Making the News

Detroit Free Press

Originally Published:Saturday, May 31, 2008

"It's a very attractive market," said Joseph Weinert, senior vice president of Spectrum Gaming Group LLC, an independent research and professional services firm in Atlantic City, N.J. "I have little doubt that Greektown will emerge from this in good standing."

Though most people think casinos are automatic moneymakers, it's not unusual for them to file for bankruptcy. In most cases, casinos get into financial trouble because they have too much high-cost debt, Weinert said. Often, as appears to be the case with Greektown, there's nothing wrong with their gambling operations.

Detroit still viewed as hot spot
Experts say it can support 3 casinos

By Katherine Yung
Detroit Free Press

Greektown Casino's bankruptcy filing is the latest bad news to hit the slumping gaming industry, but industry experts predict that the Detroit market can continue to support three casinos.

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"It's a very attractive market," said Joseph Weinert, senior vice president of Spectrum Gaming Group LLC, an independent research and professional services firm in Atlantic City, N.J. "I have little doubt that Greektown will emerge from this in good standing."

Jake Miklojcik, president of Michigan Consultants of Lansing, which does work in gaming, said he expects the Detroit casino market to grow by 25% over the next few years.

"The market has really done pretty well," he said, noting that Greektown's "underlying assets are strong."

Though most people think casinos are automatic moneymakers, it's not unusual for them to file for bankruptcy. In most cases, casinos get into financial trouble because they have too much high-cost debt, Weinert said. Often, as appears to be the case with Greektown, there's nothing wrong with their gambling operations.

Detroit's casinos are generally regarded as a success. Despite an economic downturn, they generated $1.3 billion in gaming revenues last year, up from $1 billion in 2001.

As a result, last year the state received $160 million in tax revenues from the casinos. Detroit now ranks as the fifth-largest U.S. casino market, after Las Vegas, Atlantic City, the Chicago area and Connecticut, according to the American Gaming Association.

Despite its woes, Greektown saw its revenues climb 22% over the last six years, and they hit $341.3 million in 2007.

But Detroit's three casinos now face pressure to show they can increase revenue enough to justify the capital they've invested in their moves to more attractive, permanent facilities, said William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno.

MGM Grand Detroit has been forced to lay off some of its food, beverage and hotel workers because demand didn't meet expectations. In the first four months of this year, it was the only Detroit casino to show an increase in revenue.

The slowdown in business in Detroit isn't unique. The economy has delayed or halted a few casino projects in Las Vegas. And one of its large operators, Tropicana Entertainment, announced plans this month to file for bankruptcy protection.

If consumers continue to feel pinched, more bankruptcies could lie ahead. People assume casinos are super-profitable, Miklojcik said, but "it's a business like any other."

Contact KATHERINE YUNG at 313-222-8763 or [email protected].

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