the backyard and they don't look at the full market," says Mr. Brolick.
A decision was made early on, MGM Mirage officials say, to introduce a new property that would far outdo anything in the area and establish MGM Mirage dominant in the region.
Well-known designers were hired; alabaster was ordered. The MGM property is built in the style of the "new" Vegas, which has sought to remake itself in a less-cheesy image, dropping theme-park development and loud color schemes in favor of cutting-edge architecture and subdued luxury to attract a higher income business and leisure crowd. A swank nightspot attached to a poker room has a bar made of solid ice, taking its cues from a bar in Vegas's Mandalay Bay hotel, also owned by MGM Mirage. The three main restaurants -- one by Wolfgang Puck and two by Michael Mina -- boast private features like dining rooms with chilled glass walls that double as wine racks.
MGM Mirage officials hope all the amenities catch the attention of conference planners on the East Coast and across the Midwest. They are marketing the MGM Grand Detroit's 30,000 square-feet of meeting space as an affordable alternative to pricier cities. They plan to allay concerns about limited activities in the city by selling the property as an all-inclusive resort.
But MGM and city officials also note that Detroit, despite its problems, is in something of a development boom, with new luxury hotels and condos going up in the city's downtown area, and recent success as host of the 2006 Super Bowl and World Series.
To look at all the casino expansion in Detroit "you'd never know Detroit was in a recession," said Leon Paesani, a card dealer and union steward at MGM Grand, where dealers belong to the UAW. "This is a perfect industry. They do well when times are good, and they do well when times are bad."
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