Diplomats and businessmen from around the globe. Tourists from across the country. Day-trippers from neighboring states.
They flock to the nation's capital for commerce and pleasure and might also try their luck at a planned MGM casino near the National Harbor development, high on a bluff above the Potomac River and just south of Washington. MGM says more than two-thirds of the visitors to the resort are expected to come from outside Maryland.
Such an international destination could transform a Maryland gambling industry that until now has mostly focused on creating a regional foothold. The $925 million facility, which MGM hopes to complete by 2016, could draw residents from the affluent Washington region and high rollers from overseas, analysts said.
The MGM development would vie with more established casinos to be the premier East Coast gambling resort. The opportunity is a rare one, analysts said, as destinations such as Atlantic City, N.J., and Las Vegas have been bruised by the recession and many casino operators are looking outside the United States for growth.
Alex Bumazhny, director at Fitch Ratings, which provides analysis of the gaming industry, said the Prince George's County casino license could be the most lucrative awarded in the United States in the past decade.
MGM Resorts International "really went out of their way," Bumazhny said of efforts by the Las Vegas-based company to win the license, "and probably rightfully so."
Dressed in sharp suits and wearing wide grins, MGM executives shook hands and slapped each other on the back Dec. 20 in a nondescript conference room at the Maryland Lottery headquarters in Baltimore. Tens of millions of dollars in speculative investment — staked on the potential of the region's affluence and gravitational pull for tourists — had finally paid off.
MGM beat out Penn National Gaming, which had proposed a $700 million facility at its Rosecroft Raceway harness track in Fort Washington, and Greenwood Racing, which proposed a $761 million facility off Indian Head Highway.
The development promised by MGM calls for 3,600 slot machines and 140 table games at the casino, a 21-story hotel and spa, seven restaurants, and a 1,200-seat theater.
"We are not viewing this as a local's casino," MGM spokesman Gordon Absher said. "We're viewing this resort the same way we view our resorts in Las Vegas. We are looking to attract visitors from outside the state and outside the country."
In less than five years, Maryland has become a billion-dollar-a-year gambling state, largely on the stronger-than-expected performance of the Maryland Live casino at Arundel Mills mall. MGM National Harbor promises to push state revenues higher.
Consultants for the state estimate that MGM National Harbor will take in $713 million to $719 million in annual revenue. In its fifth year, consultants estimate the facility will generate about $374 million in gambling, property, sales, income and hotel taxes.
Bumazhny said the revenue estimate for the Prince George's facility is a huge number in today's casino market, where saturation on the East Coast in the past decade has driven down the revenue potential of any one facility.
More than $700 million in annual revenue would make that one casino larger than several casino markets, such as Reno, Nev., and New Orleans, based on last year's revenue, according to the American Gaming Association.
"It's a large number, but I think it's feasible in terms of the supply and demand in the market," Bumazhny said.
MGM's Absher said the company has databases of millions of customers, many who live along the East Coast and others around the world, that it will use in attracting players to National Harbor. It uses the same databases to keep occupancy rates in its 40,000 Las Vegas hotel rooms routinely above 85 percent, he said.
"Bringing the power of that brand equity to the Maryland gaming and entertainment industry is obviously a plus," he said. "Combine that with the visibility of this location, we think that's going to be a very powerful draw and that will help Maryland attract tourists."
But uncertainty hovers over the entire industry. The National Harbor plan comes at a time when gambling markets are being reshaped.
The Las Vegas Strip, where MGM is heavily invested, is only now beginning to climb out of the recession with convention business returning, Bumazhny said. Atlantic City is still performing poorly, losing business to Pennsylvania, Maryland and other nearby states.
Online gambling in New Jersey — which began last month — is poised to shore up the state's gambling revenues, but it could also cannibalize profits from Atlantic City casinos, Bumazhny said. Casinos must ensure that players are located in New Jersey to qualify them for online gambling.
Many casino companies, including MGM, are looking to Asian markets for growth, particularly in Macau, where junket operators flood VIP rooms with high rollers. MGM is planning a $2.6 billion resort on the Cotai Strip in Macau, an administrative region of China near Hong Kong.
MGM's Asia dealings came up in Maryland's suitability review of the company, amid allegations that the company's business partner in MGM China has ties to organized crime. MGM denies the allegations, and Maryland officials found no issues disqualifying MGM from holding a Maryland license, asking only that MGM provide regular updates on its Macau operations.
Officials in Massachusetts recently found MGM suitable to hold a license in that state.
Absher said the company has "one of the most robust internal auditing processes in the industry" and welcomes the oversight.
The company is optimistic about its Macau operations, but in the United States, the National Harbor location is one of its top priorities, Absher said.
Major companies such as MGM and Caesars Entertainment Corp. — which is building the Horseshoe Casino in Baltimore — are increasingly looking to establish footholds in untapped markets as opportunities arise, analysts say.
"There's been this shift, and I think in the last five to 10 years, it's gone from putting a bunch of casinos in one place like Las Vegas or Atlantic City or the Gulf Coast to having this more urban paradigm," said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas.
James Karmel, an industry analyst and history professor at Harford Community College, said Maryland has come a long way in a short time in terms of its place in the national gambling industry.
"When Maryland's casino venture started five years ago, there were all sorts of dismissives around because of the high tax rates," Karmel said. "But now I think you would have to say that Maryland is vying for leadership on the East Coast in the casino gaming industry."
In coming years, as the state's tax rate of 67 percent on slots revenues is adjusted and lowered at some locations, Maryland's reputation as a bankable investment in the eyes of gaming executives will continue to rise, Karmel said.
As other local casino owners, including the Cordish Cos., owner of Maryland Live, and Penn National, owner of Charles Town Races and Slots in West Virginia, look for ways to hedge against losses to MGM, Absher said MGM designers are scouring their own plans for potential adjustments to maximize returns.
With poker becoming a big draw at Maryland Live, they are re-evaluating how best to feature table games, he said. They also are reviewing hotel operations and food and beverage vendors, looking for small-business and minority partners.
The National Harbor site, on the edge of a major highway system, with nearby rail and subway and quick access to three airports and a major tourist, business and cultural center in Washington, will attract many first-time visitors to Maryland, MGM says.
"The resort site is almost letter perfect," Absher said. "If you were to put resort operators, designers and builders in a room with a blank sheet of paper and ask them, 'What would make a perfect site?' this site hits on almost every aspect."
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