Through The Fly's Eyes: MGM Mirage
from Larry Ramer of Theflyonthewall.com
MGM Rolling the Dice on Atlantic City Resort/Casino
MGM Mirage (MGM) is making a big bet that it can profitably run a huge Las Vegas-style casino in Atlantic City.
The company has announced plans to build a huge, $4.5B to $5B hotel, casino, and entertainment complex in Atlantic City. The project, called the MGM Grand Atlantic City, is slated to have 3,000 rooms and three towers. It will also boast a 1,500 seat theater, a spa, 5000,000 square feet of retail space, nightclubs, and the largest casino floor in the city.
As several people noted, the project is clearly an attempt to change the character of Atlantic City.
"[MGM's project] is another step in Atlantic City's evolution to a full-scale destination resort," said Joe Corbo, president of the Casino Association of New Jersey, as quoted by the Associated Press.
"[MGM Grand Atlantic City] is a bet on what Atlantic City can become," said Susquehanna Financial Group analyst Robert LaFleur. "We are long-term believers that the market can transition from a predominantly day tripper market to more of a Las Vegas overnight destination."
Perhaps, but MGM will face several significant hurdles in its attempt to lure people looking for a Las Vegas-like resort experience to Atlantic City . First of all, as LaFleur noted, people don't think of Atlantic City as a vacation destination, and it may take a while to change that perception. The city's gambling area just doesn't have the glitz of Las Vegas -- instead of the lights and glamour of the Strip, the casinos are surrounded by a dull boardwalk on one side, and parking garages and downscale restaurants and shops on the other. Also, unlike Las Vegas, any luxury resort in Atlantic City is sure to have a long off-season. How many high rollers are going to want to spend their vacations in the chill of New Jersey from the end of November through the beginning of April? And Foxwoods' casino in Connecticut, as well as casinos that are slated to be built in Philadelphia, will provide some competition for short-term vacationers.
On the other hand, MGM's $1B-plus Borgata casino in Atlantic City has done well, and maybe there is a market for Northeastern and Middle Atlantic vacationers who don't want to go far from home, but do want to gamble while enjoying a resort experience.
MGM and its investors are hoping that this gamble pays off. But do the odds here favor the house?