The Showboat is closing, the Revel is bankrupt and the Mayor of Atlantic City is looking to a multi-facetted future.
With some of the best online casinos for US players being set up by those states forward thinking enough to award licences and properly regulate gambling’s future it shouldn’t surprise anyone that the physical world is feeling the pinch.
The famous Broadwalk of Atlantic City looks set to lose two of its casinos this year culling the number of casinos in the gambler’s Mecca from a dozen to just ten. The Revel is already seeking a buyer from bankruptcy court and Caesar’s Entertainment will close the Showboat.
The Showboat, Caesar’s Mardi Gras themed hotel and casino that included a House of Blues, is to shut its doors for the final time on August 31st after a year-on-year quarterly decline in revenues of over 60%.
The 2,100 employees of the Showboat will be assisted in finding work within the Caesar’s Entertainment group according to their CEO Gary Loveman, it remains to be seen if the staff of the Revel will be as fortunate.
Tidal Wave Of Change
With casino revenues across the city as a whole slumping from $5.2 billion to a paltry $2.86 billion last year the Mayor, Don Guardian, is under no illusions. “Although it is sad today,” he said, “it’s part of the transition that Atlantic City needs to have.”
Atlantic City Feels The Squeeze
•Do US gambling laws hinder competition?
•Will Atlantic City recover?
•Is the decline set to continue?
Diversification of attractions to Atlantic City is an important part of the future according to the Mayor who foresees more casinos closing soon. “It’s critical for Atlantic City to realize we are no longer the monopoly of gaming on the East Coast.” He said.
The casino business in Atlantic City faces a shrinking world making overseas gambling more cost effective, online gambling sites in the US now legal and being licensed by three states already and Pennsylvania’s rise to the second largest casino market in the US.
The healthy competition doesn’t stop there with New York and Maryland both about to open up casinos of their own and put even more of a squeeze on Atlantic City. Online betting in the US might be the future but right now it’s still bricks and mortar.
Analysts point out that there has long been a worry that the northeast has become over saturated with casinos and that there was always going to be issues with so many in a contracting market.
Israel Posner, executive director of the Lloyd D. Levenson Institute of Gaming Hospitality and Tourism, said that “We know that the oversupply of gaming product is a region issue, as we’re seeing the effects of the pressure all around Atlantic City.”
The oversupply, now some degree less as 2 of the major casino resorts are closing, is a feature of the economic circumstance of the city that hasn’t escaped notice nor comment.
Fitch Ratings saw some positives emerging from the recent bad gambling news.
“The closure makes financial sense for Caesar’s and is a positive for the oversupplied Atlantic City market.” The company told investors, “Showboat has about $50 million in labor costs and pays about $15 million in property tax.”
Adjusting to normal
They also noted that Casear’s was likely to recapture most of the Showboat’s customers at one of the three other casinos they still own in the city. Something not lost on Wall Street where they believe this is just a correction.
“You are seeing the market right-size, which is a positive.” Said Srihari Rajagopalan, a debt analyst at UBS. Adam Rosenberg a managing director with Goldman Sachs agreed with him that a reduction of capacity was a good thing.
Of course the newly redundant 2,100 staff might see it differently and, Bob McDevitt, president of the Local of the Unite-HERE has been quick to term the closure of a profitable casino to be a “criminal act”.
Mr. McDevitt warned even before the opening of the Revel that the addition of another casino to the 11 that were already there would lead to one or more shutting down. He was entirely correct as events demonstrated. “I’m heartbroken and angry” he said.
Overseas competition and home truthes
Atlantic City isn’t the only traditional gambling hub to be facing issues with increased competition and strict US gambling laws. The almost stratospheric rise of Macau has left many markets reeling as high rollers and the well heeled head east.
But in Atlantic City’s case the market can simply no longer support so many establishments in such a small area and gambling will now have to take on a supporting role in the economic life of the city.
Don Guardian believes that gambling should only be part of what brings people to his city and wants to create a multi-facetted destination that isn’t entirely dependant upon it.
“If you build more and more casinos and don’t increase the amount of people coming to them, you’re sharing that wealth. We’re just going through a difficult time.”
It remains to be seen if Atlantic City can make a go of rationalizing its supply to conform with the new levels of demand, but what’s certain is that there are likely to be more victims of this sea change along the north east coast.