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Betting on Detroit

What happens in Las Vegas may stay in Vegas, but what's happening in Detroit is no secret. The Motor City has unveiled the $800 million MGM Grand Detroit casino hotel, and it is counting on gaming and clients with a taste for luxury to lift it from its economic doldrums.

Detroit's sagging auto industry with its massive layoffs and Michigan's 7.4% unemployment may not seem conducive to a pastime known for depleting paychecks, but city leaders and hoteliers see casino hotels as a lucrative revenue source for the cash-strapped town.

“Michigan is one of the top five feeder markets to Vegas, so we feel we can capture some of that market,” says Scott Grigg, a spokesman for the MGM Grand Detroit, built by Las Vegas-based MGM Mirage. “A lot of people in Michigan have gone to Vegas in the past,” and never visited casinos in their own state. “We feel with this property that will change.”

Besides the 18-story, 400-room MGM Grand, which opened Oct. 2, Greektown Casino is building a 20-story, $200 million hotel as part of a $475 million upgrade and addition to its gaming operations. And this month, MotorCity Casino adds a $275 million, 17-story hotel to its operation.

MotorCity and other casinos have faced labor issues involving the Teamsters and other unions. They also endured the threat of closure if legislators failed to agree on a new state budget, from which gaming regulators are paid. While the budget issue was resolved Oct. 1, MotorCity briefly shut its doors Oct. 17 after more than 1,000 union employees warned of a work stoppage over health benefits and other issues. The casino reopened after reaching a tentative union agreement.

A work stoppage would affect company and government budgets. Revenue from MotorCity, Greektown and MGM Grand's older operations in 2006 totaled $1.3 billion, and funneled $158 million in taxes to the state and $132 million plus other fees to Detroit. The casinos pay about $360,000 in taxes to the city each day, says David Zin, a state economist.

Some analysts question whether the region can support the casino palaces. With rooms starting at $299, the MGM Grand Detroit touts 42-inch plasma TVs, “Hypnotic” spa treatments, 4,500 slots and video poker. Restaurants operated by such culinary legends as Wolfgang Puck will find patrons, Grigg believes, and the city could grow as Vegas did.

“It certainly is above the needs of the business traveler,” says Chuck Skelton, president of Hospitality Advisors Consulting Group, which tracks hotel statistics. “Within three months you're dumping 800 rooms into a market that's only about 3,500 rooms to begin with in downtown Detroit.” The hotels will need to market aggressively, he says.

Current downtown occupancy is about 55%, Skelton says. “That's not going to cut it when you're adding 800 luxury rooms.” It's a new idea to build grand hotels in an industrial city, he says, but with relatively new stadiums for the Detroit Lions and Tigers, the city could become a sports mecca.

The MGM Grand is targeting the tri-county area's 3 million people as well as Windsor, Canada, and Chicago, Cleveland and other cities within a one-hour flight. With 30,000 sq. ft. of meeting space, MGM is also booking events for the January auto show and beyond.

Many Detroit residents go to Chicago for fun, notes Skelton. “It'll be interesting to see people from Chicago come to Detroit. Detroit may become a vacation haven. Who would have thought?”

TAGS: News
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