There are no magic pills, no passports into a bygone era

As the revenue figures continue to come in from across the northeast, the impact of the increased competition is being becoming clearer; its is more damaging than anyone would have believed in 2005.  In January, Atlantic City casinos reported a 13% decline in revenues and Connecticut casinos had a 12% decline. On the opposite side of the coin, Pennsylvania reported a 12 percent increase in table game revenue – the total gaming revenue in Pennsylvania was $247 million in January – gaming revenues were $205 million in Atlantic City.  New York reported a 7.7 percent increase to $145 million; $59.1 million of the $145 million came from Resorts World, the racino in Queens – New York City.  Taken together New York and Pennsylvania had nearly $400 million in gaming revenue, at one time; all of that revenue would have belonged to Atlantic City and Connecticut’s two Indian casinos.

The loss of a significant portion of its revenue to other jurisdictions has reshaped the Atlantic City market – as the just announced sale of Trump Plaza demonstrates.  The Plaza which cost Donald Trump $210 million in 1984, sold in February 2013 for $20 million; that is the lowest price yet in the bargain basement sales in Atlantic City.  It is also less that Borgata, the most profitable casino in town, is going to spend this year “upgrading” its suites; hell, it is less than the Atlantis and Peppermill casinos in Reno spent on their new spas a couple of years ago. I wonder how The Donald is spinning this one?

The second, current-indicator of the degree of change that is taking place in Atlantic City is the pending bankruptcy of Revel.  One casino sells for $20 million, while the one that cost $2.8 billion sinks into the sea; times are tough indeed around the grand old Boardwalk.  No magic pill is going to save Atlantic City, that was supposed to be Revel’s role.  It was the reason Governor Chris Christie helped find the last billion dollars to finish construction.  Revel had been left standing, unfinished for since 2009 due to a lack of financing.  Revel was conceived before the Great Recession; it was before people really began to understand the impact of casinos in Pennsylvania and New York on Atlantic City.  Revel came to too late to party.  However, Governor Christie was sure Revel was just what the city needed; a new, glitzy jewel to lighten up the beaches and serve as beacon to draw in wayward travelers.

The magic-pill, beacon-that-failed, Revel opened in April, 2012.   Never a success, Revel generates less than $10 million dollars a month in gaming revenue; not quite enough to service a $2 or $3 billion debt is my guess.  What do you think?   The magic pill idea still has some supporters, such as those who are banking on sports betting or online gaming to save the day, but they won’t.

 Trump Plaza Hotel and Casino, Atlantic City’s poorest performing property, is being sold to a California development group for just $20 million. The buyer, the Meruelo Group, plans to rename and revitalize Trump Plaza, but said Thursday that it is not yet ready to announce the cost or scope of its redevelopment project. “Suffice to say, we are firmly committed to the property and we are firmly committed to the city. We are excited about making a mark and an investment in the property,” said Xavier Gutierrez, Meruelo’s president and chief investment officer. The sale is expected to close May 31. If the deal goes through, Meruelo will take over a property that finished dead last in 2012 in gambling revenue among Atlantic City’s dozen casinos, grossing just $102.5 million. Trump Plaza’s gambling revenue plunged 25 percent overall for the year, including 46 percent at the table games. The $20 million deal is the cheapest in a series of bargain-basement deals that have been made in Atlantic City; Trump Plaza opened in May 1984 and cost $210 million to build. Donald Wittkowski, Press of Atlantic City, 2-15-13

Senate President Stephen Sweeney warned Thursday that the $2.4 billion Revel megaresort appears “on the verge of bankruptcy and collapse” and he is demanding an explanation from New Jersey’s top casino regulator.  Sweeney outlined his concerns about Revel in a three-page letter to David Rebuck, director of the Division of Gaming Enforcement, the state agency that oversees Atlantic City’s casino industry. In the letter, Sweeney criticizes Rebuck and the division for not keeping a close enough watch on Revel’s deteriorating finances. Sweeney, D-Gloucester, Salem, Cumberland, is demanding that Rebuck brief both him and Assembly Speaker Sheila Oliver, D-Essex, Passaic, on Revel’s “volatile situation.” Donald Wittkowski, Press of Atlantic City, 2-15-13

But on the bright side, Atlantic City is getting the Miss America pageant back; it was started in 1921 as an attempt to extend the resort city’s summer season by one more week.  It won’t extend anything – but it will add a little something.

 Eighty-four years passed before Miss America decided to leave Atlantic City, but it took just six weeks of conversations to get her back. The Miss America Organization has agreed to return the pageant to its birthplace this September for a three-year run broadcast on ABC…“No matter what it costs … I don’t think you can put a price tag on what it means to Atlantic City,” Lt. Gov. Kim Guadagno said at the announcement. “The value to Atlantic City and the state of New Jersey is priceless.”… Miss America got her start in Atlantic City in 1921 when leaders were looking for reason to keep visitors at the shore after Labor Day. Jennifer Bogdan, 2-15-13

By itself, Miss America will not turn things around for Atlantic City.  However, anything in Atlantic City that brings in people and gets positive national public attention helps a little.   What the city needs to happen now is a closing – not the closing of a real estate transaction, like Trump Plaza, but the closing of a couple of casinos.  It is no magic pill, no passport into a bygone era, but it could soften the pain of the survivors.  Reno has lost approximately 20 casinos since Indian gaming began in the Pacific Coast states, the remaining casinos in Reno are better off for the closings.  Atlantic City needs to reduce its product in the same way – that is the only way any of the casinos can survive and make a profit.

To some, it may sound as if I had a grudge against Atlantic City, or that I just like negative news.  Neither is the case.  The case, the truth is the story itself – the biggest story in gaming now and for the foreseeable future is the change that is occurring due to the dramatic expansion that has taken place over the last 20 years.  I am beginning to feel like a war correspondent, albeit an armchair one.  There is a war, there are new battles and causalities all of the time and someone has to report them.   In  the 1980s and 1990s, the Las Vegas Strip was the dominate narrative of the gaming industry.  Beginning in the 1990s and all of the 21st century the expansion of gaming into dozens and dozens of new jurisdictions, domestic and foreign was the narrative.  The narrative has changed again, the final stages of the expansion and its impact is the dominate narrative in 2013, as it was in 2012 and will be in 2014.

1 Response to “There are no magic pills, no passports into a bygone era”

  1. 1 rexdstock1 February 15, 2013 at 7:19 pm

    The Miss America Pageant is dead too. 

    >________________________________ > From: ADAMS – GAMING BUSINESS REVIEW >To: >Sent: Friday, February 15, 2013 3:04 PM >Subject: [New post] There are no magic pills, no passports into a bygone era > > > >Ken Adams posted: “As the revenue figures continue to come in from across the northeast, the impact of the increased competition is being becoming clearer; its is more damaging than anyone would have believed in 2005.  In January, Atlantic City casinos reported a 13% declin” >

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