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Md. Slots Would Have To Fight for Md. Dollars

By Lisa Rein
Washington Post Staff Writer
Monday, October 6, 2008

CHARLES TOWN, W. Va. -- One of the biggest pitches for bringing slots to Maryland amounts to declaring a trade war on its neighbors: Let's keep gambling money inside our state borders.

Three of the locations proposed in the slot machine gambling proposal on the November ballot -- in Allegany, Cecil and Worcester counties -- were chosen in part to attract Marylanders who now go to West Virginia, Pennsylvania, Delaware and New Jersey to take their chances.

But the plush new Inn at Charles Town, where from their rooms guests can watch thoroughbreds race and can hop a free shuttle to the slots floor, shows that the competition is prepared to fight back.

The $21 million, 153-room hotel, 60 miles from Rockville, opened after Labor Day with flat-screen televisions in every room, gold upholstery and a granite bar in the lobby. Less than a month before Maryland decides whether to authorize as many as 15,000 slot machines at five locations, it is a reminder that as much as state leaders are counting on billions of gambling dollars that their constituents spend every year in nearby states, the venues in those states will compete fiercely to keep them.

"Charles Town has been watching what has been occurring in Maryland as the debate has continued," said Eric Schippers, vice president for public affairs for Penn National Gaming, the owner of Charles Town Races & Slots. The hotel was a response to "significant customer demand," he said. "And we recognize that gaming expansion is going to continue in neighboring states."

In recent months, Charles Town, the country's second-highest-grossing slots venue, also polished its popular customer-rewards program, creating tiers that provide big spenders with VIP parking, hotel stays and preferred lines at the buffet. West Virginia's three racetrack-slots parlors now are open 24 hours on weekends, holidays and special promotion nights. And two added table games in the past year.

At Dover Downs in Delaware, 40 miles from the Maryland line, customers at the harness racetrack and slots parlor enjoy a newly renovated 900-room hotel, a luxury spa and a convention center, added to attract high rollers who will spend the night. Half the patrons are Marylanders.

Harrington Raceway in Delaware also upgraded its hotel and added a wing to the slots floor. Golfers can now tee off at the 18-hole course at Delaware Park before they hit the slots. And the state has allowed the tracks to operate round-the-clock and add thousands more slot machines as 61,000 slot machines ramping up in Pennsylvania threw off revenue by 4 percent. Sports betting is now being considered as a response to the competition.

Slots revenue helped rescue Delaware's racetracks. But "if Maryland comes on board, we're going to feel it," said Jim Logue, deputy director for the Delaware Lottery.

Maryland has found itself surrounded by a gambling boom in the mid-Atlantic. Every expansion of gambling pushes neighbors to raise the ante, largely with non-gambling attractions to broaden the industry's customer base with destination resorts.

Atlantic City, for example, is in the midst of a multibillion-dollar expansion to counter the Pennsylvania threat, building high-end stores, hotels, nightclubs and an Olympic-size indoor swimming pool.

Legislative analysts in Maryland predict that slots could yield more than $500 million a year for the state treasury within a few years, a number they say takes into account competition in other states. Gambling opponents are skeptical that the state would take in that much if the industry continues to reinvest across the borders.

"We're the last ones into a gambling arms race, and you've got three states that are already years ahead of Maryland," said Scott Arceneaux, senior adviser to Marylanders United to Stop Slots, which is fighting the Nov. 4 ballot proposal.

But others say slots could create new gamblers at the proposed Maryland locations, which would include Anne Arundel County and Baltimore, as well as draw players from neighboring states. If the ballot proposal passes, a lot will depend on whether convenience and high gas prices keep Maryland gamblers home or loyalty keeps them crossing the border.

"The competition is only going to increase over time," said Joe Weinert, an analyst with Spectrum Gaming Group an Atlantic City-based research and consulting firm. "The Maryland convenience gambler will stay close to home, so the strategy will be, 'Let's give them a better experience.' "

Thomas E. Perez, Maryland secretary of labor, licensing and regulation in the pro-slots O'Malley administration, offered the case for slots in a report last year that showed Maryland players contribute $150 million to tax coffers in Delaware and West Virginia

Perez said in an interview that with the high cost of gas, he is "hard-pressed to imagine that people in Maryland are going to want to make a lot of 100-mile trips" out of state when they can travel shorter distances.

"The tourist who is here for a conference in Baltimore isn't going to get on a bus and travel to Atlantic City. They'll play in Baltimore," Perez said.

At Charles Town recently, retirees Betty and Tom Burton, who came for three days of slots, sightseeing and visiting friends, were impressed by the new hotel, where they reserved a room for three nights. The drive was 270 miles from their home near Ocean City. If slots were introduced at the track at Ocean Downs, they would be there in a heartbeat. "Five minutes as opposed to four and half hours," Betty Burton said.

But choosing where to play would be more complicated for Sam Kladitis, a retired Fairfax County history teacher, who drove 106 miles from Waldorf for one night at the hotel, which cost only $49, thanks to his wife's customer rewards card. If slots are approved in Maryland, the closest the couple could play would be Ocean Downs, about the same distance from home.

Where would they go? "It depends on the casino," Kladitis said. "If it's halfway decent and they treat you right, it would bring us back." He confessed to a loyalty to Charles Town, saying, "I like the food."

Penn National is counting on customer loyalty as it hedges it bets in Maryland. The company has an option on land near the proposed site in Cecil County and hopes to invest $125 million to develop it, partnering with a local developer, Schippers said.

The legislation authorizing the referendum has some built-in restrictions to placate gambling opponents in the General Assembly. Weinert said slots operators would pocket the lowest share of proceeds in the country, 33 percent, compared with 48 percent in Delaware, 45 percent in Pennsylvania and 42 percent in West Virginia.

Maryland slots venues would be prohibited from offering free food and drinks as rewards to frequent players, a concession to the restaurant industry that eliminates what is a widespread marketing strategy in other states. Maryland's smoking ban, enacted last year, would not exempt slots parlors, which are going smoke-free elsewhere but allow customers to light up in West Virginia and Pennsylvania. Smoking and gambling have always gone together.

"In trying to contain the industry in Maryland, the legislature could put the state at a disadvantage, which would defeat its purpose," said James Karmel, a professor of financial history at Harford Community College who focuses on the gambling industry.

Perez said, "I'm absolutely certain we will attract top-flight applicants to run these places."

Plans taking shape at some of the Maryland sites do envision full-blown tourist attractions. A slots floor in Perryville, the Cecil location, could rise next to a hotel, theater, tourist center and stores, and the resort hotel at Rocky Gap in Allegany was put on the gambling map as a draw for players. Slots supporters say a well-run gambling operation could usher in restaurants and hotels and attract Inner Harbor tourists a shuttle bus ride away from the Baltimore location.

At Ocean Downs, though, one of two existing racetracks that would be eligible for slot machines, no hotel, conference or convention center, amusement park or live entertainment venue could be built within 10 miles of the track, a concession to leaders in Ocean City who worry that their businesses could suffer from the competition.

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