Atlantic City closures offer stark warning to the rest of the casino industry By Aaron Stanley November 17, 2014 at 9:15 am I went to Atlantic City last month to learn more about how the city’s leaders were planning to revive the city’s economy and, more importantly, its image. What I discovered something larger: the city’s trials and tribulations offer a harbinger of the future challenges that will hit the casino industry nationwide sooner rather than later. It’s painfully obvious to anyone who has visited Atlantic City this year or followed the ubiquitous news media reports harping on casino closures that the city is in need of a makeover. It’s not just a physical makeover that is required; rather it is a fundamental identity shift from its status as the former East Coast gambling Mecca to a diversified tourist destination that can weather the storm of new competition of all forms. Atlantic City cannot prosper by simply finding new gimmicks to convince people to visit for the weekend, then sending them home with empty pockets, hoping they have smiles on their faces. Today’s reality is that the city is no longer competing as a gambling venue but as an entertainment venue, in the broadest possible sense, against every other attraction in the mid-Atlantic region, including a possible North Jersey casino at the Meadowlands. It’s also competing against the smartphones, tablets, and personal leisure habits of consumers. All of the city’s revitalization efforts, from cleaning up the Boardwalk to bringing in brand name chefs from the Food Channel, are aimed at increasing the number of non-gaming-related reasons people might consider putting down their new iPhone and visit or invest in the city. While gambling revenues are decreasing and the city is clearly bottoming out economically with the job losses associated with the casino closures, the plain and simple fact is that people are still coming to visit Atlantic City. Earlier this year, a reported 100,000 people packed both the Boardwalk and the beach on consecutive nights for concerts by Blake Shelton and Lady Antebellum. The Atlantic City Air Show attracted more than half a million people to the city as well. Overall, despite four casinos closing, an estimated 25 million people will visit Atlantic City in 2014. If and when the casinos in Bethlehem, Pennsylvania, and Dover, Delaware, close down, how many people will continue go out of their way to visit those places? Probably not very many. Herein lies the secret that the rest of the casino world and stakeholders must learn, especially those who are promoting gambling as a viable form of economic development: casinos can no longer be counted on as revenue cows that citizens and tourists will simply flock to. Competition from new regional casinos is one reason for this, as one can get the ‘wow’ factor of entering a casino floor pretty much anywhere now. More importantly is growing competition from other forms of entertainment that casinos face, especially among the younger, tech-savvy demographics that have no shortage of other leisure options. For the “Xbox generation”, using technology to interact socially is the norm. It should be obvious that slot machines, where casinos make the majority of their money, are inherently anti-social. So it should be no surprise that dedicated slot players under 40 are few and far between. Sure, a younger person might play a slot machine as a gimmick if they are passing through a casino for some other reason, but it’s hard to see millennials engaging with these games unless they offer a more social component than just playing the machine next to the machine your friend is playing. Growing competition is by no means a problem unique to Atlantic City. Casinos around the country, particularly in the northeast, are wrestling with this same issue. These other places need to ask themselves the same question that Atlantic City is addressing: how to attract visitors in the event their anchoring casino(s) underperform(s) or fail(s) altogether. If 2014 was the year of Atlantic City casino closures, 2015 will be the year that rationalization in the market spreads to new locales. When that happens, those communities will know for sure whether embracing casinos brought illusory growth or the real thing. This is where promoting non-gambling attractions take on utmost importance, but even destination casino resorts that offer more comprehensive entertainment packages are not out of the woods. After voters last week upheld Massachusetts’s casino law, Steve Wynn will plow ahead with his $1.6 billion Vegas-style casino just north of Boston, against the will of most of the urban dwellers and the Boston Globe, who tried to keep him and other casino operators out. Mr. Wynn is banking that he can turn Everett, Massachusetts, into a place that people will fly halfway across the country to visit. If his casino fails to attract out-of-state visitors, or if Massachusetts gamblers simply aren’t into the resort aspect and instead opt for more convenient locations, we may be looking back at this referendum in a few years and asking why the big casino companies spent $7.5 million fighting off the repeal, when they could have invested in newer products that appealed to the millennial generation, the generation which will ultimately decide the next batch of winners and losers.