Is Atlantic City Sinking?
Posted: September 5, 2014
Updated: June 4, 2017
Atlantic City has nearly 9,000 people newly unemployed as four of twelve casinos close in the space of a year as competition in the region heats up.
Atlantic City's troubles have been brewing for a while now. The last seven years have seen a slide in operating profits across the casino sector the mainstay focus of the city's economic lifeblood, the number of visitors is down, with fewer of them gambling and those that do spending less when at the slots, tables and wheels. There was always going to be a tipping point when the realities of profit margin investment required a dynamic area specific adjustment, in other words, some of the dozen casinos were going to have to go.
The Atlantic Club was first to bite the bullet and shut up shop. The only remaining “locals casino” it quite suddenly closed in January ending an all but uninterrupted gambling history on the site dating back to 1980 when the Golden Nugget cost $140 million to build. Analysts suspected this was the start of a larger economic shift and it says much about how times have changed that when Caesars Entertainment sold the property to TJM Properties, a Florida based development firm, they only got $13.5 million for it.
The Revel closed a few days later, the process having been underway, as with the Showboat, for some time. Only opened in 2012 the Revel boasted two night clubs, thirteen restaurants, two live entertainment venues and the most northern location on the Broadwalk which might explain why the 130,000 square feet of gambling floor didn't make enough of a profit for the owners to keep it open and instead they filed for Chapter 11 bankruptcy. In the new tighter hard competition those on the edge were being shut out.
There are a whole host of reasons for this year's adjustment of circumstance. The rise of online casinos in the US is spreading, the far off allure of the exotic east in the shape of the mega destination known as Macau, the resurgence of Las Vegas after its own fiscally driven slump, these have all played a part. However, it is the competition from surrounding states that has done the real damage to what is, after all, more a regional than international destination, and some analysts think Atlantic City won't be the only victim of harsher competition in the sector.
When Atlantic City had a monopoly on casinos in the region it was, of course, getting one hundred percent of the revenues available, but those days are long gone, and with a slew of states nearby introducing casino gambling it means there are about 25 casinos in the region and of that Atlantic City is only about 45%. Of all the overriding reasons behind these closures, that's it, and worse might be to come as lobbying for a casino complex in northern New Jersey pushes for a decision on what could drain away New York players from surrounding entities.
“It's really a market-share battle,” said Israel Posner and expert on the region's gambling industry, “unless someone creates a better mousetrap, or a mousetrap that's closer to the mice, that's really what it's about.” He is by no means alone in this view, but the over-saturation of the market recent events indicate doesn't seem to be deterring those who seek to open even more casinos in the northeastern United States. The liberalization of gambling laws that has crept across the region is in danger of defeating itself.
The newly unemployed casino workers in Atlantic City would almost certainly agree as they queued at the convention center at which union officials were gamely assisting them apply for unemployment and associated benefits. The 49 year old Irene Seda, former card dealer at the Revel, was amongst them and said “You have to take the ups with the downs, and you have to have faith in god.” which reflects much of the stoicism with which the workers are facing an uncertain future.
Thankfully officials have assured them that the state's unemployment insurance trust fund is in good shape to cover this rise in unemployment numbers, pointing out that unemployment benefits only extend to 26 weeks per worker and that they had $610 million on hand to make payments. Although they did sound a small note of caution saying “No one can accurately estimate at this point what the financial impact of the casino closings in Atlantic City will be on the trust fund.”
Nor indeed can they foresee what the impact might be for the city as a whole. As more states consider liberalizing their versions of US gambling laws, it is unlikely to get better unless the city can reinvent itself and its image as more than merely a hub of gambling. Until then Atlantic City's newly unemployed casino workers can look upon the shiny monuments to a city rejuvenation gamble that didn't pay off that now litter the Broadwalk, their future as uncertain and that of the workers themselves.
Atlantic City's troubles have been brewing for a while now. The last seven years have seen a slide in operating profits across the casino sector the mainstay focus of the city's economic lifeblood, the number of visitors is down, with fewer of them gambling and those that do spending less when at the slots, tables and wheels. There was always going to be a tipping point when the realities of profit margin investment required a dynamic area specific adjustment, in other words, some of the dozen casinos were going to have to go.
The Atlantic Club was first to bite the bullet and shut up shop. The only remaining “locals casino” it quite suddenly closed in January ending an all but uninterrupted gambling history on the site dating back to 1980 when the Golden Nugget cost $140 million to build. Analysts suspected this was the start of a larger economic shift and it says much about how times have changed that when Caesars Entertainment sold the property to TJM Properties, a Florida based development firm, they only got $13.5 million for it.
The Woes Of Atlantic CityThe Showboat went next after 27 years of operation, closing its doors on the 31st of August. A Mardi Gras themed hotel and casino it opened with a 60-lane bowling alley and only half the number of rooms it ended up possessing after the addition of the $90 million hotel tower in 2003. Of the 2,100 employees around 470 were due to be transferred to other Caesars casinos, but that still leaves a sizable proportion out of a job as the city swings from the summer season into autumn and winter. It doesn't help that it wasn't the last to make gambling news by closing.
• Four of twelve casinos close inside a year
• Increase in internet betting in the US a factor
• Region wide competition mainly to blame
The Revel closed a few days later, the process having been underway, as with the Showboat, for some time. Only opened in 2012 the Revel boasted two night clubs, thirteen restaurants, two live entertainment venues and the most northern location on the Broadwalk which might explain why the 130,000 square feet of gambling floor didn't make enough of a profit for the owners to keep it open and instead they filed for Chapter 11 bankruptcy. In the new tighter hard competition those on the edge were being shut out.
Trump Pulls The Plaza out
Opening in 1984 the Trump Plaza had been a partnership between the comb-over collector Trump and Harrah's, with the former building it and the latter managing it. Over time Trump took over the property and attempted to make it a center for high rollers, which alas failed to happen and as it slid into a hopeless financial situation Donald sued to have his name taken off the property. It is due to pass into history and close its doors on the 16th of September leaving another sizable number of employees out of work. Atlantic City has nearly 9,000 new jobless this year, some two thirds of that coming within the space of a few weeks.There are a whole host of reasons for this year's adjustment of circumstance. The rise of online casinos in the US is spreading, the far off allure of the exotic east in the shape of the mega destination known as Macau, the resurgence of Las Vegas after its own fiscally driven slump, these have all played a part. However, it is the competition from surrounding states that has done the real damage to what is, after all, more a regional than international destination, and some analysts think Atlantic City won't be the only victim of harsher competition in the sector.
When Atlantic City had a monopoly on casinos in the region it was, of course, getting one hundred percent of the revenues available, but those days are long gone, and with a slew of states nearby introducing casino gambling it means there are about 25 casinos in the region and of that Atlantic City is only about 45%. Of all the overriding reasons behind these closures, that's it, and worse might be to come as lobbying for a casino complex in northern New Jersey pushes for a decision on what could drain away New York players from surrounding entities.
“It's really a market-share battle,” said Israel Posner and expert on the region's gambling industry, “unless someone creates a better mousetrap, or a mousetrap that's closer to the mice, that's really what it's about.” He is by no means alone in this view, but the over-saturation of the market recent events indicate doesn't seem to be deterring those who seek to open even more casinos in the northeastern United States. The liberalization of gambling laws that has crept across the region is in danger of defeating itself.
More To Join The Party?
The shrinkage that has left so many out of work in Atlantic City does not bode well for those that are seeking to open up gambling in the region even more. In Massachusetts there is barely two months until a ballot referendum is held to repeal the state's casino law, and this wasn't the publicity the supporters of the repeal needed. Opponents have already latched on to the issue and cite it as the best reason not to open any more casinos in a region that doesn't apparently require any more of them. They could well be right.The newly unemployed casino workers in Atlantic City would almost certainly agree as they queued at the convention center at which union officials were gamely assisting them apply for unemployment and associated benefits. The 49 year old Irene Seda, former card dealer at the Revel, was amongst them and said “You have to take the ups with the downs, and you have to have faith in god.” which reflects much of the stoicism with which the workers are facing an uncertain future.
Thankfully officials have assured them that the state's unemployment insurance trust fund is in good shape to cover this rise in unemployment numbers, pointing out that unemployment benefits only extend to 26 weeks per worker and that they had $610 million on hand to make payments. Although they did sound a small note of caution saying “No one can accurately estimate at this point what the financial impact of the casino closings in Atlantic City will be on the trust fund.”
Nor indeed can they foresee what the impact might be for the city as a whole. As more states consider liberalizing their versions of US gambling laws, it is unlikely to get better unless the city can reinvent itself and its image as more than merely a hub of gambling. Until then Atlantic City's newly unemployed casino workers can look upon the shiny monuments to a city rejuvenation gamble that didn't pay off that now litter the Broadwalk, their future as uncertain and that of the workers themselves.
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