Giant MGM National Harbor casino is looking beyond Maryland

'The majority of our business is going to come outside the state,' MGM CEO says

Unlike Maryland's five existing casinos, the $1.2 billion MGM National Harbor will be a "destination" resort projected to attract more than half of its business from outside the state, the top executive of MGM Resorts International said.

"The reason why we're investing to the degree we are — it's clearly far more money than anybody has ever invested in a regional casino — is because we don't believe it is a regional casino," James Murren, MGM's chairman and CEO, said recently in Washington.

"Sure, we'll grab some Maryland business. We'll grab some from existing operators — I think they know that. But that's really not our target market," Murren said. "The majority of our business is going to come outside the state."

The casino, expected to open in the second half of 2016, will take aim at Virginia — which sits directly across the Potomac River — and nearby Washington, Murren said. More broadly, he said, Maryland's sixth casino will draw from well beyond the region.

Chris Jones, managing director of Union Gaming, an investment bank dedicated to the casino industry, agreed that MGM will be different from prospective rivals Maryland Live, which is adjacent to Arundel Mills mall in Hanover, and Horseshoe Casino Baltimore.

"It taps markets that haven't necessarily been tapped," Jones said of MGM National Harbor.

Located just south of Washington near where Interstate 95 crosses the Woodrow Wilson Bridge, the casino will be positioned to attract the area's large international community, Jones said. It will have the capacity to benefit from large-convention business because of its location at National Harbor, already home to the Gaylord National Resort and Convention Center, which has 2,000 guest rooms, he said.

The MGM property will include a 23-story hotel with 308 rooms and suites.

The casino's design is sleek but not gaudy because, MGM says, the national capital area has such a different look and sensibilities than Las Vegas.

Murren, who also chairs the American Gaming Association, said he hopes MGM will become a "home base" for visitors touring the nation's capital area.

"We, in our other regional properties, have a robust charter air program. We intend to deploy that here, too, so that we'd be bringing people from up and down the East Coast and in the middle of the country for multi-day excursions," he said.

Until MGM opens, Maryland Live and the Horseshoe are the state's nearest casinos to the prime Washington and Northern Virginia population hubs. West Virginia's Hollywood Casino at Charles Town Races also competes regionally.

Analysts forecast that Maryland Live, the state's largest casino, could see some revenue declines once MGM opens. Horseshoe, smaller and a little farther away, is predicted to see smaller declines.

A study by Colorado-based consultant Jim Oberkirsch predicted Maryland Live could lose 23 percent of its revenue and Horseshoe 14 percent.

The study was conducted in December 2013, before MGM was awarded its site license, and "there is so much that has changed," said Stephen Martino, former director of the Maryland Lottery and Gaming Control Agency.

"Clearly, the market has developed in ways that weren't fully anticipated," said Martino, now an attorney with Duane Morris in Baltimore.

The region has a bigger appetite for table games than originally believed. Also, Maryland Live has not suffered the level of revenue losses expected from the arrival of Horseshoe, which opened last August.

Still, Martino said: "It seems certain there is going to be some impact to Maryland Live and maybe Horseshoe as well."

Horseshoe and Maryland Live declined to comment on the impact of MGM's entry into the market. Neither casino has an adjoining hotel, although Maryland Live's owners say they are planning one.

"Generally there is a sense in the industry that we're getting pretty close to market saturation in the Mid-Atlantic," said James Karmel, a casino analyst and history professor at Harford Community College.

"I do think Maryland Live in particular is probably looking at a double-digit hit in revenue, percentage-wise," Karmel said. "It's really hard to quantify. What if three years from now a Virginia casino legalizes? That will change everything again."

Murren said he is "still assuming that commercial gaming will not come to Virginia. I'm building a business model that will be highly attractive to Virginians."

MGM received its license in December 2013, beating rivals Penn National Gaming, which proposed a $700 million facility at its Rosecroft Raceway harness track in Fort Washington, and Greenwood Racing, which pitched a $761 million facility off Indian Head Highway.

The $442 million Horseshoe, which has delivered less revenue than state consultants expected, acknowledges it has had to battle a perception among some out-of-towners that Baltimore is unsafe. That perception may be heightened by last week's rioting after the recent death of Freddie Gray, 25, in police custody.

"This is Horseshoe's worst nightmare," Karmel said. "Their biggest problem from the beginning was getitng suburbanites to come into Baltimore. And now that is even harder. What could help Horseshoe Baltimore is a state- and city-level PR campaign to kick into high gear once things get to a more normal state."

Normally open all hours, Horsehoe was closing at 9 p.m. last week to allow customers to get home by the city-imposed curfew of 10 p.m. The casino declined to estimate how much it lost financially before the curfew was lifted Sunday and the casino returned to its regular schedule.

"While closing during peak hours is clearly impacting business volumes, our top priority remains the safety of our guests and team members," the casino said last week in a statement.

"We fully support the governor, mayor, City Council and Baltimore's first responders in their efforts to resolve the public safety issues they are addressing, and we look forward to resuming our normal business operations as soon as city and state officials feel it is appropriate for us to do so," it said.

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