Is The End Near for Atlantic City?

By Michael Jacobs

RevelIn addressing the Pennsylvania Gaming Control Board in February, Steve Wynn said Philadelphia needs a casino-hotel luxurious enough for gamblers to want to stay there instead of Atlantic City. He drew laughs when he added, “Atlantic City is the enemy.”

As the 35th anniversary of legal casino gambling on the Jersey shore approaches May 26, Atlantic City in many ways is looking defeated:

• Less than a year after becoming the first new hotel-casino in Atlantic City in nine years, Revel filed for Chapter 11 bankruptcy reorganization March 25. Built for $2.4 billion, the resort claims $1.5 billion in debts and $1.1 billion in assets and is now valued at less than $500 million. In a disclosure statement filed before its bankruptcy, Revel projects reaching profitability as late as 2017.

• The Trump Plaza, built in 1984 for $210 million, is being sold to the Meruelo Group for a record-low $20 million, Trump Entertainment Resorts announced in February.

• Pinnacle Entertainment revealed to the Securities and Exchange Commission on March 1 that it has agreed to sell 19 vacant, casino-zoned acres along the boardwalk for $30.6 million to an undisclosed buyer. Pinnacle bought the site for $270 million in 2006, blew up the Sands casino there in 2007 and began trying to sell the property in 2010.

• Day-trippers aren’t flocking to the shore the way they used to. The Press of Atlantic City reported April 3 that 140,000 people arrived on casino buses in February, down 30 percent from February 2012 and about 50 percent from February 2011, continuing a two-year run of monthly year-over-year declines.

• Pennsylvania’s 11 casinos have displaced Atlantic City’s 12 casinos to become the nation’s No. 2 gaming state, behind Nevada. In 2012, Pennsylvania’s casinos had total gaming revenue of $3.16 billion, more than $100 million ahead of New Jersey’s $3.05 billion. Pennsylvania’s revenue was up 4.4 percent from 2011, while New Jersey’s was down 8 percent.

Final 2012 results, released April 3, showed that the Atlantic City casinos’ total profit fell 27.5 percent in 2012, from $497.6 million to $360.7 million, although Revel’s $110.6 million loss accounted for most of the decline. Take away Revel and the decline was 5.3 percent.

Hurricane Sandy played a part in the decline. Atlantic City’s casinos closed Oct. 28 and reopened between Nov. 2 and 5, and false reports that the boardwalk was destroyed outside the casinos damaged business for weeks if not months.

In mid-January, a survey by the Atlantic City Alliance found that 25 percent of respondents thought the storm ruined the boardwalk, which at least was an improvement from 41 percent in November.

The annual report from the New Jersey Division of Gaming Enforcement did find some sunshine amid the clouds. The casinos’ nongaming revenue rose 2.9 percent in 2012 to $1.26 billion, and the total number of occupied hotel rooms rose 2.6 percent, or more than 130,000 rooms, to more than 5.2 million.

And New Jersey is not surrendering in the fight for East Coast gamblers’ money.

In February, Gov. Chris Christie signed legislation that allows online casino gambling for the next 10 years. New Jersey joined Nevada and Delaware in legalizing real-money Internet gaming. The servers have to be based at Atlantic City casinos, providing them with a way to tap players who can’t or won’t travel to the shore.

Anyone who is at least 21 years old, not just New Jersey residents, will be able to gamble from anywhere in the state once a GPS verification system is enacted.

“I am confident that we are offering a responsible yet exciting option that will make Atlantic City more competitive,” Gov. Christie said after signing the bill.

Online gaming has lured the Rational Group, the owner of online poker sites PokerStars and Full Tilt Poker, to Atlantic City. Rational is seeking approval to buy the Atlantic Club.

Michael Frawley, the chief operating officer of the Atlantic Club, told “NJ Today” that Rational would invest $20 million into the facility in the first year and $40 million over five years and would like to buy other sites. He said the money-losing Atlantic Club and its 2,000 jobs might not survive without the sale.

The bigger play for Atlantic City, however, is the state’s challenge to a federal ban on sports betting. The city’s casinos would be the only ones outside Nevada to offer betting on sports, providing a competitive advantage against Pennsylvania.

New Jersey enacted legislation last year to become the second state to offer full wagering on sports and promptly was sued by the four major professional sports leagues and the NCAA. New Jersey lost in U.S. District Court in its arguments that those leagues don’t have legal standing to defend a federal law and that the law itself, the Professional and Amateur Sports Protection Act of 1992, is unconstitutional because it doesn’t treat the states equally.

New Jersey is appealing to the Third U.S. Circuit Court of Appeals, and the case is certain to be appealed to the Supreme Court eventually. That case could wrap up just around the time Philadelphia’s second casino opens sometime in 2015.

In the meantime, Atlantic City at least has the Miss America Pageant back from Las Vegas this September.

Gov. Christie repeatedly has stated his commitment to Atlantic City as the core of a state tourism industry that produced $40 billion in business in 2012. “We can revitalize one of our state’s premier attractions,” he said, “and reintroduce New Jersey and Atlantic City at the forefront of innovation and entertainment.”

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