Atlantic City Casinos See Revenue Soar in July: That was the headline from the Press of Atlantic City on August 15th. It screamed out a phoenix-like rise of Atlantic City from the depths of decline that began a decade ago. According to the Press, the nine casinos operating in Atlantic City took in $299.8 million in July, an increase of 12.8 percent over July 2017. The increase was not unexpected due to some important developments. Most obvious were the two new casinos that opened in June, Hard Rock and Ocean Resort. Combined they produced $49.7 million in gross casino win. The other seven casinos had a win of $250.1 million, $17.7 million less than last year. Besides the two new casinos, sports betting contributed $3.8 million to the total, including $2.1 million from Meadowlands and Monmouth Park race tracks. Finally, online gaming was up a whopping 25.8 percent to $25.8 million. Clearly, Atlantic City is undergoing major changes with the additional casinos, sports betting and the still rapidly growing internet gambling. It is too soon to determine if those factors are enough to create a reborn Atlantic City.
Other changes are taking place in Atlantic City that give rise to optimism. Stockton University is building a new campus and is due to open in September, bringing 1000 students, faculty and staff into the heart of the casino district. In addition, the university has just authorized the purchase of the closed Atlantic Club, formerly the Golden Nugget of Steve Wynn fame, which it intends to tear down. The land is scheduled to be used for additional student services.
The university is not the only one investing in Atlantic City. Bart Blatstein is one of several developers who have shown interest in the town lately. Blatstein bought the closed Showboat and opened the hotel portion. He says he may open the casino in time if conditions are right. In 2014, Blatstein bought the Pier Shops at Caesars for $2.7 million. He intends to create an entertainment district in that space. Other developers are building non-casino properties. Both owner-occupied and rental properties, with retail and other amenities are in the works. An article in the New York Post says a younger group of buyers is moving to Atlantic City to be part of the excitement being created. It may be a bit much to call anything that has happened thus far a rebirth. However, Mayor Frank Gilliam, Hard Rock Corporation, Bart Blatstein and Bruce Deifik have all expressed great confidence in a new Atlantic City. Deifik’s company paid $200 million for the closed Revel Casino, which it remodeled and opened on June 24th as Ocean Resorts.
Atlantic City has never had it easy. Even in the best of days in the 1980s and 90s, there were challenges. The city is semi-isolated and has only 38,000 residents. Since its inception, Atlantic City has been dependent on tourism. The city began as a resort in 1853 when developers built the first commercial hotel, the Belloe House, to attract vacationers from Philadelphia. According to Wikipedia, “…by 1874, a half a million railroad passengers a year were coming to Atlantic City.” In 1978, after years of decline, Atlantic City underwent a metamorphosis and became a casino resort. Voters chose casinos as a way to rescue the city from what appeared to be a slow, but certain death. The strategy worked in the short-term. As long as the casinos in Atlantic City had no competition, revenues grew year after year, reaching a peak of over $5 billion in 2006. But in 2007, casinos in Pennsylvania started to eat into Atlantic City’s cash flow.
No assessment of Atlantic City’s future is complete without a full understanding of the impact of the casinos in Pennsylvania. In July 2006, the casinos in Atlantic City reported $480.5 million in revenue. It was down 4.8 percent from July 2005, but the casinos had been closed for three days in July 2006. In a budget battle with the legislature, New Jersey Governor Jon Corzine forced the casinos to close. If the casinos had remained open for those three days, the revenue might have reached $530 million. As encouraging as the July win might be, it is still a very long way from the days before the Pennsylvania casinos opened. Before 2006, over 50 percent of Atlantic City’s customers came from Pennsylvania; from 2007 on, those players have found a place to gamble much closer to home. Since 2006, casinos in Pennsylvania have generated $29.1 billion in revenue. In addition to Pennsylvania, other states have added casinos, further eroding Atlantic City’s player base.
It is the repeat of a pattern for Atlantic City. All of its resorts built in the last hundred and fifty years have depended on people traveling to the Boardwalk to play. But each time the city’s resorts became successful, conditions changed. The first was a dramatic change in the summer vacation culture; people stopped taking the family to a resort for a couple of weeks or months and started to take three to five day vacations. Next came the introduction of cheap air travel allowing people to visit other beaches in the country just as quickly and often more cheaply. Finally, in this last round, the gambling monopoly disappeared when gambling became a national commodity. No one needs to go to Atlantic City to gamble; there are closer options for anyone living on the Eastern Sea Board. Atlantic City has two temporary advantages, online gambling and legal sports betting. The advantages will not last long, Pennsylvania is adding both online gaming and sports betting, as are other states.
With all of its challenges, Atlantic City does have a place in the overall gaming landscape. However, its place is much smaller than it once was. The city can support some casinos, the question is how many? A couple of days before the July results were released, Wayne Schaffel, a former Atlantic City executive, said those numbers would be critical. He said if the casino revenue was not up at least 15 percent, some of the casinos would fail. The win did not reach that 15 percent threshold. I think it is fair to say at this point, we are not watching a Phoenix rising. We are however, witnessing a dramatic change in the city’s character. Stockton University and other developments not intended to attract tourists or add to the casino experience hint at the possibility of a truly new Atlantic City. Now, if only Tesla would build a mega-factory, a sustainable diversification might happen. I am not counting the phoenix out yet.
