Downtown casino could be USD 1.6B jackpot

Just one Las Vegas-style casino in downtown Atlanta could generate up to USD 1.7 billion in economic impact, create 10,800 direct jobs, fill tax coffers with USD 135.3 million annually and add nearly USD 3 million to the city’s hotel-motel tax fund.

Casinos — according to a new study by Atlanta hospitality experts PKF Consulting Inc. obtained by Atlanta Business Chronicle — could be the winning hand downtown needs to stay on top of the convention business, and add a strong leisure attraction.

A downtown Atlanta casino could lead to a massive redevelopment of the central business district, spanning from near CNN Center along Marietta Street to Underground Atlanta.

An area known as „The Gulch“ near Philips Arena and CNN Center is already ripe for redevelopment.

PKF‘s study — the first to specifically measure the impact casinos could have on the city of Atlanta — is sure to spark a civic debate over gambling here.

„One always has to understand their competitive environment,“ said Mark Woodworth, executive managing director of PKF Consulting.

„We’re seeing more and more destinations that have gambling, which functions as an important amenity, especially in attracting group meetings and conventions.“

That will be the crux of the debate: Atlanta has been counting its losses for years, as cities with gambling, such as Las Vegas and Chicago, gain a larger share of the group meetings business.

PKF‘s study shows that there were three convention cities in 2005 that were also in the top 20 gambling markets. Top-ranked Las Vegas had USD 6 billion in casino revenue, followed by third-ranked Chicagoland, Ind., with USD 5 billion, and 16th-ranked New Orleans with USD 534 million.

On the other hand, the social costs of gambling can’t be ignored. PKF‘s study estimates that dealing with problem gambling could cost Atlanta USD 320 million a year.

About 8 percent of the U.S. population over age 18 is susceptible to gambling dependency. That number doubles when there is a casino within 50 miles.

But the study concludes the impact of gambling far outweighs the negatives, with a gain between USD 676 million and USD 1.7 billion annually.

A group of downtown business leaders asked PKF to do the study pro bono. For now, the group wishes to remain anonymous.

One member of the group, speaking on condition of anonymity, said gambling needs to have a public hearing after years of Atlanta dodging the issue and „putting its head in the sand. Given the fact we’ve rolled the dice on the convention industry with public- and private-sector investment — and we can’t get a refund — it’s a no-brainer to consider gambling.“

This person said funds generated by gambling could be used to pay for education and more security downtown — an issue that has exasperated downtown business leaders for years.

If casinos are approved, it could spur a master redevelopment downtown, from The Gulch to Underground Atlanta, said the person.

The hospitality industry is the largest in the city — already employing tens of thousands of people and ringing up a USD 4.2 billion annual impact.

The city’s investment in hotel, airport and downtown infrastructure has been billions of dollars.

Without casinos, each year Atlanta slips away from its convention heyday, as other cities have learned the formula for a strong meetings business.

Woodworth says that one, 200,000-square-foot casino — slightly larger than MGM Grand’s 171,500-square-foot casino in Las Vegas — could fill downtown’s 10,000 hotel rooms.

„We’re very confident that the existing Atlanta hotels will enjoy greater levels of occupancy if casino gambling would be allowed,“ he said. Citywide occupancy in Atlanta last year was 64.5 percent.

A downtown casino could even spur the development of large new hotels with hundreds of rooms, he said. In Atlantic City, a 100,000-square-foot casino supports about 1,200 hotel rooms, according to the PKF study.

Atlanta Convention & Visitors Bureau President Spurgeon Richardson, who is not affiliated with the group that commissioned the study, said he believes it is time to take a long, hard look at casino gambling.

„We’ve gotten a lot of inquiries [about casinos],“ he said. „We’re not taking a point of view on this, we just want to discuss it. The economic impact would be significant, based on what we’ve learned.“

„There needs to be a fundamental discussion about what it is they’re seeking in getting gaming,“ said Alan Feldman, senior vice president of public affairs with MGM Mirage, which had nearly USD 6.5 billion in revenue in 2005.

„If the objective is simply, ‚Let’s raise tax revenues,‘ that’s not going to be a particularly inviting discussion as far as gaming is concerned. But if the outcome is towards using it as a means to an end — increasing investment and entertainment options and complementing the convention business — that actually sounds like a worthy conversation to have.“

When asked what would attract a company like MGM Mirage to Atlanta, Feldman said, „In our company, we look to build very multifaceted, multidimensional entertainment complexes, with hotels, restaurants, nightclubs, theaters and sometimes convention space.“ The template, he said, is the The Beau Rivage in Biloxi, Miss. „We don’t just build casinos.“

„The tax rate,“ he continued, „would be a very big issue for us. Something at or below 20 percent would be a reasonable rate in order to afford all those other things. We didn’t even put in a bid in Pennsylvania because the tax rate was too high.“

Pennsylvania approved licenses for slot machine casinos last year, taxed at 54 percent.

The tax on gross revenue in Las Vegas is 6.75 percent, not including other fees, said Feldman. PKF‘s study assumes a 21.4 percent tax, the national average.

Location, as in all real estate decisions, will be key to attracting casinos, said Atlanta’s Michael Leven, a director of Las Vegas Sands Corp..

„Casinos,“ he said, „will always go where there are serious amounts of people.“

Leven, the vice chairman of The Marcus Foundation Inc. and the retired president and CEO of lodging company US Franchise Systems Inc., said that although the odds are slightly in favor of the house at casinos, to support a casino infrastructure and to have a healthy profit margin, the key is getting a high volume of people.

In an urban area like Atlanta, putting a casino near the convention center, surrounded by a lot of parking, will be the key to success.

Casinos would be even more interested in Atlanta, in Leven’s opinion, if licenses were limited to one or two casinos, not four or five casinos. Full gaming floors would attract a high volume of out-of-town visitors.

„Slots appeal more to locals,“ he said, which is not the group that casinos really want to attract.

Nonetheless, locals do seem to have a significant appetite for gambling.

In 2005, 1.8 million people traveled from Atlanta to Las Vegas, the PKF study shows.

The study also shows Georgia is one of only 12 states nationwide where gaming is not allowed nor being considered. Georgia is ringed by states that have some form of gaming other than the lottery, including North Carolina, Alabama and Florida.

Eleven states have full-scale gaming, five states allow horse betting, 28 states have Indian reservation casinos, and eight states are considering gaming, says the study.

Hartsfield-Jackson Atlanta International Airport could also hit the jackpot with gaming. The 1,282 slot machines at McCarran International Airport in Las Vegas generated USD 37.6 million in revenue in 2005. By extrapolation, slot machines at Hartsfield, the busiest airport in the world in terms of passengers, could generate USD 75.2 million, PKF estimates.

But Woodworth, who said his firm is neither for nor against gambling, said the negatives can’t be ignored.

„I believe it’s as important to understand the negative consequences associated with gaming as it is to understand the positive,“ Woodworth said. Aside from the costs of problem gambling, Atlantic City and Detroit saw temporary spikes in crime after casinos were built, his study shows.

But three years later, crime dipped below pre-casino levels. Woodworth said it may have taken police in those cities a while to understand and combat the crime that emerged with the casino industry. And as tax revenue rolled in, the cities had more money for crime fighting.

As for problem gambling, Leven said that three years ago, he would have worried more about it. But today, „you can gamble all day on the stock market then come home and gamble online. If you’re a gambling addict, you’ll find your way to it anyway.“