Las Vegas is moving to the East Coast, sort of.
Some of Las Vegas' biggest names are seeing the East Coast of the U.S. as a massive untapped market they can expand into. Wynn Resorts (WYNN 1.73%), Las Vegas Sands (LVS -0.34%), and MGM Resorts (MGM 1.00%) have either opened properties there or are building them with more potentially on the way.
At this point, if you haven't wondered why casino companies want to build near the shadow of Atlantic City's casino failures, maybe you should. And while there are differences between what's being built and Atlantic City, the scale of investment and similarities to the ghost of casinos on the boardwalk should raise a few red flags for investors.
Wynn Everett outside Boston is one of the new East Coast casinos under construction. Image source: Wynn Resorts.
Gambling near the nation's capital
The latest Las Vegas-style resort on the East Coast is MGM's new $1.4 billion National Harbor casino, which opens later this week. The property includes 308 hotel rooms, 3,300 slot machines, and 124 table games along with a number of restaurants and bars for visitors. It's a short distance south of Washington, D.C., hoping to attract guests visiting the nation's capital.
MGM National Harbor. Image source: MGM Resorts.
MGM National Harbor is in addition to MGM's Borgata in Atlantic City and opens just ahead of MGM Springfield in Massachusetts, which is expected next year. This will give MGM new exposure to the East Coast gaming market where there has been a lot of interest in recent years.
Las Vegas Sands was an early mover in Pennsylvania when it opened Sands Bethlehem and it was so profitable others decided to follow. The last entrant will be Wynn Resorts, which is currently building Wynn Everett just outside of downtown Boston, Massachusetts.
What's strange about this expansion is that it's taking place as Atlantic City's casino business is crumbling. Atlantic City's gaming revenue last year was just $2.56 billion, down from $5.22 billion in 2006. The economy has been part of the problem in the region, but an explosion of competition in more attractive areas has been a key as well. And that's only getting worse with these new casinos.
Moving out of Atlantic City
The casinos MGM, Wynn, and Las Vegas Sands have built have a major theme in common: They're built around or in major urban centers. Wynn Everett and MGM National Harbor are near urban centers while MGM Springfield and Sands Bethlehem have tens of millions of people living a few hours drive away in Philadelphia, New York, and Boston.
New resorts aren't necessarily easier to get to than Atlantic City, but they're in more attractive areas for travelers and may also bring more regional visitors from inland. The challenge will be financially justifying a billion-dollar resort in an area where gaming is commonplace and there's no center of gravity (think the Las Vegas Strip).
Time will tell if the expansion in Las Vegas-style resorts on the East Coast will be profitable as more are built. But I think there will be fatigue as more are opened. For now, gaming companies are betting big that the market is big enough for everyone.
