How Do The Casinos Measure Up?

The three Detroit temporary casinos are now up and running and have all turned in a profit for the year 2000. There was seventy three million dollars in taxes paid to the city for last year on reported revenue of $743 million. According to a story in the Detroit News earlier this year, the forecasted revenue for this year is close to one billion dollars in revenue. Considering this is based on the temporary casinos, and that Greektown Casino has only been opened for four months, it is a strong indication of the growth potential for this industry in Southeastern Michigan. Its also creates a question as to if the permanent casinos are necessary. Would the permanent casinos provide more profits or drain revenue?

Originally the overall market for the Detroit area was estimated at 1.5 billion dollars in yearly revenue. Each casino was expected to earn roughly a third of the projected revenue. Currently the MGM Grand Casino, the first one to open, has narrowly beaten out the competition in their quest to earn the most profits. MGM Grand opened in 1999 and Motor City opened in December 1999. Both had a sizable jump on the Greektown casino that almost opened a year after the other two. But the Greektown casino has its own special attractions that separate it from the others.

The Greektown casino was located in Greektown, which already had a following and attracted large crowds on the weekend. The temporary casino was also designed to partner with the surrounding Greektown business to create a traffic flow from and to the casino. The other two casinos are located in a portion of downtown Detroit that has few, if any foot traffic in the daytime and at night.

Motor City Casino had a seemingly rough start. This casino has the highest percentage of local ownership but less than what it started out with when the Mayor chose this casino one day after he was re-elected to office in 1998. Motor City Casino had to lay of at least 400 employees in its first year. Motor City experienced the highest reported management changes over the other two casinos. And the casino had to replace some table games with the more profitable slot machines to help increase profits. A start up business always experiences some bumps in the road so the above could be normal business practices. But the absence of the same from the other two casinos should raise an eyebrow to have the oversight groups keep watch on the financial stability of the casinos and the overall gaming market in southeastern Michigan. It’s quite possible that some of the now departed managers made some mistakes that the company had to take actions to correct.

The Detroit News reported that the turnover rate for the casinos, specifically Motor City. Was fifty-two percent. So most of the employees that were there when the casino opened are now gone. And after the layoffs there are roughly 2,800 employees with the company here in Detroit.

Jobs was a big, if not the biggest, selling point used when the Mayor, city council and others asked Detroiters and the State of Michigan to approve the ballot proposal to allow three casinos in the state of Michigan, specifically Detroit. Without the permanent casinos, which was to provide upwards of 15,000 jobs, this benefit is not materializing. The current economy is sliding into, if not at the beginning of a recession. Jobs are needed at times like these because other industries in the state, such as the auto companies, lay off employees at this time. But recent reports from the mayor’s office and the city indicate that the permanent casinos will not be built before 2005 and perhaps just in time for the super bowl in February 2006. They were originally scheduled to open in 2003.

This past December Dennis Archer asked the city council for an additional year to acquire the land for the permanent casinos. This would move the land accumulation deadline two years after it was supposed to be handed over to the casinos. The council granted this request but only after some deal making with the Mayor. The resulting extension allows the mayor and his sister in la C. Beth Duncombe who is overseeing the land acquisition, until December 31, 2001 in which to make deals with the current landowners. Originally the mayor tried to condemn the property with the cities condemnation powers but a local judge threw out he settlements because it was inadequate. So the administration has gone back to negotiating with the landowners, and their attorney on a price. Some land deals are set to expire in March of 2001, which would mean that the mayor would need to renegotiate a new price based on this year’s market value of the land with owners who had already approved a deal with the city.

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