Aerial views of Atlantic City
Four nights of Beyonce failed to ignite lasting buzz for Revel, the USD2.4 billion Atlantic City casino that flopped after little more than two years. Now the Hard Rock Hotel & Casino is heading to New Jersey’s battered gambling resort with a mix for the masses: country greats, headline comics, 1980s pop stars, even a hypnotist.
The oceanside city is showing signs of a rebound, after a decade-long decline led to the closing of five of 12 casinos, With two new venues set to open in 2018, Governor Phil Murphy is projecting the highest casino-tax revenue in eight years – just as more competition has arrived or is coming in Massachusetts, New York and Rhode Island.
Murphy, a Democrat who took office in January, already is taking steps to end the state takeover of Atlantic City that was pushed by his predecessor, Republican Chris Christie, and opposed by local officials, unions and residents. At the same time, Pennsylvania, which overtook Atlantic City as the second-largest U.S. gambling market in 2012, now allows betting at truck stops and airports and has cleared the way for a second Philadelphia casino.
“The Northeast is just a disaster waiting to happen,” said Alan Woinski, president of Gaming USA, a Paramus, New Jersey-based gambling consulting company. “There will be closings in the next few years.”
During Atlantic City’s 2006 peak, New Jersey collected $417.5 million in taxes on casino revenue, money dedicated to programs for senior citizens, education and the disabled. Last year the total was half that, even with the addition of $37 million from online gambling. For the fiscal year that starts July 1, Murphy is budgeting $238 million, a figure not reached since 2010.
Murphy, a former Goldman Sachs Group Inc. senior director, campaigned on returning the 39,000-resident city to local control. On April 16 he announced plans to remove the law firm overseeing Atlantic City. While the firm, headed by a Christie ally, saved the city tens of millions of dollars with a bond deal, private trash collection and lower fire and police costs, it charged more than $4 million, according to public records obtained by Bloomberg.
“Atlantic City has without question turned a corner, but it still has a ways to go,” Murphy said in Jersey City on April 19. “We’ve now begun to undo this big-footing, the taking over.”
Atlantic City, which has a monopoly on gambling in New Jersey, once relied on casinos for 70 percent of its property taxes. Five casinos closed from 2013 to 2016, and the city’s credit rating was cut to junk by Moody’s Investors Service in 2014 and Standard & Poor’s in 2015.
While the city remains below investment grade, Atlantic City gambling revenue rose for a second-straight year in 2017, helped by the increase in Internet gambling.
Ocean Resort Casino at the former Revel property, bought by Colorado developer Bruce Deifik for $200 million in January, expects a September opening. Hard Rock is scheduled to open June 28 at the former Trump Taj Mahal, once owned by Donald Trump, and has promised more than 200 live shows in its first year.
“It’s not about gaming — it’s about entertainment,” Jim Allen, Hard Rock International’s chief executive, said April 18 when he announced the casino’s opening date at the company’s Times Square restaurant. “We come to Atlantic City with a mindset of growing the market.”
In January, though, Moody’s said U.S. Northeast gambling is saturated and cited “cannibalization” of gaming revenue in New York after two casinos opened there. In another report, S&P said overall competition will become fiercer.
“Commercial casino gaming expansion in the region may provide short-term economic and budgetary gains, but is unlikely to improve state credit quality and may prove a long-term credit risk for states in the region,” S&P analysts Timothy Little and Eden Perry wrote on Jan. 24.
Revel’s grand opening in May 2012 drew then-First Lady Michelle Obama and her daughters to one of four concerts by Beyonce. Spas and fine dining, though, weren’t enough to lure high rollers, and bread-and-butter visitors were turned off by a smoking ban and the lack of buffet dining. It closed in September 2014 having twice declared bankruptcy.
The Hard Rock, with a $375 million renovation of Trump’s onetime boardwalk property, will be the first Atlantic City casino to open in more than six years. The plan calls for 2,200 slot machines and 125 card tables, plus more than 150,000 square feet of event space.
While Revel sought a clientele that would think nothing of dropping big bucks for Beyonce, Hard Rock is going for broader appeal, with comedians Amy Schumer and Jon Lovitz and country stars Florida Georgia Line and Blake Shelton. Other acts include lesser-known comedian-turned-hypnotist DougT and ’80s rockers Rick Springfield and Pat Benatar.
“You may not be bringing in the most coveted acts but you don’t necessarily want that customer anyway – you need the more well-
rounded customer that’s going to gamble, spend money in the bars,” said Woinski, the Gaming USA consultant.
The oversight prescribed by Christie has put the city itself in less risky shape. S&P said it’s “unlikely to face a near-term credit or payment crisis” through October after cutting its budget, settling tax appeals and beginning to collect casino payments in lieu of taxes. S&P still considers the city “very weak” on economy, management, budget, liquidity, debt and pension obligations.
Meanwhile, gamblers have plenty of closer-to-home alternatives to driving 100 kilometers from Philadelphia and 127 miles from New York City.
“You’re never going to get back to the point where Atlantic City has a monopoly on Eastern gambling,” S&P credit analyst David Hitchcock said by telephone. “You’re never going to have that dominant draw from other states.” Elise Young, Bloomberg
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