The Eighth Wonder of the World Leaves a Hole in AC

The Trump Taj Mahal Hotel & Casino turned out its lights on October 10th sending the casino industry in Atlantic City into another downward spiral.  In its absence, it is almost certain that casino revenues will fall for the next twelve months.  Gaming revenues in the city have fallen for the last nine years and now it seems likely the trend will continue on into the foreseeable future.  It wasn’t always that way.

Atlantic City was once the “second city” of gaming behind Las Vegas. From 1978 until 2006, casino revenue grew every month on a year-over-year comparison.  At the peak in 2006, casino revenue hit $5.2 billion. But since that high point, revenues have fallen over 50 percent to an estimated $2.4 billion in 2016.  When Trump’s Taj Mahal opened in 1990 it was termed the “eighth wonder of the world.”  Granted those were Donald Trump’s words, but it was special.  The Taj Mahal cost nearly one billion dollars to build and at the time, was the most expensive casino in the world, dwarfing the $630 million Steve Wynn had spent the year before to build the Mirage.

“The scale, Charlie, is what brings the people. The opulence, the size, the everything is really what’s going to make the Taj Mahal the most successful hotel anywhere in the world,” Trump told ABC News’ Charles Gibson in 1990.

It was never the most successful hotel or casino in the world, but until Borgata opened in 2003 it was the highest grossing casino in town.  Unfortunately for both Atlantic City and the Taj Mahal, the bloom left that rose when casinos started to open in other states.  New Jersey gaming revenues are now behind those of Pennsylvania, California and Oklahoma and could fall even farther down the list next year in the wake of the Taj demise.  After losing four casinos in 2014, the loss of one more is only going to exacerbate the problem.

In September the Taj Mahal was pathetic doing only $8 million in revenue, a mere 3.5 percent of the city’s total.  But until June and the labor union strike that led to its closure, the Taj Mahal was generating close to 7 percent of the city’s total gaming revenue.  However if you discount Borgata and look only at the remaining seven casinos, Taj Mahal generated 11 percent of the revenue. Filling that hole in the revenue is not going to be easy even for the rapidly growing wagering online.

In the long run, officials hope that internet gaming will replace all of the revenue lost by the closure. In September internet gaming revenues were $16.2 million, an increase of 35 percent over last year.  If that growth rate holds, online gaming might eventually replace the revenue lost from all five of the closed casinos.  However, continuing that growth rate would require a perfect world and the world is not perfect.  In the first place more competition is coming down the road that will impact Atlantic City.  Currently, there are three casinos under construction in New York, two in Massachusetts and one in Maryland.

But as much of a threat as those six casinos are to Atlantic City, the biggest threat is Pennsylvania that is getting ready to add at least one more option.  Every time Pennsylvania expands its gaming options, Atlantic City takes a hit.   Pressure to add more gaming in Pennsylvania is being driven by two separate issues.  First a state court has determined the slot tax that goes directly to host communities is not legal.  The court has given the state legislature four months to find a legislative solution.  There is speculation that a legislative “fix” might mean more gaming to replace the taxes lost due to the court’s ruling.  The second issue, a potential budget shortfall promises to apply even more pressure to add more gaming options.  The budget for next fiscal year includes $100 million from internet gaming, slot machines at airports and off-track betting parlors.  Both online gaming and more slot machines will hit Atlantic City’s casinos and internet gaming hard.

There is no guarantee that the proposal will make its way into law, but as long as Pennsylvania needs more money to balance its budget, gaming is going to be an ideal candidate.  And as history clearly shows, every time Pennsylvania increases its gaming, Atlantic City casinos pay the price.  Sitting where I am, three thousand miles away, things do not look very promising for Atlantic City.  The downhill slide that began in 2009 appears to be poised to pick up speed again this year or next.  The loss of the Eighth Wonder of the World and more gaming in Pennsylvania won’t kill Atlantic City’s casinos, but combined with six new casinos in the region, it means there are dark days ahead for the famed Boardwalk city and the once glorious casinos.

A Tidal Wave of Slot Machines Hits Illinois

A tidal wave of slot machines called VLTs has hit the towns and casinos of Illinois.  None of the casinos have been sunk yet, but they are taking in water.  In 2009, the then governor, Patrick Quinn signed into law the Illinois Video Gaming Act, legalizing the operation of video gambling machines in “any licensed retail establishment where alcoholic liquor is drawn, poured, mixed, or otherwise served for consumption on the premises,” including bars, truck stops, fraternal and veterans organizations throughout the state.  The governor planned to use the new-found wealth to finance a huge construction budget.  Unfortunately for him the process took too long and he was out of office before the money started to trickle in.  But looking on the bright side, at least he escaped without going to prison, unlike his predecessor Rod Blagojevich.

But back to the VLTs, the first went into operation in September 2012; that first month there were only 61 VLTs in 13 locations. One year later there were 10,210 VLTs in 2,469 locations; the next year there were 18,412 VLTs and 4,516 locations. In 2015 the number of VLTs had increased to 21,509 VLTs and in 2016 the total number of establishments reached 5600 with 24,065 VLTs.  That is pretty dramatic growth by any standard.

However, the rate of expansion appears to be slowing and opposition has increased.  With over 5000 video gaming casinos scattered around the state, people are beginning to take notice and not everyone is pleased.  For four years, most people ignored the spread of the games. But now, people are beginning to take notice; they are asking, “What is going on here and why are there slot machines everywhere?” That new-found awareness has led to a legislative trend; towns and cities are taking steps to limit the number of locations and total number of games.  In the last few months, at least three towns have passed laws to limit the number of locations within their limits.

The Carbondale City Council voted Tuesday to limit the amount of video game machines to 100. There are currently 17 locations with 74 terminals licensed gaming terminals with four other locations with pending applications with the Illinois Gaming board. Associated Press, 9-22-16

Fearing a proliferation of businesses offering video gambling, the Oak Forest City Council approved changes Tuesday to ordinances on what entities can provide the devices. Aldermen had said they feared too many businesses were trying to locate in Oak Forest under the premises of being restaurants when all they were really doing was offering opportunities for people to use video gambling.    Gregory Tejeda, Daily Southtown, 9-14-16

Huntley has imposed a moratorium on allowing new video gambling establishments until Jan. 1 so officials can prepare regulations now that the village has home-rule powers. Video gambling venues have been allowed in town since June 2012. But without home-rule authority the village could not then impose rules more restrictive than what is allowed by state law. Huntley’s latest population count surpassing the 25,000 population limit that automatically grants Illinois municipalities home-rule authority..  Madhu Krishnamurthy, Daily Herald, 9-16-16

There are still many communities in Illinois that do not have VLTs.  It is estimated that 45 percent of the cities and towns that are eligible have not yet authorized any.  But that could change and then there might be as many as 40,000 units in the state.  At the moment, only the communities with video gaming are showing concern. owns without any VLTs are still being tempted by the promise of easy money. Undoubtedly the nature of dialogue is changing, but the spread of VLTs will continue for at least another year, or maybe two. It has been slowed but not stopped.

Even if the spread of VLTs did stop, they have already caused havoc with the state’s casinos. In September 2012, casino revenue was $137.7 million and growing, while in September 2016 it was $114.9 million and shrinking. In that same four year period, VLT revenue went from $91 thousand to $91 million.   Unfortunately, there are no life rafts for the casualties from the VLT tidal waves.  The state makes more money, the businesses with VLTs make more, but the casinos make less, much less.

 Illinois is not alone in the VLT business; Louisiana and South Dakota have a slew between them and efforts are underway in Pennsylvania and Indiana to legalize VLTs.  In four years, Illinois has collected nearly a billion dollars in fees and taxes and that makes a powerful argument for any state in need of more tax revenues.   In Illinois and other states which may follow suit, there is already too much competition from surrounding states,- no one needs any more.  Those VLTs are on a slippery slope, but one that is very attractive for lawmakers looking for money.  After all that is how Illinois got from being a very cautious, conservative state that allowed casinos only on riverboats, limiting the number of licenses and the number of  slot machines each could have to the wild and wooly state it is today with slot machines everywhere.  The governor wanted money to build his pet projects.  He is gone, his projects forgotten and all that is left are 26,000 slot machines changing the nature of Illinois communities and sinking the state’s casinos.

Is there a Communist Takeover Plot in Macau?

The government of Communist China and its surrogate in Macau may be laying the ground work to take the licenses of foreign-owned casinos and give them to Chinese operators.  Of course I have no hard evidence; I am just speculating while trying to read between the lines and looking for conspiracies.  SJM, the company founded by Stanley Ho, Macau’s godfather of gambling, recently announced it was delaying the opening of the Grand Lisboa Palace in Cotai until 2018. SMJ has said it will have room for 700 table games and trusts its request will be treated fairly.  SMJ is spending $3.9 billion on the project and probably hopes in two years it will have a better idea of the regulatory and market conditions when the intent of Communist China is clearer.  In the meantime, SMJ is letting Wynn, Sands and Melco test the waters; each received a much smaller allotment of VIP tables than anticipated in the original plans.  And now they must try to service their debt with the revenue from mass market gamblers, restaurants and hotel rooms.  Missing from the revenue mix are the high rolling VIP gamblers who existed before June 2014; you know the guys who paid the bills.

The construction work will be completed at the end of 2017 and we hope that it can be open in 2018,” So said the Grand Lisboa Palace casino will have room for up to 700 gaming tables. Macau News, 8-11-16

Stanley Ho owned gambling in Macau until the government ended his monopoly in 2002. The first of the new casinos – Las Vegas Sands’ Venetian – opened in 2004, others opened in rapid succession with each taking a bit of Ho’s apple.  Three years ago SNJ had close to a 30 percent market share, now it is less than 20 percent and shrinking.  SMJ has lost market share month after month to the Sands, Melco, MGM and Wynn – the foreigners. Given the circumstances, Ho’s company might be plotting a bit of revenge.  However there could be more to the postponement than revenge, construction delays or marketing strategies.  The Wynn and Sands allotment and the timing of SMJ’s announcement make me wonder if something else is not afoot.  Could it be that the government’s long-term plan includes Chinese ownership of Macau’s resorts?  Stanley Ho is, after all, Chinese. He might have inside information.  The government took over a magazine, changed management and then continued publishing under a new name; and a steel company had its license seized for falsifying records. If a magazine or steel company, why not a casino?

The ousted editors of a liberal Chinese magazine are suing the government in an effort to wrest back control of one of the country’s best-­known political journals. The struggle for the journal’s reins comes at a time when President Xi Jinping’s administration is quashing dissent and revisionist voices. Macau Daily Times, 8-17-16

The Court of Final Appeal last week turned down an appeal from Central Steel to overturn the government’s abolition of its license. The Securities and Futures Commission of Hong Kong discovered that CMR had been falsifying the majority of its annual revenue figures and official documents. Macau Business, 10-3-16

The plan that I think might be unfolding is part of a bait and switch strategy.  The foreign casino developers have been encouraged to invest in Macau. In 2014, they were asked to invest even more to attract a broader audience.  But once the investments have been made and the infrastructure is in place, the foreigners are expendable. I think SMJ is right – the government will treat them fairly and certainly better than Melco, Wynn and Sands have been treated.

Taking control of the foreign-owned casinos would not be as difficult as one might think.  In 2020, the licenses will be up for review.  Reissuing a license will depend on whether the government thinks the operator is doing a good job.  There are no fixed and measureable standards, just “good jobs” and “bad jobs” categories.

 “It is the government that judges whether we are doing a good job, and it will decide how to deal with the licenses during the renewal,” Lui Che-Woo Galaxy Entertainment said. Bloomberg, 9-7-16

So, the casinos are investing huge sums and working very hard to do that good job; two casinos opened in September that cost $7 billion to build.  Regardless of the amount invested by Wynn and Adelson, I suspect they will find that Chinese companies like SMJ are capable of doing a better “good job” than those owned by Americans.

Casino Industry Pioneer Clifford Perlman Dies at 90

The first generation of gaming industry pioneers built a platform on which today’s leaders have been able to erect the magnificent palaces of entertainment that line the Las Vegas Strip.  That first generation brought gambling out of the backrooms of its shady past and into the neon lights of the famous Strip. But sadly, most of those pioneers have gone; the latest to leave was Clifford Perlman of Caesars Palace fame.

Clifford Perlman and his brother created a restaurant empire, Lums.  With money from the chain of restaurants, the Perlman brothers bought Caesars for $60 million in 1969.  At the time, Caesars had 550 rooms and generated $5.8 million a year.  When Perlman left the company in 1982, Caesars Palace had 1750 rooms and generated $82 million a year in revenue.  In his mind that growth came from a willingness to take risk.  He believed in gambling on his ideas just like the high-rolling gamblers on the turn of a card.  He also believed in creative marketing, big name fights, Formula One Racing, world class tennis and Frank Sinatra crooning in the showroom and gambling with the “best of them” on the casino floor.

In the early 1980’s, I was lucky enough to hear Perlman speak at a Laventhol & Horwath Annual Gaming Conference. The conference was a great place to see, hear and learn from industry leaders.  For me in the beginning of my career, it was a very important opportunity to learn my trade.  At the time, Perlman was president and CEO of Caesars. In his speech, he related the innovations to the Las Vegas Strip initiated by Caesars and he took pride in his role in making Caesars a world renowned brand.  Perlman told the story of his famous moving sidewalk that moved people from the busiest corner in Las Vegas into Caesars, but did not give them a return trip.  According to Perlman the moving sidewalk cost a million dollars and caused his board of directors no end of anxiety; that is until they saw the returns on the investment.  Perlman was famous for bringing top ranked boxing to the Strip, his high-end shops and star-studded entertainment; Frank Sinatra performed at Caesars for ten years.

Perlman was proud of all of that, but he was proudest of his high-roller program.  “Imagine walking into Caesars on New Year’s Eve,” he said.  “Every slot machine and table game is occupied, the average bet higher than any other casino on the Strip. Chips are stacked to the ceiling.  But all of those players and their wagers are insignificant in the grand scheme.  In a secluded baccarat room, one player is risking more on each hand than those multitudes on the casino floor.  If he wins, Caesars is a loser for the day and maybe for the month. If he loses Caesars will have its best day ever.”

According to Perlman, that high roller was no accidental visitor.  He was the result of a carefully constructed network of offices around the world charged with bringing the richest gamblers in the world to Caesars.  Perlman described one of his greatest coups, Mohamed Ali.  Representing Caesars, Ali toured Africa hosting parties in each country for the most important and wealthiest citizens.  Ali personally invited them to meet him at Caesars.  Caesars was not the only casino that catered to international high-rollers, but its presence in the major capitals of the world was far more advanced than any of its competitors.

Perlman was forced out of Caesars by the state of New Jersey.  The New Jersey gaming regulators said the Perlman brothers had associated with organized crime figures and therefore were unfit for a casino license.  The brothers sold their stock and left the company.  Perlman moved to MGM for a time.  Strangely, Nevada never saw the problems that ended Perlman’s career in Atlantic City and subsequently Las Vegas.  Nevada was lucky on that score; the casino industry in Las Vegas would not be the same today without his vision and willingness to take a chance on new ideas.  One might even wonder what Atlantic City would be like today if Clifford Perlman had been allowed to work his magic on the Boardwalk as he had on the Strip.


The New Filipino President Is Taking his Country and Gaming in Hand

Rodrigo Duterte was sworn in as president of the Philippines on June 30th and he hit the ground running.  In his first few days, Duterte set up a national complaint line, changed the emergency call number to 911 and delivered a speech: “I am sorry for my country.”  He revealed the names of hundreds of government officials, including 23 mayors of cities and 5 top police officials who he said were involved in illegal drug trading.  The newly minted president called for a reinstatement of the death penalty and encouraged ordinary citizens to kill drug “pushers and addicts.”  It is estimated that as many as 1000 people have been killed by the government and citizens in just two months.  The killings have shocked the world and is virtually unprecedented in a country with a constitutional government.

When the supply of drug lords dwindled, President Duterte turned his attention to public officials singling out 150 he said should be removed from positions of authority.  The statement caused a constitutional crisis and Duterte backed down, although not before threatening to declare martial law.  He apologized to the chief justice of the Supreme Court; for the moment the rule of law has been preserved – except for those “drug lords” executed mob style without a trial or an opportunity to plead their innocence.

President Rodrigo Duterte’s is also after business tycoons who he has termed “oligarchs.”  One of his first targets was Roberto Ongpin.  He is chairman of the electronic gaming firm PhilWeb and a minister of trade under former President Ferdinand Marcos. Ongpin offered to sell his shares of the company, but that was not enough.  The company license was not renewed and it was forced to close.  Duterte assures other business leaders they do not have to worry: “The campaign against oligarchs must not impose fear to the business community.” Unfortunately for those who are not supposed to be concerned, the president is the only person who knows exactly who the oligarchs are.  It’s rather like trying to guess who the flies and tigers are in China, isn’t it?

After unleashing a crackdown on drugs, Philippine President Rodrigo Duterte is turning his guns on a booming online gaming industry, abruptly scrapping one firm’s 13-year monopoly this week and denouncing its billionaire chief as a corrupt oligarch. Neil Jerome Morales/ Farah Master, 8-11-16

Former PhilWeb Corp. Chairman Roberto Ongpin has been singled out by Philippine President Rodrigo Duterte in a campaign to end the influence of big businesses on the government, said he will sell his stake to protect the electronic gambling company and its workers. Duterte on Aug. 3 named Ongpin as among the businessmen he says have undue influence on the government and whom the newly installed head of state wants to “destroy” as he seeks to end online gambling in the country. Macau Daily Times, 8-11-16

In fact, on the surface the “clean up” of the Philippines and campaign against crime and corruption in China have much in common.  Both presidents took office on the promise of cleansing their countries of bad people doing bad things.  Both presidents have had a major impact on gaming.  In Macau, revenues have declined for 26 months since President Xi started his efforts to improve Chinese political culture.

The situation is still unfolding in the Philippines and it is hard to know what else might happen or what the impact on the country’s casinos will be. In the midst of the turmoil, the Philippine Amusement and Gaming Corporation (Pagcor) reversed a previous position and raised casino tax rates. Four casinos have been put on notice that the tax rate increase is effective immediately.  It has a new governing board appointed under Duterte’s direction.  In a rapid series of announcements, Pagcor denied licenses to 124 online gaming sites, announced a merger with the national lottery and then put itself up for sale. The changes can be seen as part of Duterte’s polices as Pagcor answers directly to the president.

Philippine president Rodrigo Duterte is pushing for the merger of state-owned gaming companies, Philippine Amusement and Gaming Corp and lottery operator Philippine Charity Sweepstakes Office.  Asia Gaming Brief, 8-26-16

The Philippines government has directed Philippine Amusement and Gaming Corp. to sell its casinos in order to raise funds to support the proposed P3.4-trillion 2017 national budget. she said. Asia Gaming Brief, 8-29-16

And then as if intended to confuse everyone even further, Duterte changed his mind about online gaming.  In a very personal statement, he said “he would restore online gaming” as long as the operators paid their taxes and stayed away from schools and churches.

“I will restore online provided taxes are correctly collected and they are situated or placed in districts where gambling is allowed, which means to say, not within the church distance or schools,” Mr Duterte told a briefing. Gross Gaming Revenue Asia, 8-25-16

Duterte might appear to be a crackpot, but he has a long and distinguished political career behind him.  He has been consistently against crime, drugs, alcohol, and tobacco. Even if he has not attacked legal gambling in the past, he has traditionally maintained an anti-crime and corruption position. He has also always shown support for minority ethnic groups in the Philippines and to Islam and a willingness to negotiate with communists.  Duterte is trying to move his country into the 21st century and leave its 20th century persona behind. He is also establishing to create a new identity for the Philippines in the Pacific region.

Unlike Macau, there are no major American casino companies invested in the Philippines. As a consequence, the gaming industry and its dance with Duterte does not get much coverage here. However, the Philippines is developing into an important international casino destination.  The Philippines, Cambodia, Korea and Vietnam along with Macau are all competing for the Chinese gamblers.  The Chinese/Asian market is huge, but each jurisdiction has its own unique idiosyncrasies that make operating a casino challenging.  However, the potential rewards are so great that many are willing to take the risks.  At the moment, things in the Philippines are unstable, maybe even life-threatening.  But once they settle down, I think the gaming landscape will be predictable and stable.  It will never be as lucrative as Macau, but in the long run, it will be an easier place to operate than Macau or even Vietnam.


Voters in New Jersey are Facing a Tough Choice

The nation is heading into the final phase of the campaign season.  Everything up to this point has been child’s play compared to what we will see in September and October. Trump and Clinton are lining up their forces, finalizing policies and preparing to debate. In the meantime, they are on tour making speeches and trying to make friends.  The majority of us will not see or hear them speak, except during the televised debates.  What the majority of us will experience is incredible noise and distraction created by hundreds of millions of dollars of advertising.  Prepare yourself; we will get no respite until the votes are counted.

At the same time, the residents of New Jersey will be besieged with advertising on another subject: To casino or not to casino?  It will be a very difficult choice for many voters and the advertising rhetoric is not likely to make the choice any easier. Of course, the amount of money spent on billboards, radio and television in New Jersey will be minuscule compared to presidential spending, but in New Jersey it will still be significant.  It is also likely to be the most hotly contested ballot issue in memory.

The ad war over North Jersey casinos is underway. Groups that support or oppose expanding gambling in the state outside Atlantic City recently launched ad campaigns… “New York and Pennsylvania have stolen billions of our gaming revenue, robbing us of dollars to fund programs like Meals-on-Wheels and the property tax freeze,” a woman says in the ad. “Vote yes and support gaming expansion in Northern New Jersey to protect our seniors.” Christian Hetrick, Press of Atlantic City, 8-15-16

The stakes are high for the citizens of the Garden State and even higher for those with a horse in the race. The proponents believe it is a chance to get back some of the gaming revenue, jobs and taxes lost to other states over the last two decades.  The politicians in favor of more casinos in the state see Atlantic City as a lost cause.  They think a couple of casinos on the border with New York could regain the lost tax revenues. Of course, the operator of the Meadowlands Racetrack sees this as chance to get rich.  The proponents cite jobs, tax revenues and an overall economic boost from two new casinos that will at least partially replace everything that has been lost in the last nine years since casinos started opening in Pennsylvania.  And no one would deny that competition from other states has a painful impact on the economy in Atlantic City and to a lesser degree on the state of New Jersey.

The opposition takes no issue with the claims that jobs and taxes have been lost. But, it makes a completely different argument – more casinos in the state will not create a net gain.  Instead, new casinos would take much of their revenue from the existing casinos in the Boardwalk city and further reduce jobs and tax revenues in the state.  In a best case scenario, additional casinos would be nails in the coffins of two or three casinos in Atlantic City.  In the worst case they would sound the death knell for all of the casinos in Atlantic City.  In that scenario Atlantic City would slide back to the city that hosted the Democrat convention in 1964; it was that dismal and embarrassing city that eventually lead to the casino legislation that created the Atlantic City of the last thirty-eight years.

Millions of dollars will be spent trying to convince the voters to believe those arguments.  The casinos in Atlantic City are staunchly against the plan; clearly more casinos in the state would not be good for the existing ones.  They have picked up some interesting allies including Monmouth Park racetrack in Oceanport, Genting Resorts in Queens and New York trade unions. Monmouth Park wants a larger share of the revenues than Meadowlands is offering.  The New York casino doesn’t want any more competition than is already on its way and the unions have only a conditional objection; they want the right to organize the workers in any new casino.

A major New York union and the operator of a Queens casino are anteing up against a New Jersey referendum to allow gambling outside of Atlantic City. The New York Hotel and Motel Trades Council will begin running a television and digital ad campaign against the referendum. Kenneth Lovett, New York Daily News, 8-15-16

The casinos also have strong support from local government.  Atlantic City is already in dire straits and its problems are directly related to the issues facing the casinos.  If casino revenue declines the city’s taxes decline, when casinos close the city loses tax revenue.  And one more casino, the Taj Mahal has said it will close in October.

A $73 million state loan could come with many conditions for this city, including dissolving its water authority by next month.  The city must first use redirected casino tax funds included in a state recovery bill to pay back the state…But if those funds aren’t enough, the state could collect proceeds from a Bader Field sale; the assets of a dissolved Municipal Utilities Authority; any state aid received by the city; and a portion of casino payments in lieu of taxes. Christian Hetrick, 8-2-16

When a celebrity owner hosted a lavish opening of Trump Taj Mahal Casino Resort in 1990, it made huge news well beyond the city. And with the current owners’ announcement they plan to close, it was a big deal all over again. Martin DeAngelis, 8-4-16

Atlantic City is on a downward spiral that reflects the casino revenue trajectory.  The government is embattled, bankruptcy and a threatened state-takeover are howling at the door.  The government grew its services and expenses with the growth of the city’s casino industry for thirty years, and now it is desperately trying to shrink itself to fit the size of its revenues; it is a vicious cycle that is not likely to be broken soon.  More casinos in the state would exacerbate the problem.

Will there be layoffs at cash-strapped City Hall? “To be determined,” Mayor Don Guardian told workers last week.  Christian Hetrick, 8-10-16

It is easy to understand why the casinos and the city and the casino in Queens oppose additional casinos.  And it is easy to see why Meadowlands would like to become a casino.  But the political proponents of adding more casinos are not easy to understand.  The governor, the assembly speaker and the president of the senate all support it. Especially confusing is Governor Chris Christie. Just a few years ago he was Atlantic City’s champion.  He promised to stand by the city, to make operating a casino less expensive and more profitable.  He helped the stalled Revel get enough money to finish construction and open. He was there during Hurricane Sandy.  In every crisis Christie could be counted as a supporter of the city and its primary industry.  But now Christie has joined those who think the future of casinos in New Jersey does not lie on the Boardwalk, but in the meadows in the shadow of New York City.

A group that backs building casinos in North Jersey has formally entered the campaign, and its supporters include some of the biggest names in state politics… The top two names in that first group are state Senate President Steve Sweeney and Assembly Speaker Vincent Prieto. Other powerful political backers include state Sens. Ray Lesniak and Joseph Kyrillos. Martin DeAngelis, 8-5-16

Gov. Chris Christie says he will cast his ballot this November in favor of expanding casinos to northern New Jersey.  The governor also said he would campaign for the ballot question if asked. Nicholas Huba, 8-16-16

Maybe I should not be surprised; politicians can be a fickle lot who change their minds often.  Christie’s Atlantic City attitude reversal is so extreme it makes one wonder if it is related to his failed presidential bid.  Would he be in favor of expanding gaming outside of Atlantic City if he had gotten the presidential nomination or been chosen as Trump’s running mate?  We will never know, but we do know he is putting as much effort into undercutting the casino industry in Atlantic City as he once did to protect it

In the next couple of months, the issue will be debated at length and with much heat; lots of money will be spent by both sides.  At the moment, in the language of the bookies, it is a “pick’em.”  Even with the governor and the leaders of both houses coming out in favor of expansion, the measure is not guaranteed to succeed. In fact, polls show the measure down by a few points.

In the national election, people have become very, very polarized.  Republicans and Democrats alike are declaring that this is a do-or-die time for the nation; neither side has an unblemished candidate and that allows each to predict a national disaster if their opponent is elected.  I am not certain that I agree, but I do think this is a do-or-die election for the casino industry in Atlantic City.  If the voters authorize two more casinos in the state, Atlantic City will continue its long decline and in time become a tiny, unimportant remnant of its former self.  There are approximately eleven more casinos entering the northeastern market, all of which will impact Atlantic City.  But none will do more damage than a casino at the Meadowlands.  Some voters in New Jersey will be faced with a tough choice in November.  But for those with a vested interest in Atlantic City and its casinos, voting “No” should be an easy decision to make.


Steve Says He and His Palace Are Ready

At what seemed like the last moment, Wynn Palace finally received its table game allotment.  It was given permission for 100 new-to-market tables for its August 22nd opening, less than expected, but Wynn is ready to open.  The tables are designated mass market, not the VIP tables that most expected and there is a significant difference. Mass market tables historically earn less than half of VIP tables.  It is less than the 400 games the property was designed to operate, but, Wynn has a backup plan. It will move 250 of underperforming tables from Wynn Macau.

Observers are taking the allotment as a reprimand as for two years the governments of both Macau and China have been sending clear signals – they want destination tourist resorts, not gambling halls.  Wynn does not agree and thinks the allotment is adequate.  However, there are others who see a coded message in the allotment. Wynn has not pleased the powers that be in their eyes.

When making the announcement, the Secretary for Economy and Finance, Lionel Leong Vai Tac said, “We consider different factors when granting new-to-market gaming tables.  This includes whether the project is helpful for the development of Macau into a World Centre of Tourism and Leisure, whether the company supports local SMEs, as well as its input to developing non-gaming elements.”  Wynn apparently fell short by those measurements as his competitors Galaxy and Melco were awarded 150 more tables.  In the logic of those who see the allotment as a reprimand, Galaxy and Melco built better tourist attracting resorts and do more business with local companies than Wynn.

Wynn Palace will be authorized to operate 100 tables when it debuts Aug. 22 in the world’s largest casino hub, with 50 more to be allocated in the following two years, Macau’s Secretary for Economy and Finance Lionel Leong said. The government stipulated all the tables will be for mass-market players. The resort also received approvals for 1,145 slot machines. Daniela Wei, Bloomberg, 8-12-16

While Wynn may not be upset by the allotment, others are clearly disturbed. Investors and analysts are wondering how Wynn can get a fair return on $4 billion with 100 mass market table games and 1100 slot machinesBut by transferring tables from Wynn Macau, Wynn will have a better hand than the one the government dealt to him.  In fact, he apparently thinks by moving tables around he will have better utilization and be more efficient than Wynn Macau is currently.

Union Gaming has downgraded the stock for Wynn Macau to Hold with analyst Grant Govertsen saying that, while he thought it possible for Wynn Macau to achieve the firm’s estimates over the next two years, “it does raise concerns on how an operator can ultimately get to where they need to be on a longer-term basis with only 150 tables on a $4bn+ investment… While we do think it is possible that the company could apply for more tables post-2018, we are more comfortable being on the sidelines for the time being and until we get more clarity on how future table allocations will be dealt with (for all operators).” Asia Gaming Brief, 8-12-16

Regardless of the concerns of the observers, this is Steve Wynn we are talking about.  Every time Wynn opens a new property the pundits predict his demise.  The doubting started with the Golden Nugget in Atlantic City, but the Mirage really upped the game of doubt as all of the analysts agreed it was simply impossible to generate the million dollars a day that was necessary to service the debt. Of course it was possible.  In a way, the opening Wynn Palace is like the opening of the Mirage.

 “A casino is a passive place,” Wynn stated. “Its value as a revenue source depends solely on how many people come through it and what their average per person spend is. What is dynamic in my business is the non-casino stuff: that is what brings people from afar.”  Wynn Palace – which Mr. Wynn dubbed as “arguably the most beautiful hotel in the world” – would be themed around flowers, he said. The property features several large-scale floral installations to be changed on a regular basis. “People who come to Macau, they come frequently. So the building has self-change built into it,” Mr. Wynn explained.  Gross Gaming Revenue Asia, 8-17-16

While to others, a billion dollars in debt is impossible to service in today’s market and especially with the number of games allotted, Wynn is confident as usual.  He is confident and proud to be opening a resort that will once again redefine casino resorts in Macau and worldwide. He shared his strategy for dealing with opening in uncertain times with the media:

“I say don’t overreact, cool your jets. Focus on things that you can control: your business, your employees’ welfare, your guests and the quality of the product that you dish up,” he said. “Do that, keep your chin down, pay attention to business and the sun will come up tomorrow. That’s the way I figure it.” South China Post, 8-17-16

Wynn certainly speaks from experience. He has faced challenging times before.  He has faced a sea of doubters and he has made extremely high-value, high-risk wagers many times before.  It has been 36 years since the Golden Nugget opened in Atlantic City and in all of that time Steve Wynn has yet to fail. So if you are considering a wager on Wynn Palace, I would recommend putting your money on Steve.  Wynn Palace could fail, but it would be a first for Steve Wynn in over 40 years in the business.



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