Making the News

New York Times

Originally Published:Wednesday, October 10, 2007

“What this says is that, like us, MGM sees this decline as a temporary phenomenon,” said Michael Pollock, publisher of The Gaming Industry Observer, a trade journal based in Atlantic City. “What they're saying with this proposal is that they see the long-term growth potential for Atlantic City as very real.”

“For those casino companies willing to make the investment,” Mr. Pollock said, “the upside in this market is enormous.”

MGM Plans Huge Atlantic City Resort

By GARY RIVLIN
New York Times

An otherwise dismal year for the Atlantic City casino industry turned a bit brighter today when MGM Mirage, the gambling giant, announced plans to build a huge new resort hotel that will rank among the most expensive casino projects in history.

The casino hotel, to be called the MGM Grand Atlantic City, will cost $4.5 billion to $5 billion, according to the company. The current Las Vegas record holder is Wynn’s, which cost $2.7 billion and opened in 2005, though there are several casino hotel projects on the drawing boards in Las Vegas in the $4 billion to $5 billion range.

The MGM announcement comes at a time of declining gambling revenue as Atlantic City faces increased competition from slot parlors that have recently opened in Pennsylvania and New York. Through the first nine months of 2007, the city’s casinos won a combined $3.8 billion, a 5 percent drop compared with figures in the period a year earlier, according to the New Jersey Casino Control Commission.

“What this says is that, like us, MGM sees this decline as a temporary phenomenon,” said Michael Pollock, publisher of The Gaming Industry Observer, a trade journal based in Atlantic City. “What they’re saying with this proposal is that they see the long-term growth potential for Atlantic City as very real.”

Gordon Absher, an MGM spokesman, said the company did not look at the overall performance of Atlantic City’s 11 casinos but instead focused on the experience of a single property: the Borgata, the first billion-dollar casino in a market that still ranks as the second largest in the United States.

Despite new competition from nearby markets, the Borgata, which opened in 2003, has seen a modest rise in slot machine and table game revenue in the first nine months of 2007. MGM owns a 50 percent share of the Borgata.

“The Borgata has changed the paradigm for Atlantic City,” Mr. Absher said. “The Borgata shows that if you provide people with the right product, Atlantic City can attract the customer who has an appetite for the Las Vegas experience but doesn’t want to fly across the country to have that experience.”

The project includes three distinct hotel towers, each with its own personality. One is expected to have a “more contemporary feel,” Mr. Absher said, while a second will be more “upscale.” A third, he said, will be an all-suites tower “for high rollers or those who are willing to pay to be treated like high rollers.”

The property will also include a 1,500-seat theater, a spa, a convention center and up to 500,000 square feet of retail space.

MGM is only the most recent company to wager large sums that Atlantic City can transform itself from a low-rent gambling factory on the Jersey Shore into a world-class entertainment destination. In that view, Atlantic City moves upmarket to become a kind of Las Vegas East that lures a younger, more free-spending tourist who spends as much money on fine food, big-name performers, expensive hotel rooms and other amenities as they do gambling.

Harrah’s, for instance, has spent hundreds of millions of dollars in Atlantic City over the last couple of years to improve its four properties there, and Pinnacle Entertainment, which operates six casinos across the country, announced plans last year to build a $1.5 billion casino hotel in place of the Sands, which closed last year.

“For those casino companies willing to make the investment,” Mr. Pollock said, “the upside in this market is enormous.”

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