Experts eye Canadian metropolis as ripe for Big Casinos
A study by UNLV’s International Gaming Institute concluded a resort complex featuring a hotel, casino, convention space and other entertainment amenities in the heart of Toronto could stimulate the economy of Canada’s largest city.
Instead of cannibalizing the market, the complex would spur growth for any surrounding businesses.
Meanwhile, the worldwide accounting firm Ernst & Young found that Toronto could collect almost $200 million a year from a casino complex in the form of tax revenues, on top of a one-time sale or lease of city-owned land.
So it wasn’t a surprise last week that Toronto city leaders, following the public release of the two reports, decided to ask residents if they favor a casino.
It’s also no wonder that Caesars Entertainment Corp. Senior Vice President Jan Jones and MGM Resorts Senior Vice President Alan Feldman are bumping into each other more often in Toronto than on the Strip.
Nevada’s biggest casino companies view Toronto as the industry’s next major battleground.
“It’s truly a potential destination we can’t ignore,” Jones said.
Earlier this year, the Ontario Lottery and Gaming Corp. announced plans to develop a single hotel-casino complex in Toronto. Government officials said the facility could generate $1 billion a year in gaming revenues.
Comparisons were immediately made between Toronto and Singapore.
Ernst & Young scaled back the revenue projections but still lauded the notion of a Toronto casino.
“It was noted that several characteristics of Toronto would make the city an attractive locale for international high rollers including the lack of taxes levied on gambling wins, the number of direct flights from Asian countries and the local demographics and family connections to Asia,” Ernst & Young officials wrote in the executive summary of its Commercial Casino in Toronto Study, which was researched on behalf of the city.
Singapore approved two casinos back in 2005, after much heated debate, as a means to drive tourism. Gaming was limited to a small portion of the two integrated resorts, but Singapore could surpass the Strip as the world’s second-largest gaming market behind Macau by the end of this year.
Toronto is following the Singapore model, and the debate is expected to be equally as furious. No casino will happen without the support of Toronto and its citizens.
Toronto Mayor Rob Ford backs the casino idea, but the Toronto city council has 43 members and their decision process is expected to stretch into next year.
“I don’t envy that task,” said Jones, a former two-term mayor of Las Vegas who oversaw a panel with five elected council members.
Ten days ago, Caesars released conceptual artist renderings of what a downtown Toronto casino complex might look like. Caesars is in partnership with Rock Gaming of Detroit, the company’s joint venture partner in the Horseshoe casinos in Cleveland, Cincinnati and Baltimore.
Jones said the Caesars project would be on Toronto’s downtown Front Street, and likened the complex to Harrah’s New Orleans, which is near that city’s French Quarter. Casino resorts of that caliber cost $1 billion to $2 billion to build.
“It’s all conceptual and at the end of the day, we would locate a casino where the city requests,” Jones said.
MGM Resorts, which jumped into the Toronto gaming debate early in the process, has championed Exhibition Place, a location outside of downtown that has support from several city leaders.
Canadian media reported in September than Jones and Feldman actually crossed paths between meetings at Toronto’s City Hall.
Meanwhile, Las Vegas Sands Corp. President Mike Leven, during the company’s third-quarter earnings conference call, said the casino operator chose a downtown site.
In August, Las Vegas Sands Chairman Sheldon Adelson had a private meeting with Toronto’s mayor.
“We don’t know where that project is going to go at the moment, but we’re ready to pursue it as soon as the project is released and our conditions are met,” Leven said. “The return on investment is critical, particularly in the North American locations.”
Wynn Resorts Chairman Steve Wynn in October visited several potential casino sites, including the Toronto Convention Center and the Canadian National Exhibition grounds.
The reports by Ernst & Young and the International Gaming Institute have only added fuel to what’s expected to be a heated competition.
The University of Nevada, Las Vegas study is the first of four the research team plans to conduct on the Toronto market on behalf of the Canadian Gaming Association, a nonprofit advocacy group. Other studies include the potential social costs of the casino, any impact the casino would have on problem gambling in the region, and the economic impact of a casino.
Bo Bernhard, executive director of the International Gaming Institute, said the school’s researchers wanted to study emerging gaming markets. He and Kahlil Philander reviewed research on casino gaming’s impact on other gaming and nongaming industries in the U.S. to determine any effects of “cannibalization.”
Bernhard and Philander concluded a Toronto casino would not hurt nearby businesses or diminish lottery revenues.
“When the studies are applied to the Toronto situation, you have megaconvention facilities, a large hotel and tourists having lots of disposable income,” Bernhard said. “They will venture out and spend that money in nearby locations.”
The Toronto area already has several forms of gaming, including lotteries, horse racing and a slot-machine casino at the Woodbine racetrack.
Ontario is home to a dozen small and midsized casinos, including Casino Niagara in Niagara Falls, and Caesars Windsor, which has been operated by Caesars Entertainment since 1998.
“There is minimal downside risk,” said Philander, who lived for a year in downtown Toronto while studying economics at the University of Toronto.
“Cannibalization is often claimed with respect to casinos but we could not find strong empirical evidence to support this argument,” Philander said.