Detroit’s casinos have ridden out the recession surprisingly well (with the exception of Greektown, which went through bankruptcy that was mostly the consequence of poor management). That lucky streak appears likely to end in June, following the May 29 opening of Hollywood Casino Toledo, with 2,000 slots and 80 tables. It will be the second casino to debut in Ohio, following this week’s rollout of Horseshoe Cleveland (2,100 slots, 95 tables). Additional casino openings in Columbus (3,000 slots and 100 tables) and Cincinnati (2,300 slots and 104 tables) will follow in November and next February. What does this mean for Detroit?
According to consulting firm McKinsey & Co., a $30 million tax shortfall is headed Motown’s way. Fifteen percent (or $177 million) of Detroit’s municipal budget comes from casino revenue, so pain will be felt. Mayor Dave Bing’s 2012-13 budget anticipates this by booking only $150 million casino-tax revenue for the next budget cycle.
Detroit’s casinos draw four-fifths of their business from a 150-mile radius, a circumference that includes both Toledo and Cleveland, and falls just short of the greater Columbus area. In other words, the impact will be felt and felt swiftly.
One casino boss, however, is pooh-poohing the Ohio factor. "I'm not taking Toledo lightly in any way," claimed MotorCity Casino Hotel CEO Gregg Solomon, while minimizing the revenue falloff to 4%, maybe 7%. He’s not even planning to step up marketing efforts to counter Hollywood Toledo.
Former Greektown board member Jake Miklojcik and industry analyst Frank Fantini are even more sanguine, pegging the revenue drop in the 2%-5% range, and $6.5 million less in tax revenue. A $10 million dip, Fantini told the Detroit Free Press, would be "high but not outrageous." Both men think the McKinsey study overestimates the amount of play that actually comes from beyond, say, an hour’s drive from Detroit. Only a fifth of Greektown’s player-loyalty cards, for instance, were issued to non-Michigan punters.
The "Ohio effect" can be expected to cross the international border, into Canada, where Caesars Windsor continues its slow decline. In 1998, it opened with 5,000 staffers. Today, it employs half that number, as business has fallen 50%. "We thought we were geniuses," mourns CEO Kevin Laforet, who has been with the property since its inception. A smoking ban, the current weakness of the Canadian dollar, and severe border-crossing restrictions that were an (over)reaction by the U.S. government to the Sept. 11 attacks all have taken a severe toll on Caesars Windsor’s business.
Earlier this month, Caesars announced a "defense plan" for Windsor, the first phase of which was to sack 27 employees. To add insult to injury, Horseshoe Cleveland (also owned by Caesars Entertainment) has been marketing its new casino to Canadian players, a move that stirred up ire in the Great White North. Caesars CEO Gary Loveman has also been making sheep’s eyes at the city of Toronto, hoping to snag a megaresort concession there. That hasn’t been going over well in Windsor, as you can probably imagine.
