Casinos Good for Business? Will they Cannibalize Local Businesses? Key Debate.

CASINO RESORTS
Would casino mega resort hurt existing Miami restaurants and shops? Opinion is split

Retailers and restaurateurs are split on the potential impact casino resorts would have on S. Florida, with some seeing them as a boon and others fearing they spell doom.

BY ELAINE WALKER
EWALKER@MIAMIHERALD.COM
Joe’s Stone Crab owner Steve Sawitz distinctly recalls his grandfather’s admonitions decades ago against bring casino gambling to Miami. The move could be the “downfall” of independent business, his grandfather cautioned.

That warning resonates with Sawitz today as legislation to allow resort casinos is debated in the Florida Legislature and casino companies jockey for position in the market. Although he acknowledges Joe’s could benefit from casino traffic because of the nearly 100-year-old landmark’s reputation, Sawitz fears that a mega resort with dozens of restaurants and a shopping mall would put many of his neighbors out of business.

“There is not one good reason for them to want you to go outside of that casino,” said Sawitz, the fourth generation of his family to run the Miami Beach restaurant, which also has a location at the Forum Shops in Las Vegas — a far different market, he said. “It’s hard to compete with comped meals and drinks. You’ve got to show me a place where restaurants and retailers outside of the casino do well. I’m not risking my sweat equity of 100 years in their promises.”

The debate over whether Genting’s Resorts World Miami or a destination resort project by Las Vegas Sands would be good business for existing retailers and restaurants has divided the Miami community. Some see it as the death knell for small mom-and-pops, while others envision a windfall of new customers and revenues.

The issue has come to a head since Genting purchased The Miami Herald and surrounding property for nearly a half billion dollars last year, then unveiled plans for the massive, $3.8 billion Resorts World Miami. Under the terms of the agreement, The Miami Herald can remain in its current quarters rent-free through May 2013.

Genting has tried to gain support by touting projections of two to three million new visitors annually and the addition of about 45,000 direct and indirect jobs. For local restaurants and bars, Genting offers the chance to participate in a WorldCard rewards program that would encourage casino guests to visit local businesses.

“Miami has so many unique cultural attractions and we want to promote them,” said Jessica Hoppe, senior vice president of governmental affairs for Resorts World Miami. “We want our customers to go and experience South Beach because we want Miami to thrive and grow. We fully believe that a rising tide lifts all ships.”

That pitch has already drawn interest from more than 50 Miami-Dade restaurants and bars, including Tony Chan’s Water Club, City Hall the Restaurant, Truluck’s Seafood, The Daily and Wall nightclub. Others like The Forge and Garcia’s Seafood Grill are interested not only in the loyalty program, but also in opening an outpost at Resorts World Miami.

“It really does go to show that these folks are serious about sharing the wealth,” said Shareef Malnik, whose family has owned The Forge on Miami Beach for 45 years. He has a handshake deal to bring an outpost of The Forge to Resorts World Miami. “Genting will be a magnet. If it makes our city better, I will get my fair share of increased business over the long run.”

Luis Garcia, whose family owns Garcia’s Seafood Grill and Garcia’s Wholesale, hopes he can convince Genting to create a fisherman’s wharf on the project. But even without that, he thinks tourists will leave Resorts World Miami to visit his restaurant on the Miami River.

“People are going to come to my business because they want an authentic Miami place,” said Garcia, whose family has been in the restaurant business for 25 years. “I like competition. It’s one of the greatest things we have in this country.”

But studies on the potential impact of casinos tell a different story.

A 1996 study on the Regional Economic Impacts of Casino Gambling found the long-term economic impacts of casinos are “generally positive” and result in an increase in real disposable income and jobs. Yet the study also found the only place the effect might be negative is a region with a thriving tourism economy — such as South Florida.

Adam Rose, the study’s author, visited Miami recently and said that because of the strong tourism base, gambling could hurt local businesses. “The key question: Is the casino going to attract people who wouldn’t otherwise go to Miami? said Rose, now an economist at the University of Southern California’s Price School of Public Policy. “If it doesn’t, you’ve got cannibalization.”

Rose’s study suggested that local restaurants and other service providers do not share “as broadly” in the direct gains from a casino opening.

Las Vegas casino owner Steve Wynn said as much to a business group in Bridgeport, Conn. in the 1990s. “There is no reason on earth for any of you to expect for more than a second that just because there are people here, they’re going to run into your restaurants and stores just because we build this building [casino] here.”

And Robert Goodman’s book, The Luck Business, claims that four years after the introduction of casinos in Atlantic City in 1978, about a third of the city’s retail business closed. During a 10-year period, the number of independent restaurants in the city declined by 40 percent.

A 2005 study on the impact of casino gambling on retail sales growth in mid-size Iowa cities found that between 1996 and 2004, the average annual growth rate of retail sales was .6 percent in four cities with a casino, compared to 3.4 percent in six cities without a casino.

Iowa and Atlantic City are far different from Miami. And it’s also hard to compare South Florida to Las Vegas, where casinos built a modern-day Land of Oz in the desert.

But the potential impact of casinos worries small businesspeople like Alfred Patino, whose wine bar and restaurant Bin.18 would be just down the street from Resorts World Miami.

“We already have a huge amount of competition,” Patino said. “We don’t need 50 more restaurants and bars. I’d rather let the area continue to grow organically.”

Casino or not, there is a valid concern about just how much retail and restaurants the Downtown Miami area can support. While the area has long been considered an underserved market, in typical Miami fashion it’s about to go from bust to boom.

Recent years have brought a flurry of new activity along Brickell Avenue, Midtown Miami, the Design District and Biscayne Boulevard. Swire Properties is seeking construction permits for Brickell CitiCentre, a 4.6 million-square-foot mixed-use project with shopping, a hotel, offices and residential towers. Developer Craig Robins plans to bring Louis Vuitton and Hermes to the Design District as he grows a collection of luxury fashion brands in the area.

Opinion is split on where to put up the stop sign.

Robins thinks any casino in the Downtown area would have a negative impact on his plans and others.

“It’s bad for Miami and I think it’s going to be bad for business,” Robins said. “These projects would be in a position to artificially compete with other businesses and put them at an extremely competitive disadvantage. It could fundamentally damage the character and spirit of the great projects that are already happening in Miami.”

But management for Bayside Marketplace and Mary Brickell Village both say they would welcome a casino and the visitors it would bring.

“Our feeling is that any economic development would be good,” said Pam Weller, general manager at Bayside.

Kerry Newman, a broker with Koniver Stern that handles the leasing for Mary Brickell Village, said ultimately the retailers will decide if the demand is there. “The retailers won’t come in unless they feel they can do the business,” he said.

Fueling concerns over Resorts World Miami is a proposal for what Genting says would be one of the largest casinos in the United States. Plans unveiled last year featured a dramatic design inspired by a coral reef with four hotels and 5,200 hotel rooms, a 3.6 acre outdoor lagoon, more than 50 restaurants and bars, a luxury shopping galleria with about 60 shops and a rotating vendor marketplace. The restaurants and retail together represent nearly one million square feet.

The restaurants alone number about double those at major Las Vegas hotels. Caesar’s Palace leads the list with 26 restaurants and bars, not including those at the attached Forum Shops, and MGM Grand and Mandalay Bay, are close behind at 24.

The project would be akin to “an atomic bomb,’’ said David Wallack, the owner of Mango’s Cafe on Miami Beach and Power Studios in the Design District. “It needs to be on the proper scale so that it doesn’t annihilate everything in the area.”

Genting executives say the size of Resorts World Miami — particularly the retail and restaurant space — will be reduced as the company adjusts its plans based on feedback from the community.

“The design is in a bit of a state of flux,” Hoppe said. “Our desire is not to engulf everything that exists in Miami.”

Representatives of Las Vegas Sands Corp., which also wants to build a Miami casino, said its resort would be more modest in size.

“We’re not going to go head to head with local established restaurateurs,” said Andy Abboud, Sands’ vice president of government relations. “We’ve got to bring new stuff to the marketplace.”

Although Sands has not settled on a Miami location — it favors the Miami World Center site — the company envisions a hotel with no more than 2,000 rooms and about a dozen restaurants. The project would also include one million square feet of convention space and a 500,000 square foot retail shopping mall.

Genting argues that what distinguishes it from Sands or any other Vegas operator is an “open access” program, which encourages guests to leave the hotel. Genting’s WorldCard program allows guests to take the rewards points rung up at Resorts World Miami and “spend’’ them at off-site partner establishments. In most other casino loyalty programs, points can only be used for discounted or free offers within the hotel.

Consumers can ring up loyalty points on the Genting card while dining or drinking at member establishments. There’s no charge to merchants or consumers to participate. Genting doesn’t take a percentage of sales. But the merchant has to float the bill for 30 days before it receives payment from Genting and may lose the cost of a processing fee on the transaction reimbursement.

Steve Haas, the owner of City Hall the Restaurant just up Biscayne Boulevard thinks he will benefit from additional tourist traffic and still maintain his local consumer, which is the core of his business.

“I don’t think locals will actually go there on a regular basis,” Haas said. “I think most of the neighborhood will end up avoiding the hotel. We will go there once in awhile, when people come to visit.”

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