Last week, in a widely anticipated decision, Maryland authorities awarded MGM Resorts the state’s sixth and final casino license. MGM will use that to build a massive Vegas-style facility at National Harbor, just south of Washington, DC. While the decision was celebrated by MGM, which expects the prized new resort casino to be among its most profitable, it was yet another significant defeat for Penn National Gaming (PNG).
The $925 million MGM complex will be the crown jewel of the region’s casinos due to its size and coveted location, just a stone’s throw from Washington’s southern edge, and a bridge away from suburbs of northern Virginia, which include several of the nation’s wealthiest counties: Fairfax, Prince William, and Arlington. But it’s not just local gamers that will be drawn in. National Harbor has become a premier tourist destination for both leisure and business travelers alike. The enclave already has several hotels, a convention center, a marina, and even an outlet shopping mall.
MGM’s two main competitors are Hollywood Casino at Charles Town Races and Maryland Live. Both are situated more than a half hour drive from Washington’s city limits, giving National Harbor a huge advantage with those who live in the District. Both are successful, currently, offering a glimpse of the market that MGM expects to tap into.
Charles Town Races is a full service casino and horse racetrack owned by PNG, nestled on the edge of West Virginia’s eastern panhandle. It is PNG’s most profitable property and currently the state of West Virginia’s casino cash cow. The casino began to flourish in 2010 after a local referendum permitting table games was passed in late 2009.
Although located an hour’s drive west of the Washington and Baltimore metro area, the 2010 change made the casino the closest venue offering a full array of table games, poker rooms and slot machines. The table games expansion was a major factor in PNG’s increase of more than $226 million in gaming revenues between 2010 and 2011, according to the PNG’s 2011 10-K filing.
In 2008, in neighboring Maryland, voters authorized slot parlors to be built in five locations across the state. Still, Charles Town Races had a regional monopoly on table games and poker rooms. But in 2012, another gaming expansion referendum was put on the Maryland ballot, to authorize casinos in the state to offer table games and poker rooms, and for the issuance of a sixth casino licence, in Prince George’s County, which includes the National Harbor area.
PNG, seeking to protect its interests in West Virginia, fiercely opposed the measure, spending $44 million to help fund a committee running attack ads against MGM and the proposition. MGM, which had its eyes on National Harbor, spent $41 million in support of the proposal, making the ballot measure spending among the most expensive in Maryland state history.
To PNG’s dismay, the measure passed. So PNG, in a “Why the heck not?” move, placed a bid for the sixth casino licence it had just spent millions opposing. Again, they were defeated by MGM, which last week was chosen for the National Harbor licence last week. Since then, PNG has griped that the onset that the process was fraught with shady backroom deals between state politicians and MGM.
The 2012 table games expansion has proven to be quite lucrative. Since rolling out the games in mid-2013, the Maryland Live casino has raked in more than $50 million per month for seven consecutive months, becoming one of the hottest destinations in the area. That’s particularly good news for local real estate magnate David Cordish, who owns that casino.
A large swath of this success has come at PNG’s expense. An estimated 40 percent of its the Charles Town poker regulars have relocated to Maryland Live since August. In the past year, that’s lead to both a hiring freeze and a round of layoffs at the West Virginia casino.
While Maryland Live is doing well, it can expect to lose customers in 2016 when the National Harbor casino opens. The new location will likely balkanize the Washington gaming market into three sections, with Maryland Live potentially ending up with one of the smaller and less wealthy portions.
Residents of Washington proper, the city’s eastern and southern Maryland surroundings, and inner Virginia suburbs such as Arlington, Alexandria, and Falls Church – will have a much shorter trek to National Harbor than to the two alternatives. So will the southern part of Fairfax County, and Prince William County.
The outlying Virginia suburbs, including Loudon and most of Fairfax County – which have the first and third highest median household incomes in the country, respectively – are still likely to be drawn to Charles Town Races due to both proximity and the notoriously heavy Washington area traffic. Maryland’s Montgomery County, the 10th wealthiest in the nation, will also find Charles Town to be the closest option due to the county’s location on DC’s north side.
Maryland Live still figures to draw in market share from the more northern suburbs of Washington and along the I-95 stretch to Baltimore, a region that also includes some of the wealthiest counties in the nation.
The Maryland Live casino faces another threat. A consortium lead by Caesar’s has begun construction on a new $400 million casino in Baltimore’s Inner Harbor, with a grand opening scheduled for 2014. That project, billed as the second largest casino in the state, and be another strong contender among the casinos fighting for supremacy in the Washington market.
