Detroit Casinos See a 1.5% Upswing in Revenue This Year

Increased competition from the new casinos in the state of Ohio, as well as tribal properties nearby, have contributed to the decline in revenues for the casinos in Detroit, at least since 2012.

However, the three casinos in Detroit, which opened between 1999 and 2000, have finally seen their revenues climb 1.5 per cent in April, 2016, compared to the year before; reversing what had been a long standing decline in gambling revenue, however the numbers still fell by 2.1 per cent compared to March 2016.

Strong uplift

Figures provided by the Michigan Gaming Control Board show that total gambling revenues for the first six months of the year are up by nearly 5 per cent compared to last year, providing an overall positive outlook to the future of gambling for the state.

The Michigan Gaming Control Board also said that Year to date aggregate revenues have also risen 0.6 per cent, compared to last year.

Many experts have pinned down the improvement to the growing economy and the lower gas prices. According to GasBuddy, unleaded fuel prices are currently averaging at USD 2.95 per gallon compared to a year ago when they were USD 3.80 for a gallon in Detroit area.

According to Jacob Miklojcik, a Lansing-based gaming consultant, ‘The economy is doing better and you've got more disposable income because of gas prices. That shows up in how people spend their recreational money.’

Strong Detroit convention business and reports of higher number to downtown by suburban residents than in the recent past are also considered as one of the factors leading to the upward trend.

The details

At USD 42.3 million in revenues, for first-quarter of the year, Motor City Casino Hotel saw revenues increase by up to 4.5 per cent in the month of April, 2016.

Similarly, Greektown Casino Hotel's April 2016 revenues also rose 4.9 per cent to USD 29.5 million.

However, the casino with the largest market share, MGM Grand, saw monthly revenue drop by 2.7 per cent in April this year to USD 50.5 million, compared to a year earlier.

MGM Grand lays claim to 41 per cent of market shares; compared to 35 per cent for MotorCity and 24 per cent for Greektown.

Miklojcik is quick to point out that the revenue figures released do not provide an indication of the actual profits for each casino. It is therefore not clear whether the increase is down to bigger, more expensive promotions or lucrative giveaways that would help the total revenues, though not necessarily the bottom lines.

Miklojcik said, ‘If everyone had a big cash-back effort you'd see higher revenues, but that's not profit gain.”

Therefore, once again an improvement in revenues does not necessarily reflect the cost that goes into making them.

The figures released also do not show the casinos’ non-gaming revenues that can come from sources such as hotel rooms, food sales and banquets.

At just under USD 170 million, taxes from casino gaming represent about 16 per cent of total revenues for the city of Detroit.

As one of the more prolific states of Michigan, the city of Detroit fell on hard times and had to declare bankruptcy. However, with the exit from the said bankruptcy, the city regained full access to gambling taxes that were held as collateral on debt.

This is considered to be crucial to financing basic services and the city is restricted to spending casino proceeds on certain purposes fully supervised by state law which include police and fire protection, economic development, anti-gang programs to name but a few. The aim is to use these funds for the development and improvement of the quality of life for the residents of Detroit city.

 

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