The Revel was the most shocking of the casino closures in Atlantic City in 2014 but new details have emerged showing it wasn’t so much closed as drowned by it’s utility company
When the Atlantic City gambling market decided to shrink like a cheap sweater in the wash there were more than a few predictions that it would become far more like Atlantis and sink without trace, but far from it, the town has picked up the pieces as best it can, and is struggling to find a way back to pre-slump levels of employment, income and visitor numbers. Having survived the initial disaster of having so many of it’s casinos close in such rapid succession, Atlantic City is doing it’s best.
Revel’s Death Revealed
• Bad marketing decisions
• Poor construction budgeting
• Suicidal utilities contract
It’s going to be a long, slow, slog but they’ve little choice but to do as they can to mitigate the issues that arose when the fiscal crisis chipped away at the foundations of it’s business, and increased competition from surrounding states liberalizing their own particular brand of US gambling laws gently eroded a significant portion of the city’s slice of gambling US public pie. Where once it was but one of few places in the US you could gamble, now you could just about everywhere.
2014 saw a third of their casinos close up shop, a shrinkage that caused an explosion of unemployment, a dip in city revenues and the distinctly ugly sight of hulking great empty buildings shuttered up on the Broadwalk. The Atlantic Club was first to go, it’s 34 year history coming to an end as it sold off it’s contents to Caesars and it’s tables and slots to the Tropicana. The Showboat was next, finally closing up in August of that year, and whilst it has been bought by Stockton College there are still issues with their project to turn it into a dorm.
The last of the four to close was the Trump Plaza, thirty years after it opened, a insult to a city that had already weathered quite enough, but as you might have guessed by not mentioning it so far, it’s that third closure that we’ll be taking a glance at today, partly because the Revel was heralded as being so much and ended up being so little for such a short space of time, but mostly because it’s demise was probably the first ever case of a building dying of water torture.
Atlantic City Almost Sank Like Atlantis
Whilst it is almost certain that declining visitor numbers, competition increase around it and a distinct falling off of the distance people were willing to travel to gamble had a massive effect on the Revel, there were some troubles it had created all by itself without any help from anyone else. When Chris Christie stood outside and called it a turning point for the city, he might have been a little less gleeful about it had he known all the details behind the scenes.
These are, of course, details we are only getting know because the bankruptcy case they’re currently involved in requires quite a lot of disclosure, and reveals to us all that the Revel was a project that was fatally flawed by some of the most basic decisions. The former owners probably gambling news coverage won’t tar them with having made blunders that would embarrass a school boy, and noting them for perhaps having believed their own best case scenarios whilst ignoring all the others.
We can put aside the construction overruns, they plague just about every large scale building project in a free market economy, as being just one of those things, an unfortunate miscalculation, but not a deal breaker. We could also, perhaps, ignore the fact that like so many new enterprises the entity that was the Revel had taken on far too much debt, and servicing that debt was always going to make profitability tricky in the economic circumstances.
Trouble is when you fail to attract day-trip gamblers in a market of increased localized competition, you’re just begging for disaster, especially when you charge people through the nose for drinks and food once they’re there, people came to spend money on gambling, not an over-priced club sandwich, and there really is no excuse in this day and age to have technology glitches and start-up problems that put your reputation on the back foot as soon as you open.
Drowning Not Waving
Add these together and the Revel was already a struggling shackled beast, $100 million over budget at opening and with the wrong approach to its mainstay customers, however the enormous immovable weight to which was inescapably chained wasn’t something so easily observed despite it being on show for all to see, it was a ubiquity throughout but at a cost no one would have believed. It wasn’t the staff costs, the construction debts or the marketing that killed the Revel. It was the water and power.
ACR Energy Partners were contracted to supply the Revel for the next 20 years with hot and cold water and electricity. This seemed sensible enough I’m sure, until you realize ACR couldn’t actually provide that service and had to build an entirely new power plant to guarantee satisfaction of the casino’s requirements. Not that they could afford to build it themselves and indeed contracted with the Revel to build and operate the plant together.
This meant that the Revel not only had to pay it’s supplier for what it was supplying but also pay off the debts incurred by building the plant to produce the things the supplier was contracted to supply. The cost of the utilities was already quite high, but above and beyond that cost the contract with ACR was costing the Revel $2 million a month, yes, that’s right, a month. In effect due to its own stupid choices the Revel was slowly getting waterboarded by it’s utility company.
This contract still haunts the place with developer Glenn Straub refusing to sign up with ACR and thus being denied all utilities, being restrained by court order from hooking up any other suppliers and being fined five grand a day for his fire detection systems not being powered up, and no one who’d bet on sports in the US would give high odds ACR are going to walk away without their money. The Revel wasn’t killed by economic circumstance, it was drowned by a greedy utility company and the stupidity of it’s own management……..and people wonder why I gamble online at Bet365 instead. Go figure.