Majestic Research

The Wichita Eagle

Experts Say Area Prime for Casino

By Fred Mann
Published: December 09, 2007

The fact that casino giants like MGM Mirage and Harrah’s Entertainment want to build opulent resorts in rural Kansas doesn’t surprise gaming insiders.

Opportunities to develop new gambling markets are limited in the U. S., they said. Gambling is legal only in certain jurisdictions, and many of them are saturated.

“When a new jurisdiction opens up, it becomes enticing even for companies that traditionally haven’t built in those types of regions,” said Matthew Jacob, gaming analyst for Majestic Research.

Monday, the public will have a chance to find out what Harrah’s and MGM, as well as Penn National Gaming and Marvel Gaming, have in mind for the $350 million to $500 million casino resorts they hope to build along the Kansas Turnpike in Sumner County.

Company representatives will give 90-minute presentations at public hearings in Wellington on Monday and Tuesday. Sumner County commissioners will decide Wednesday which proposals to endorse and pass on to the Kansas Lottery. The winner will be chosen by a lottery review board.

The two largest bidders, Harrah’s and MGM, operate some of the best-known casinos on the Las Vegas strip and around the world.

Penn National is a fast-rising company specializing in regional casinos. It also submitted the only bid to build a casino in Cherokee County in southeast Kansas.

Marvel Gaming is a spin-off of Jack Binion’s Horseshoe Gaming franchise.

Why Sumner County?

Sumner County is being swept up in a trend of spreading casino empires throughout the midwest.

“You’re starting to see more established companies that historically have not pursued these markets looking to expand,” Jacob said.

As long as there is a city with a decent population nearby, they know they can make money, the experts say. And Wichita will do just fine to serve a Sumner County casino.

William N. Thompson, a professor of public administration at the University of Nevada-Las Vegas, who has written articles and books on gambling, said there are enough people in Wichita and the region to allow a Sumner County casino to earn $300 million to $400 million annually.

Unfortunately, that also means the casino companies won’t have to do much to boost tourism and bring in conventions, even though they vow in their proposals to do exactly that, Thompson said.

Those efforts will be secondary to the casino, he said.

“You have enough people there that the casino doesn’t have to go outside to get customers,” Thompson said.

Gaming analyst Dennis Forst of KeyBanc Capital Markets Inc. agreed, to a point.

“They only care about the casino, but if it’s part of the bargain to make donations and get involved in local tourism, they’ll keep their part of the bargain,” he said.

Gaming companies, at least the larger ones, rarely renege on their promises, Forst said.

“If it’s an MGM or a Harrah’s, they’re going to do what they say they’re going to do,” he said.

Forst, who owns stock in MGM, Harrah’s and Penn National, said he doesn’t know much about Marvel.

But in general, “the smaller and more upstart a company is, the less reliable,” he said.

The Players

MGM Mirage, part of a group proposing a casino for the Mulvane area, owns and operates 17 properties in Nevada, Mississippi, and Michigan and is the largest landholder on the Las Vegas strip.

It is known for high-end facilities like the MGM Grand, Bellagio and Mandalay Bay in Las Vegas. But its lineup also features mass-market casinos like Circus Circus, Luxor and Excalibur.

Jacob, who has no financial stake in any of the casino companies, said a new MGM Grand in Detroit is an example of the company’s efforts to expand to the Midwest, building casinos in areas that won’t draw many gamblers from outside their regions.

“That may be similar to what they’re looking to do in Kansas,” he said.

MGM’s involvement in Kansas is a different approach for the company, Forst said. He added that MGM management probably won’t be involved in the casino, leaving the heavy lifting to the Mashantucket Pequot tribe and Foxwoods Development, which owns the Foxwoods Resort Casino in Ledyard, Conn.

Harrah’s, which also plans a casino for the Mulvane area, has grown into world’s largest casino company in part by acquiring rivals like Horseshoe Gaming and Caesars Entertainment in recent years.

Harrah’s has been successful at building a large network of casinos across the country and cross-marketing them through a rewards program that offers credits at different Harrah’s casinos.

“Harrah’s strategy is to be in pretty much every market in the United States,” Jacob said.

But its goal is to drive business to Las Vegas and Atlantic City, Forst said.

“Harrah’s wants to plant their flag as many places as they can in order to build up their customers to educate them and eventually introduce them to Las Vegas and Atlantic City,” he said.

Penn National, based in Wyomissing, Pa., is newer on the casino scene after starting out as a pari-mutuel track in Pennsylvania in 1972. The company, which proposes a casino near Wellington, owns and operates 19 casinos and race tracks in 12 states and Canada, none in Nevada.

“I think the Wichita market makes sense for them, as well,” Jacob said.

Marvel Gaming, which proposes a casino near Wellington, consists of former Horseshoe executives and Binion family members.

While the experts know little about the new group, they say Horseshoe casinos under Binion became popular among gamblers.

“They didn’t really tend to offer a lot of amenities, but tended to offer favorable rules and odds for gamers,” Jacob said.

Penn National and Harrah’s are being bought by private equity firms. That will leave them with a fair amount of debt, Forst said.

“It’s something people might think about,” Forst said. “Maybe more with Penn, a smaller company.

“Whoever’s doing the analysis should really look through the financials before they pick the ultimate winner,” Forst said.