Dan Gilbert, founder and chairman of Quicken Loans Inc., sees his proposed acquisition of a majority interest in Greektown Casino-Hotel as another harbinger in his quest to revive Detroit. “We are committed to restoring downtown to its former glory,” he says. “As we see opportunities to bring more businesses and people downtown, we will pursue them. Quite a bit of work has already taken place, and everyone needs to continue to work hard.”
As Greektown Superholdings Inc., which operates Greektown Casino-Hotel, weighs the offer, Gilbert envisions downtown as a significant office, residential, and entertainment center. Over the last two years, Quicken Loans and its various subsidiaries have moved more than 7,000 workers into the central business district. He also has acquired 20 buildings, including the First National, Madison, One Woodward Avenue, and Federal Reserve. If he is successful in buying a majority interest in Greektown Casino-Hotel, Gilbert says he will look to add more development in and around the city’s entertainment district.
That’s hardly a major blow, but industry observers and casino owners themselves recognize that the overall market of patrons has been steady for several years — meaning every new entry into the market is taking a share from the same pie. “The Detroit market has not really grown in six or seven years,” says Jake Miklojcik, an industry expert with Lansing-based Michigan Consultants. “The Detroit casinos have added some revenue because they’ve shifted some business from Windsor over to Detroit. As new places open, there will be another impact.”He also will bring considerable marketing skills to the local gaming industry, in a bid to boost revenue. The launch of the Hollywood Casino in Toledo last May, combined with a sluggish economy, had an impact on the revenues of the MGM Grand Detroit, MotorCity Casino, and Greektown Casino-Hotel, which saw their combined revenue drop 2 percent last year.
But Miklojcik says the biggest threat facing the three downtown casinos is outside competition. “I’m a little more concerned about convenience gambling, phone-in games at race tracks, lottery expansion, and slots in bars,” he says. “Detroit’s casinos have got some nice attributes they can offer, but as far as growth, I don’t know. You sometimes have to run fast to stay in place.”
Roger Gros, publisher of Global Gaming Business magazine, says Detroit’s casinos have proven pretty resilient to date, even with the hard economic times the area has experienced. That doesn’t mean they can sit tight. “Detroit is one of the few U.S. markets that wasn’t hard-hit by the recent recession,” Gros says. “Even the introduction of a shiny new casino in Toledo seems to have been absorbed rather easily. They do, however, need to increase and emphasize their nongaming amenities. They need to demonstrate to possible visitors that you can get the complete experience at any of the Detroit casinos — dining, entertainment, shopping, great hotels — in addition to a great gambling product.”Gregg Solomon, CEO of MotorCity Casino, agrees the picture is much bigger than just new casinos. “The impact of Toledo has been pretty much what everyone thought it would be,” he says. “I think the biggest story there is the fact that it’s becoming as clear as ever that the gaming industry has reached a saturation point — at least in the Midwest or Great Lakes region. Any further capacity is going to be taken from someone else.”
The casinos agree, although their approaches to new amenities are not all the same. At MGM Grand Detroit, the latest offerings are focused on dining. MGM opened three new restaurants in 2012, including the sports pub TAP, and two properties branded for their association with high-profile chef Wolfgang Puck: Wolfgang Puck Pizzeria & Cucina and Wolfgang Puck Steak. “Since we opened in October of 2007, MGM Grand Detroit has focused on creating the premier gaming, dining, and entertainment destination in Detroit,” says Steve Zanella, general manager of the casino, which recently added 125 new games and upgraded its customer rewards program. “In 2012, we made some major changes to highlight this effort, and we will continue this tradition in 2013.”
MotorCity Casino, meanwhile, has emphasized technology in its upgrades. Solomon says MotorCity can now tailor its entire gaming floor to cater to a particular kind of audience. “The gaming machine in the modern casino is really a content provider, no different than the Internet or a movie theater or video games,” he says. “For us, delivering new content is going to be a very big thing, and part of what will be our continued implementation of a server-based gaming system that we installed a couple of years ago.”
The system allows MotorCity to install chips in a board that makes it possible to change the content a user sees on the glass at the gaming table, using LED displays. “You can essentially have the facsimile of a pay table glass on top of a machine, but it’s fully animated so it allows us to deliver new games to the floor in an extremely timely fashion,” Solomon says.
When a manufacturer delivers a new game on a DVD, MotorCity installs the disc — after it’s been inspected and approved by the Michigan Gaming Control Board — and the game goes on the server such that it can be called up instantaneously on a machine. “It allows you to run a dozen different games at a single time on a single cabinet,” Solomon says. “Previously, you would have had to have 12 different machines to do what a single machine can now do at any given moment.”
The strategy of adding new amenities comes with considerable costs. Miklojcik says the casinos must be careful not to take on too much debt. Not all their spending was entirely by the casinos’ choice, of course. Certain amenities were required by the city of Detroit as conditions for licensing. Those amenities offered little value, argues Miklojcik, who believes the casinos would be better off getting past some of their competitive tensions and work together to appeal to a changing marketplace.At Greektown Casino-Hotel, two upgrades have opened. A new valet garage adds 900 parking spaces and provide access to the casino via an elevated, moving walkway that spans Monroe Street, while a new restaurant, called Brizola, is being overseen by chef Anton Brunbauer. The new Market District, meanwhile, adds five casual dining options.
However, Gros argues the casinos can add amenities without taking on major new debt. “I’m not talking about adding new hotel towers or arenas that cost tens of millions of dollars,” he says. “Refurbishing available space into new restaurants or lounges and nightclubs can be done for a reasonable cost. Shopping is one item that is lacking at the Detroit casinos. The properties could partner with a shopping center developer or an outlet mall manager to offer those kinds of things. But you have to balance what you know needs to be done to survive with the debt.”
In addition to adding amenities, the Detroit casinos face both a challenge and an opportunity from the changing nature of the work force. “What you have in the Detroit area is that there are very few 9-to-5 workers anymore,” Miklojcik says. “You’ve got the Detroit Medical Center (nearby). Say you’re a nurse. You may be making more money than you have in your entire life. You get off at midnight and you don’t want to go to a bar, and the movies are closed. So you might go to a casino.”
Appealing to that group may be more crucial than ever for casinos as other forms of gambling become available. “Many states are going to consider the legalization of online gaming now that the Obama administration says intrastate online gaming is not against the law,” Gros says. “Already, Delaware and Nevada have legalized it, and New Jersey will be next. Michigan needs to get ahead of this phenomenon.”
Gros believes online gambling does not need to be a threat to casinos and can, in fact, become an opportunity. “Contrary to what some people think, online gaming can actually increase visits to land-based casinos by rewarding players with coupons for rooms, food, or cash back at the property,” Gros says. “Falling behind in this new industry will be very detrimental to existing casinos.”
At the same time, other kinds of establishments are looking for ways to add gambling options to their array of amenities. One emerging amenity at horse tracks is the opportunity for patrons to actually bet on horse races that took place long ago. The races are re-created in cartoon form, and bettors merely pick numbers. “They emulate a slot machine,” Miklojcik says. “It’s kind of tricky, but it’s like Bingo games, where they start every 20 minutes or every 10 minutes or every five minutes. With these, you can do one every 10 seconds.”
For people who are looking for nothing more than a chance to gamble and really don’t care about the amenities, options like Internet gaming might well serve as a disincentive to make a trip to a casino. “People say, ‘Nice place, but I can do that from home, sorry,’ ” Miklojcik says.
So what’s the answer in appealing to those who have more convenient gambling options? Miklojcik believes one of the most effective approaches may be the most basic: sticking to the fundamentals. He also suggests the three casinos, perhaps working with a nonprofit organization such as the Detroit Metro Convention & Visitors Bureau, might want to develop a collaborative marketing effort that highlights attractions and activities in and around downtown Detroit.
“There are problems with getting too fancy,” he says. “You’ve got Ford Field and the Detroit Tigers, and different music venues and theaters — the whole package of a weekend in Detroit, with the casinos being part of it. That’s the angle. It’s not to add more debt and bigger expansions for the casinos themselves.”
At the same time, Miklojcik urges Detroit casinos to maintain a healthy realism. “You’re not Las Vegas,” he says. “You’re not a destination to go to for seven days. You’re (appealing to) a day-tripper or maybe someone from Lansing or even Grand Rapids who wants to go to a ballgame and will spend two days and get a nice room. All the extra expense just isn’t worth it. I don’t know anybody on a Wednesday morning who would care how big the foyers are, or the suites. They’re day-trippers.” db