Making the News

Philadelphia Inquirer

Originally Published:Sunday, March 7, 2010
http://www.philly.com/inquirer/business/20100307_pa__casino_hotels_are_a_c__s_new_threat.html

Pa. casino hotels are A.C.'s new threat
The lodging will cost the N.J. mecca its distinction as an overnight destination for gamers in the region.

By Suzette Parmley
Philadelphia Inquirer

Still reeling from the specter of table games inPennsylvania later this year, Atlantic City gambling operators have to deal with a new threat:

Casino hotels in Pennsylvania, too.

Adding hotels to what now are mostly just slots parlors will essentially strip Atlantic City of its status as this region's only overnight gaming destination - and likely will further erode the Shore town's already diminishing revenue.

"Overnight gamers are more valuable as customers, vs. day-trippers," said Harvey Perkins of Spectrum Gaming Group L.L.C., of Linwood, N.J. "At the end of the day, these types of added amenities increase the significant array of challenges faced by the Atlantic City gaming industry in the future."

Already, some New Jersey lawmakers are mobilizing, considering changes to the 1977 law that legalized gambling in hopes of helping Atlantic City even the odds.

Last week, at least four of the nine casinos in Pennsylvania said they were considering or planning to break ground on new or expanded hotels. Five more casinos, including two in Philadelphia and one in Valley Forge, are in the pipeline.

Las Vegas Sands Corp. announced it was resuming work on a 300-room hotel for its $743 million Sands Casino Resort in Bethlehem. Mount Airy Casino Resort in the Poconos is adding at least 200 rooms to its 188-room hotel, and market-leading Parx Casino in Bensalem is considering its own stay-over space.

In January, Gov. Rendell signed off on adding table games such as blackjack, craps, and poker at the state's casinos to help balance this year's budget. Pennsylvania gambling regulators and casinos have said the games could be in place by summer.

Gaming analysts predicted table games would spur Pennsylvania's casino operators to invest in hotels, convention centers, and other attractions.

Unfortunately for Atlantic City, they were right.

"Tables are a game-changer," said Bobby Soper, president of Mohegan Sun at Pocono Downs, near Wilkes-Barre, which is obtaining permits and plans to break ground on a 300-room hotel plus convention center this year.

"It certainly made the decision easier as far as further development," he said.

Table games make up a third of Atlantic City's gambling revenue; the rest comes from slots. The city currently has 17,100 casino hotel rooms and needs substantially more to attract conventions.

In 2008, three hotel towers were added at Harrah's Resort, the Borgata, and Trump Taj Mahal, bringing more than 2,500 hotel rooms to the market in a push to appeal to the more affluent, overnight gambler.

But stingy lending markets, combined with developers' turning away as revenues tumbled, have stalled all casino development in Atlantic City since then - just as Pennsylvania is building up its arsenal with table games and, now, hotels.

That present-day paradox so concerns New Jersey lawmakers that they are considering changing the 1970s-era state law requiring a hotel of at least 500 rooms with any new casino development in Atlantic City.

"There is conversation about it, and it is still very much alive and something I am interested in seeing happen," said State Sen. Jim Whelan (D., Atlantic), who wants a 200-room requirement instead.

Added Whelan, who was mayor of Atlantic City from 1990 to 2001: "You are looking for new attractions, and that involves new investment, and part of the problem is that while we have a more favorable tax structure [than Pennsylvania], the entry fee for a 500-room hotel is cost-prohibitive. A lower room threshold would allow a developer to finance a project."

The rapid pace of the blows to Atlantic City was underscored in a Bankruptcy Court in Camden last week.

"We know that table games are coming," said Mark Juliano, chief executive officer of Trump Entertainment Resorts Inc., owner of the three Trump casinos, which have a combined 22.2 percent of the table-games market. "We believe there will be an impact on table-games business . . . certainly."

What's unwanted competition for Atlantic City is welcome news for Parx regular Marie DiAmbrosio, 32, a bartender from Hamilton, N.J., near Trenton.

She has been going to Atlantic City for years to indulge in roulette and blackjack at the Tropicana.

"Atlantic City has been the only place to go for tables here outside of Connecticut," DiAmbrosio said as she puffed on a cigarette and worked an electronic roulette machine at Parx last week.

Atlantic City casinos could "jack up the prices to rooms at their hotels and the [minimum] limits on tables, and we'd have no choice," she said. "Now, we will."

Already, adjustments are being made. Last month, Resorts on the Boardwalk announced it was bringing back $2 blackjack tables; last summer, Showboat and Bally's added $10 blackjack tables. And at Trump Marina, there are about 10 more $5 and $10 tables each than there were a year ago.

"That tells you they are struggling," DiAmbrosio said.

John Kempf, a gaming and lodging analyst with Barclays Capital in New York, said hotels were important to keeping table-game players at a casino.

"The longer you can keep a customer in a facility through amenities, such as food, entertainment, and hotels, the better chance that a company has of increasing revenues," he said. "Because table play typically has better odds for the customer, increasing the length of play can be considered more important."

So is the convenience of having a place to stay.

When Richard Nagel spent New Year's Eve two years ago at what was then called PhiladelphiaPark Casino & Racetrack, the casino comped him a room at the Courtyard at Marriott a few blocks away.

Though he loved the freebie - a reward for his loyal business - Nagel, 55, of Pennington, N.J., said it was a hassle.

"It's an inconvenience to have to be taxied to a nearby hotel," he said while seated among a dozen electronic blackjack machines at Parx on Tuesday. "Sometimes, when people drink too much, or they outdo themselves and get fatigued, they need a room."

But that depends on a casino's location.

Paul Amsler of Harrisburg said there were two hotels next to the Hollywood Casino in Grantville, Pa., which he frequents, and several more hotels less than 10 miles away in downtown Harrisburg and Hershey.

"I live 10 minutes from the casino and would never spend the night," said the Pennsylvania Department of Revenue employee as he played electronic blackjack there recently.

Amsler, 28, said he spent the night only when he went to Atlantic City to play blackjack, "because that is more of a mini-vacation for a lot of people, like a guys' night out or for couples."

If Parx should add a hotel in Bensalem, DiAmbrosio said, she would consider spending the night if she got a good deal, even though she lives only a half-hour away.

"For someone who's gambling there," she said, "the hotel should offer them a special rate."

 


Contact staff writer Suzette Parmley at 215-854-2594 or [email protected].

 

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