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.

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