Rocky first year for new Resorts owners in NJ
Sunday, December 4, 2011
ATLANTIC CITY, N.J. (AP) — Four major lawsuits, a dozen union demonstrations that drove business away, more than $16 million in losses, sexy billboards, stage shows and circuses that garnered widespread free publicity, and a broken back.
That’s what Dennis Gomes, co-owner of Resorts Casino Hotel, has to show for his first year running New Jersey’s oldest casino, the first one in America to open outside Nevada.
He gives himself a grade of B-plus.
On Dec. 6, 2010, Gomes, a veteran casino executive and former mob-busting investigator in Las Vegas, and New York real estate investor Morris Bailey bought Resorts, which was within days of having to close because it had run out of money.
The decisions Gomes says he had to make to keep the casino open and save the jobs of nearly 2,000 workers are the ones that are still causing him the most grief a year later.
The pair bought Resorts for $31.5 million, a fraction of the $140 million former owners Colony Capital LLC paid for it in 2001. Colony walked away from the casino in 2009 after losing money for years and failing to find a buyer.
The first thing Gomes did was slash expenses, mostly payroll. Workers were all made to reapply for their jobs. Ultimately, more than 200 were laid off, and nearly 500 others had their pay cut as much as 52 percent.
“I knew we were buying into a hole; what I didn’t know was how deep the hole was,” Gomes said. “We were standing in the bottom of the Grand Canyon. It was a lot worse than I thought it was.
“What I did, I did to save these peoples’ jobs,” he continued. “It was right before Christmas; I didn’t want to put 2,000 people out on the street.”
Yet he knew that in order to have any chance of saving resorts, he had to cut expenses — fast.
Gomes insists that as a new employer, he was legally not bound to pay employees at their existing salaries. But that strategy infuriated the city’s largest casino workers union, Local 54 of the Unite-HERE union, which staged noisy pickets outside the casino most weekends during the summer, and persuaded several convention groups to take their business elsewhere.
Union president Bob McDevitt hammered Resorts and Gomes throughout the summer, at one point invoking slavery and plantation wages, loaded language in this predominantly African-American city. He has since tempered his rhetoric as the union seeks to begin meaningful contract negotiations with Resorts, having already reached pacts with six of the city’s 11 casinos.
McDevitt suspended the picketing as a sign of good faith during negotiations, but insists the pay cuts imposed on Resorts workers will not be permanent.
“Bailey has kept it afloat, and that’s something we all need to acknowledge,” McDevitt said. “That’s a positive thing. But whatever we agree on, there’s got to be a roadmap to get these people back to where they were.”
Last year, HBO’s “Boardwalk Empire,” the TV series based on Prohibition-era Atlantic City’s political and vice rackets, had just taken audiences by storm. Gomes decided to re-brand the casino — whose hotel is an authentic 1920s edifice — to cash in on interest in the show and Atlantic City’s shady past. A key part of the new image was new skimpy, sexy flapper costumes that female beverage servers were made to wear.
Servers had to audition and be photographed in their new outfits; those deemed insufficiently sexy were fired. That decision, along with the pay cuts, spurred three separate lawsuits, one of which is being pushed by celebrity lawyer Gloria Allred, alleging age and sex discrimination. The suits are pending, but, Gomes says, “They have no case; absolutely no case at all.”
Another multimillion-dollar suit involved unpaid heating and cooling bills from the previous owners. Resorts settled that by buying the equipment that the old regime had leased.
Resorts is still losing money, although Gomes says its cash-paying businesses — food and beverage sales, and hotel rooms — is up 40 percent over its level from a year ago.
When he first took it over, Gomes predicted the casino would turn a profit by July of this year. But through the first nine months of this year, it has shown a gross operating loss of nearly $16 million. For the same period last year, under previous ownership, the loss was $13.7 million.
For all of 2010, Resorts lost $18.5 million.
Gomes wears a back brace these days after breaking his back trying to catch a falling marble table top a few months ago. He battles the pain with over-the-counter analgesics, though he acknowledges more heavy-duty medicine would help more.
He says business is stabilizing and he expects Resorts to at least break even next year. Helping the bottom line will be several million dollars in tax credits for promotional spending that it wasn’t previously allowed to take, due to state redevelopment obligations the previous owners never made.
He also says the casino will be smarter about the level of promotional spending and comps it hands out this year. Resorts was aggressive this year in trying to lure new customers and rebuild its business with gimmicks like hotel rooms for $19.20 to capitalize on its Roaring ‘20s theme, $3.99 steak dinners after 11 p.m., and coupons for free casino play. Gomes knew it would be expensive, but saw little alternative to try to win back customers that had fled to other casinos.
“They’re doing a good job,” said David Schwartz, director of the Center For Gaming research at the University of Nevada-Las Vegas. “They’re definitely not afraid to take chances. And tying themselves in to ‘Boardwalk Empire’ shows a level of awareness of what’s going on in the rest of the country that you don’t often find in the gaming industry.”
Yet Schwartz predicts tough sledding for Resorts over the next five years. New York City recently opened a casino at the Aqueduct racetrack, and Revel, Atlantic City’s new mega-resort, is opening in May.
“It’s going to be incredible tough,” he said. “It’s hard to survive in an atmosphere like that.”
Gomes is famous for bizarre schemes to attract free publicity to his casinos. While running Atlantic City’s Tropicana, he pitted a live chicken against customers in games of tic-tac-toe. To promote a casino in Indiana, he hired a Barack Obama look-and-sound-alike to urge gamblers to bring their “change” to the gambling hall. That earned him a rebuke from the White House, and oodles of free publicity.
It was no different at Resorts. Gomes erected a billboard showing a dancer’s naked rear end to promote a stage show, leading to a court battle with the state’s transit agency, which owned the billboard location. He staged an adults-only big top show called “The Naked Circus,” and opened the first gay nightclub in an Atlantic City casino.
Frances Goodman, a senior citizen from Vineland, has been coming to Resorts since it opened in 1978.
“It’s small, and you can walk around easily,” she said. “Of all the places in Atlantic City, this is the only one I come to.”
There’s only one thing about the new Resorts that she’d change.
“The girls — I don’t care for those costumes,”’ she said, wrinkling up her nose.
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