Making the News

New York Times

Originally Published:Thursday, August 16, 2007

“Frankly, nothing will come to Bader Field any time soon,” said Michael Pollock, a casino consultant and publisher of The Gaming Industry Observer, a trade journal. “There are too many issues — zoning, environmental impact, and so forth — that have to be resolved. But otherwise, I think Atlantic City is going to do just fine in the long run if it is allowed to develop into a regional, multifaceted resort. It has certainly taken steps to be that way.”

Casinos Betting on a Future Beyond Gaming

By ROBERT STRAUSS
New York Times

WHEN Jeffrey S. Vasser approaches the dentists and gizmo manufacturers and certified public accountants who might want their next convention in Atlantic City, he is not prone to mention first what many believe is his city’s top attraction.

It’s not gambling. Like many people in the casino industry, Mr. Vasser, executive director of the Atlantic City Convention and Visitors Authority, says that the casinos’ future rests on more than gambling.

“More and more, because of the other amenities we now have here, gaming is certainly not our focus anymore when we sell Atlantic City to meeting people,” Mr. Vasser said. What sells conventions, he said, are “the million square feet of prime retail that has opened here recently and the influx of high-end restaurants.”

That outlook comes with news from the casinos this summer that, while not exceedingly grim, is not good.

Revenue and the operating profit for the second quarter of 2007 for the casino-hotels was down from the same period last year. Competition continues to grow in nearby states, including the addition of slot machines at racetracks in eastern Pennsylvania. And the city’s casinos themselves are in a snit about the prospect of casino operations at Bader Field, the airport complex on the western outskirts of town that closed last year.

Still, casino executives sound upbeat about their niche in the gambling world.

“We’ve just taken a hit from Pennsylvania opening its first operations,” said Larry Mullin, chief executive of the Borgata Hotel Casino & Spa, the highest-revenue casino in town, “but I think people will realize that there, they are getting what I call a 7-Eleven approach to gaming, and here in Atlantic City they will get a full-service version.”

According to the New Jersey Casino Control Commission, gross operating profits for all Atlantic City casinos were down 12.9 percent from the first half of 2006 to the first half of 2007. This was partly a result of the closing of the Sands Hotel and Casino in November. The Pinnacle Corporation bought the casino and plans to replace it with a $1.5 billion hotel and casino.

When not factoring in the Sands, gross operating profits were still down 11.7 percent. But the casinos’ win on table games — Pennsylvania has only slot machines — was up by 3.3 percent, and a healthy 6.7 percent without the Sands figures.

The casinos’ gross gambling revenue in 2006 was $5.2 billion, with $417 million in taxes going to the state and $65 million to the Casino Reinvestment Development Authority.

“There’s no harm in people seeing what is there, but we think they will be down here again in short order,” Mr. Vasser said. “Remember, we’ve seen gaming in Native American establishments and in Delaware and increased promotion in Las Vegas and, soon, no doubt, in New York. We know we have to provide something extra, and the new retail and entertainment options here are just that.”

The possibility of casinos at the Bader Field site has caused some uneasiness, though.

Daniel R. Lee, chairman and chief executive of Pinnacle, said during a stock analysts’ conference call last month that his company would reconsider its proposed casino if the city decided to develop Bader Field for casinos.

Mr. Lee accused state and local officials of courting the Las Vegas casino mogul Steve Wynn, who once owned the Golden Nugget in Atlantic City, about building a casino property at Bader Field. State and local officials deny having done so.

“Frankly, nothing will come to Bader Field any time soon,” said Michael Pollock, a casino consultant and publisher of The Gaming Industry Observer, a trade journal. “There are too many issues — zoning, environmental impact, and so forth — that have to be resolved. But otherwise, I think Atlantic City is going to do just fine in the long run if it is allowed to develop into a regional, multifaceted resort. It has certainly taken steps to be that way.”

Mark Juliano, chief executive of Trump Entertainment, which has 3 of the 11 operating casinos in Atlantic City, said Atlantic City was positioned to do well because it is following a Las Vegas model, trying to increase revenues from nongambling operations.

“We’re doing it on a smaller scale,” he said. Atlantic City can provide “more reasons to come for at least a couple of nights.”

Mr. Vasser said Atlantic City needs to continue building hotels — three casinos have large towers that are either in the building or planning stages, totaling 2,550 rooms — to thrive. The city now has 14,500 hotel rooms. “When the casino legislation passed in 1976, each casino was required to have a hotel with 500 rooms,” he said. “That was sufficient then. It is not sufficient now.”

When the Borgata opened in 2003, it was the first casino to have spent $1 billion on its property. Now, Mr. Mullin said, no casino will open without spending at least $1.5 billion. “It is what is expected now,” he said.

The Borgata, in fact, will market its new tower separately. The $400 million, 800-room hotel, adjacent to the existing casino, will be called the Water Club and include five pools, a spa and retail shops. Mr. Mullin said he assumed the Pinnacle property would have similar amenities.

“Sure, gaming is the biggest draw, but the more every casino updates, the more we will be a full-service resort, attractive not just to slot players, who will soon be able to play anywhere, but all kinds of people,” he said. “This short-term hit is just that. No one should worry about Atlantic City doing well for a very long time.”

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