On May 26th, Resorts, the first casino in Atlantic City, will celebrate its 40th anniversary. As if to celebrate that event, two new casinos are scheduled to open on June 26th. Actually they are not new casinos, rather reincarnations of failed casino-resorts. Hard Rock is replacing the Trump Taj Mahal, which entertained its first gamblers in April, 1990 and closed its doors in October, 2016. Ocean Resorts is going to bring the former Revel back to life. Revel opened in 2012 and closed in September, 2014. Both properties have pasts filled with financial woes and trips to bankruptcy court. The new owners are hopeful, believing this time will be different. This time, Hard Rock and Ocean Resorts have some advantages over their predecessors. Most importantly, neither has the debt the properties previously carried and each of them has had the advantage of hindsight in remodeling and developing a strategy plan.
However, Hard Rock and Ocean Resorts face one problem every casino in Atlantic City has, competition. That was not the case forty years ago pn May 26th,1978 when Resorts Casino-Hotel opened. It was a day filled with hope and optimism with no hint of the changes to come. Resorts was overflowing with people eager to gamble. The future for Atlantic City was clear; with a hundred million people within a two hour drive it would be a thriving gambling center to rival Las Vegas. I remember exactly where I was that day. I was in Reno, Nevada opening the Comstock Hotel Casinos; our future too seemed bright that day, although we did not have nearly as many customers as Resorts, we were very busy. No one in New Jersey or Reno foresaw the expansion of gaming that was ten years away. Although we might have suspected something would happen once gambling started to spread outside of Nevada. When the casinos opened in Atlantic City, other states began to look more serious at gaming as a revenue source. It took ten years for casinos to move into to other states, but once the move began it was unstoppable.
The National Indian Gaming Regulatory Act passed was passed in 1988; and it was followed by authorization of some form of casino gambling in Indiana, Iowa, Mississippi, Louisiana, Colorado and South Dakota. At the same time, each new jurisdiction that added gaming, added competitive pressures to the existing jurisdictions. Forty years ago in Reno, competition meant the casino down the street, not in another state. In Reno, casinos with enough access to cash added rooms and amenities, while the smaller ones slowly withered on the vine. By 1996, Reno casinos knew the enemy was not their neighbor, but casinos located on an Indian reservation or elsewhere. It is strange to think about it now, but the Comstock had regular customers who lived in New York, Chicago, Detroit and every other major city in the country. Not surprisingly those people stopped coming to Reno when they had casinos closer. Reno lost over 20 casinos since 1988 and regardless of the Tesla effect and the new economy, Reno will never again be a casino city; it is a city with casinos.
Atlantic City has suffered approximately the same fate as Reno, but it took longer. Until 2007 it was on a roll and gaming revenues grew year over year, every year. In 2006, Pennsylvania started adding slot machines and that coupled with the Great Recession brought a dramatic change to the Boardwalk. Atlantic City casinos began a downward spiral that would eventually lead to the closing of five casinos by the end of 2014. After those casinos exited the market, the remaining casinos have been slowly recovering with the help of online gaming that now accounts for over 10 percent of the city’s gaming revenue total. Hard Rock and Ocean Resorts might usher in a new era, what some are calling a rebirth. Of course, the two new casinos will not make the dozens of casinos in the surrounding states go away.
The Hard Rock brand provides at least one reason to be optimistic,. The company is promising to grow the market with the power of its brand and with its world-class entertainment experience. Hard Rock says that unless it can attract new customers to the city, it will fail. Without new customers, there will be nine casinos fighting over the same customers that seven have fought over for the last four years. That is the fear of many analysts, and with good reason. No casino in twenty years has been successful in growing the market. Revel’s successor, Ocean Resorts is not even promising to expand the customer base. The developer, Bruce Deifik, is quoted in the Press of Atlantic City saying, “There’s no doubt that Hard Rock and our project will take some business from other houses. That’s just the way the world works. But I believe that over two years, three years, collectively we can raise the level. A rising tide lifts all ships.”
When Revel opened, the developers thought it would grow the market and if not it would command enough market share to survive; that strategy did not work. Finding a better strategy is the challenge for Hard Rock and Ocean Resorts. If the new casinos do attract new customers to Atlantic City, then all ships will rise with the tide. However, if they do not, Atlantic City will see a repeat of 2012 when one casino after another closed. There is hope in Atlantic City for a different outcome, but for that to happen something needs to be different. The competition is going to remain and even increase. Expanding the customer base and attracting new visitors is the only way to change Atlantic City’s future. It is not 1978, but to succeed, Hard Rock is going to need to generate as much buzz and interest among gamblers as Resorts did 40 years ago. It will take all of Hard Rock’s star-power to reset Atlantic City.
