One of the interesting nuggets that slipped out during the press coverage of the opening of the MotorCity Casino Hotel was that the casino has master-planned for a second tower, the footprint of which is already known.
However, I would not count on the second tower being constructed soon. With the opening of the three casino hotels in an approximately 12 month period, the Detroit market will have to absorb approximately 438,000 room nights per year, a significant addition to the current room inventory in the City of Detroit.
In addition, the occupancy of the first tower of the MotorCity Casino Hotel on its grand opening night was reportedly approximately 35%, and the first tower is not yet sold out for the 2008 North American International Auto Show, traditionally the week with the greatest hotel demand in Detroit.
The motivation for increasing hotel revenue is clear, however. The casinos are not required to pay the 28% tax on revenues from hotel rooms, unlike gaming revenue. Of course, the profit margin on hotel revenue is substantially lower than gaming revenue, as well.
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