Atlantic City in ’12: Reveling in comeback or still slumping?
Sunday, January 1, 2012
ATLANTIC CITY, N.J. (AP) — You know that all-in moment, when you push most of your pile of chips out onto the table, and wait to see where the little white ball lands, or which card flips from the deck, to know whether you’re a winner or a big loser? 2012 is looking a lot like that for Atlantic City.
Pummeled by a five-year losing streak brought on by unrelenting competition from casinos in neighboring states and worsened by the sluggish economy, Atlantic City is anxious for the new year to arrive, and with it, the $2.4 billion Revel casino-hotel that should bring new gamblers and new money to the resort.
Hard Rock International expects to break ground for its own new smaller “boutique” casino at the opposite end of the Boardwalk, and this will be the first full year that Gov. Chris Christie’s Atlantic City rescue plan — including state supervision of safety, cleanliness and planning in the casino and shopping zones — will be in place.
Yet pitfalls lurk as well: the ramping up of New York City’s Aqueduct casino, the continuing financial fragility of the casino formerly known as the Atlantic City Hilton, which has only committed to stay in business through Halloween, and the almost inevitable psychological blow of Pennsylvania passing Atlantic City to become the nation’s second-largest gambling resort in terms of revenues, which should happen sometime in 2012.
“It’s a crucial year,” said Tony Rodio, president of the Tropicana Casino and Resort. “I think it’s the beginning of a turnaround; I really do.”
The opening of Revel, set for May 15 but likely to happen sooner than that, will be the best thing that has happened to Atlantic City since the Borgata Hotel Casino & Spa opened in 2003. The resort will likely be Atlantic City’s last huge casino-hotel for quite some time. CEO Kevin DeSanctis said Atlantic City should not look at his project as the savior of the city — though that’s exactly how many are viewing it.
“Revel is not a silver bullet. That’s never what we set out to be, or frankly, what we are now,” he said. “Revel is another tool in the toolbox for Atlantic City to be successful. We’re adding product to a market that desperately needs it. This market needs to re-establish itself as a regional destination. We will give people another reason to give Atlantic City another try.
“I hear people say, ‘I don’t go to Atlantic City; I go to the Borgata,’ “ DeSanctis said. “That’s clearly a problem. When we open, it will help expand that to ‘Borgata and Revel.’ As other folks put a little more capital investment into their properties, that will have a positive effect.”
Christie wants that to happen, too, and he thinks many casinos will be forced to follow Revel’s lead.
“It is an extraordinary facility and it is going to draw tens of thousands of people to Atlantic City just to see it,” the governor said. “And when they do get there, I hope what they’re going to find is a cleaner, a safer Atlantic City. I’m anticipating 2012 to be a comeback year for Atlantic City.
“Now it has been on the decline for years so we are not going to come back entirely in 2012, so let’s set appropriate expectations here,” Christie said. “But I think you should start to see a turnaround.”
Revel will add 5,000 full-time jobs to a market desperate for them, and has put thousands of construction workers to work at a time when little else was being built. The casino-hotel also plans to make an aggressive play for conventions and group meetings, and will have a 5,000-seat concert hall capable of attracting the biggest names in entertainment.
A big question leading up to Revel’s opening has been whether the mega-resort will bring new business to Atlantic City, or merely siphon it off from existing casinos who can ill afford to lose any customers. DeSanctis expects some combination of the two to occur.
Michael Pollock, managing director of Spectrum Gaming Group, an Atlantic City-area casino consulting firm, said it would not be surprising to see one or two casinos have to close in 2012 due to the cutthroat competition in the industry amid a still-weak economy.
ACH, the casino formerly known as the Atlantic City Hilton, appears to be on the shakiest ground. In November, state regulators approved a plan for the casino to stay open with a fresh infusion of capital from its owners, Los Angeles hedge fund Colony Capital LLC, and a cancellation of its debt. But the casino has committed to staying open only through the end of October, and it’s going after the smallest of small fish in a market that prizes whales. It recently got permission to use table game gambling chips worth as little as 25 cents — the first time Atlantic City has let any casino use a chip worth less than $1.
Resorts Casino Hotel also has yet to turn a profit in the first year of new ownership, although it expects to at least break even by the end of 2012.
Atlantic City’s casino revenue peaked in 2006 at $5.2 billion; it has since fallen to $3.6 billion at the end of 2010, mostly due to casinos opening in neighboring Pennsylvania and New York, and the poor economy. Many expect revenues for 2011 to be in the range of $3.2 billion.
Atlantic City desperately needs new money, Pollock says.
“The spigot had been turned off on new capital investment and it’s crucial that that spigot get turned back on again,” he said. “Atlantic City was on its way toward reinventing itself with a new business model” when the bottom fell out of the economy.
The Seminole Indians, through their Hard Rock franchise, say they are ready to do just that. They plan to break ground by July 15 on Atlantic City’s first so-called “boutique casino,” a smaller, less expensive gambling hall authorized under a pilot program to jump-start the stagnant casino market here. The first phase of the project, with 208 hotel rooms. will cost about $465 million, and eventually grow to 850 rooms.
New Jersey’s state government adopted a number of reforms for Atlantic City in 2011 that will have the chance to bear fruit in 2012. It beefed up the Casino Reinvestment Development Authority and put it in charge of revitalizing the resort, including making sure its streets are clean and safe.
But the reform likely to have the most immediate impact is the formation of the Atlantic City Alliance, a private casino-financed nonprofit corporation that will spend $30 million a year for the next five years to promote Atlantic City to the rest of the world. That’s money the casinos were required to pony up to the state’s racetracks in return for keeping slot machines out of racetracks, until Christie intervened and killed the arrangement, much to the delight of the casinos.
“What did Revel do in its first year, and what did we do with the $30 million we suddenly had at our disposal to market Atlantic City?” said Rodio, the Tropicana president. “That’s what we’ll be debating next New Year’s Eve.”
Associated Press writer Beth DeFalco in Trenton contributed to this report.