Look beyond the billion-dollar casinos lining Atlantic City’s boardwalk. Look beyond the lights and glitz of Las Vegas’ MGM Grand and Bellagio resorts.
Beyond the felt of the card tables and ringing of the slot machines, there are other forces at work. There are economic drivers more critical than the casinos’ once all-important “win” — the money they make off gaming.
Increasingly, revenue in America’s gambling Meccas has relied on star-studded shows, high-end restaurants and elite retailers.
Going to Vegas has become less about gambling and more about the experience of going to Vegas.
The rhetoric of Maryland’s slots debate has heated up in recent weeks, more than six weeks before a November referendum that would bring 15,000 slot machines to five locations around the state. But some gaming experts and potential site developers see slots as only the initial hook to bring patrons into more comprehensive, mixed-use venues.
“Slots are only going to work to the extent these places are done as entertainment facilities,” said Jon Cordish, vice president of The Cordish Co., a Baltimore-based developer involved in slots operations around the country. “You have to focus on more than just the gaming.”
Developers said some sites, such as the proposed 2,500-machine slots facility along I-95 in Cecil County, seem ready-made to become economic engines. Others, like Ocean Downs in Worchester County, might not.
For each site to make the predicted $600 million in revenue become a reality, developers say the machines alone won’t be enough.
Maryland hopes to recapture hundreds of millions of gaming dollars that state officials say are going out of state to Charles Town Races and Slots in West Virginia and Atlantic City. To do so, top gaming development experts said Maryland must look at the proposed slots parlors not as gambling houses but as entertainment destinations.
The state’s pro-slots coalition so far hasn’t discussed development around the slots locations, focused instead on getting them passed in the first place.
“I’m kind of a one-step-at-a-time guy,” said Frederick Puddester, chairman of pro-slots group For Maryland For Our Future. “But I think you’ve got to leave this to the developers … to the people who know that business.”
More than just “slots in a box”
Cordish, more than most developers, has embraced non-gaming amenities. He said those additions have helped Las Vegas and Atlantic City stay afloat as gambling revenues decline.
“Las Vegas’ non-gaming revenues now exceed gaming revenues,” Cordish said. “That’s how Las Vegas has transformed itself in the last 20 years. Atlantic City is trying to do that now. You have to give them [gamers] a reason to stick around, other than gaming.”
Non-gaming sources made up 60 percent of the Las Vegas Strip’s revenue last year, said Frank Streshley, senior analyst with the Nevada Gaming Control Board, while non-gaming sources comprised 40 percent. Streshley said the actual divide could be even greater, as the non-gaming figure only includes operations owned by the casino — a celebrity chef’s restaurant would only be counted for the amount of its lease paid to a casino, not the cost of its food it sells to patrons.
In Atlantic City, gaming revenue made up 78.1 percent of $6.25 billion in gross revenue last year, while non-gaming totaled 21.9 percent, according to Bill LaPenta, director of financial analysis for New Jersey-based Spectrum Gaming Group. But the latter percent has been on the rise in recent years, he said, as hotels have added non-gaming amenities.
“Non-gaming revenue” has become a buzzword in both those cities and has been embraced by The Cordish Co. in its developments. The company built two Seminole Hard Rock Hotels and Casinos in Hollywood, Fla., and Tampa, Fla., and last year announced plans to develop and operate a $200 million slots casino at Indiana Downs outside Indianapolis.
At each, he said, visitors are attracted by more than just gaming.
“We’ve categorically proved that with the Seminole hotels, where people are just as likely to go for the non-gaming amenities,” Cordish said. “Whether it’s Maryland or Indiana, you’ve got to focus on developers who have the ability to do that.”
As one of those developers, Cordish said the company would be interested in developing and operating the Baltimore City slots location.
“In Maryland, we would operate [a casino] from a nonprofit position,” Cordish told The Examiner earlier this year. “This is Maryland, there’s a different set of factors. This is our hometown.”
The big picture
Laurel Park, the state’s largest thoroughbred racetrack, likely would be Maryland’s other marquee slots location. Positioned just off I-95 between Baltimore and Washington, Laurel could divert tour buses from Virginia that now take a less-direct trip to Charles Town.
“You could put slot machines on the middle of the median strip on I-95 down there and it would do well,” Tim Capps, former vice president of the Maryland Jockey Club, which operates racing at Pimlico, told The Examiner earlier this year. “Baltimore City will be very good. But Laurel will be better, because it has a market to itself — people are not going to drive past it to Baltimore.”
But Ocean City Mayor Rick Sheehan said he’s concerned people will drive by the resort if slots come to Ocean Downs in Worchester.
Under the slots legislation, no developer with a financial stake in the track can develop a hotel, amusement park, conference center or even a mini-golf course within 10 miles of the facility, Puddester said.
“The legislation is very specific about protecting business in Ocean City,” Puddester said. “Basically they can have one person behind one piano. To the extent to which that would compete with existing facilities … there’s no competition.”
But Sheehan said the provision, while well-intentioned, might backfire. Though it might keep some dollars in Ocean City that would otherwise be lost, it could also restrain the kind of development he said Ocean Downs slots would need to be successful.
“That’s why it’s not a good location, it doesn’t make sense to put it there,” he said. “You’ve tied one arm behind the back to protect Ocean City, but will those dollars be a wash?”
One of the most promising slots locations could be in Cecil County. Penn National Gaming, which operates Charles Town in West Virginia, has announced plans to build a 2,500-slot parlor on 36 acres in Perryville, just north of the I-95 tollbooths and across the highway from the town’s retail outlets.
Penn National would invest at least $125 million in the facility, the minimum investment required under state law for a slots operation of that size, said company spokesman Eric Schippers. But their parcel is just part of 150 acres that could eventually see a hotel, retail, office space, and a visitor center, he said.
“While the tax rate is extremely high in Maryland and will make it difficult from an operating standpoint … we see an opportunity there,” he said. “You’re trying to attract gamers that other jurisdictions have more money to attract. So developing other elements in a master plan is essential to create that critical mass.”
Mike Pons, business manager of thoroughbred horse farm Country Life Farms in Bel Air, said slots facilities like Penn National’s could succeed in recapturing gambling dollars now going out of state.
“They could be big players in Maryland slots,” Pons said. “They’re near the outlet stores, they could put in a hotel or a restaurant. Sometimes you have to create your own commerce.”
Staff writer Andrew Cannarsa contributed to this story.
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