Atlantic City Finally Got Some Good News

It has been a really cold winter this year and the weather is affecting gaming revenues all over the country.  Pennsylvania, Ohio, Missouri, New York and Indiana all reported lower year-over-year gaming revenues in January and each blamed the cold weather for the decline.  But no one mentioned the weather when reporting Atlantic City’s gaming revenues for January.  The Atlantic City story for January is about gain not loss; gaming revenue did drop, but only 4.6 percent to $195.7 million.  The gain came from online gaming which contributed $9.5 million. Online gaming revenue has increased each month since it started and that is really good news for a good news starved city.

Granted, $195 million is a long way from the $406 million that the Atlantic City casinos generated in January 2006.  But by now everyone knows, the pre-2007 numbers belong in another time. It was the go-go era for the industry; 2006 was part of that magical, romantic “good old days” era of legend.  It was a time when one anticipated gaming revenues to increase almost without end.   However, although we did not know it at the time, 2006 was a tipping point. That was the last year before the Great Recession and before the Great Expansion that makes 2014 a total disconnect from 2006.

Money flowing in from Internet gambling helped Atlantic City’s casinos avoid what would have been a much worse month in January.  The city’s 11 casinos took in $195.7 million. That was down 4.6 percent from a year ago.  But without the $9.5 million that casinos won through their Internet operations, Atlantic City’s casinos would have seen overall revenue fall by 9.2 percent for the month.  January was the second full month that Internet gambling was conducted in New Jersey, after beginning in late November. The casinos won $7.4 million over the Internet in December. January’s $9.5 million represented a 28 percent increase since then. Wayne Parry, Associated Press, 2-12-14

The only valid measure for Atlantic City now is 2013 and by that measure the news from Atlantic City is getting a little bit better.  In addition to the revenue figures, there was another piece of important good news from Atlantic City; Chatham Asset Management was licensed by the state to operate Revel.  By itself, it is not good news that an equity fund is going to manage a casino, but because Chatham is not an operating company, its licensure implies that Revel will be sold. Under a new owner, Revel would be able to start life anew without an oppressive debt and that would be more good news.

Caesars is said to be interested, it is thought that Caesars would use the opportunity to close one of its casinos as it did with the Atlantic Club.  Caesars might not close Revel, but instead close one of its older, less competitive properties switching the operations to Revel.  An article in the Philadelphia Inquirer suggested that Revel might sell for $200 million.  Not much money, but it would enable the bondholders to get out of the casino business.  They could escape without having to invest any more money to prop up the struggling property and they would have a little cash in their pockets besides.  For its part, Caesars would get the newest and most expensive casino in town at one tenth its construction cost.  These are very different times. The possibility that a $2.6 billion casino could sell for $200 million would have been unimaginable in 2006. It would also have been unimaginable that one casino would buy another to close it simply to reduce the competition, but it 2014 both of these things could happen and it would be good news.  The increased revenues from online gaming and a reduction in competition is great news for Atlantic City; it is the best news the city has had in a very long time.

Chatham Asset Management, the largest equity holder in Revel Casino Hotel, was deemed qualified for New Jersey licensure by the Casino Control Commission Wednesday morning. The commission was required to consider Chatham’s qualifications following Revel’s bankruptcy proceeding last year during which the investment company agreed to have its debt converted into equity. Chatham, which owns 28 percent of the equity in Revel, had been operating under a temporary arrangement approved by the commission in May. Wednesday’s proceedings occurred following weeks of speculation over who might purchase Revel, which has been openly pursuing a sale since last year. Lawmakers have confirmed that Hard Rock International and Caesars Entertainment are among the interested parties. Jennifer Bogdan, Press of Atlantic City, 2-12-14

What a great way to start 2014!  Atlantic City boosters should not get too excited; however…there may be yet another shoe to drop.  In preparation for the next gubernatorial election, politicians are lining up to create buzz around their names and in the process a nightmare for Atlantic City.  The president of the New Jersey senate and the mayor of Jersey City have a plan for New Jersey; both want to allow casinos in other New Jersey cities.

Stephen Sweeney, the president of the senate is not in a hurry to add casinos in other cities.  He thinks the city needs more time to prove itself.  But while he waits, Sweeney is willing to discuss other casinos in the state to make up for the lost revenue due to the declining business in Atlantic City.  Steve Fulop, the mayor of Jersey City, thinks his city is the best place in the state for a casino.  He says a casino in Jersey City would draw customers from New York City and would more than make up Atlantic City’s decline.  Both are thinking of running for governor; neither man nor their respective plans would be good news for Atlantic City.  It does not need more competition or a governor who supports increasing competition.

“A casino in Jersey City right outside of Manhattan would be a top performer economically in the country and a huge benefit for Jersey City for job creation, entertainment, and financially,” Fulop said. “It is great that the Senate and Assembly will pursue options outside of Atlantic City.” Jersey City Mayor Steve Fulop has come out in support of a plan floated by Senate President Stephen Sweeney to put casinos in some of the state’s urban areas, including Jersey City.  Fulop and Sweeney are rumored to be eyeing the governor’s mansion in 2017. They recently had a brief brawl over a state measure revamping the city’s pension system that political observers believed was an opening salvo in that race.  But on the casinos issue, they agree. Terrence T. McDonald, The Jersey Journal, 2-7-14

Atlantic City is entitled to the five years it was promised to turn around, state Senate President Stephen Sweeney said Thursday, while defending the officials in charge of the Tourism District. “We made a deal” to give the resort five years to show improvement, said Sweeney… If voters do expand casino gambling beyond Atlantic City, Sweeney suggested, the Meadowlands and Monmouth Park racetrack could be bypassed for cities such as Camden, Jersey City or Newark. He said these cities could benefit from a newly built casino.  Derek Harper, Press of Atlantic City, 2-7-14

Any reasonable observer might ask, “What are they thinking?”  A “thinking politician” may be an oxymoron.  Would any public official be a party to what might a death blow to one of the state’s most important industries and sources of revenue?  Apparently they would in New Jersey.  Just because a couple of politicians are grandstanding and posturing does not mean anything is going to happen.  But it does mean that the idea is starting to gain traction and as Atlantic City slips further, the idea is certain to get more attention.  A few years ago, it would have been impossible for any creditable person in the state of New Jersey to suggest putting casinos in other cities.  But Atlantic City’s slide is changing the way people think about the city.  Atlantic City has become a good news-bad news story and that is good news.  For seven years it has been a bad news only town, but now it finally has some good news, at least for the moment.



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