Making the News

Press of Atlantic City

Originally Published:Friday, January 11, 2008

Meanwhile, Spectrum Gaming Group, a casino consulting firm based in Linwood, is predicting that gaming revenue will increase to $4.99 billion for 2008. Although that figure represents modest growth over Atlantic City's 2007 performance, it still falls short of the record set in 2006.

"Within that forecasted increase, there are powerful forces dampening our projections," said Harvey B. Perkins, Spectrum's senior vice president of analysis. "These range from continued competition from Pennsylvania casinos to a tightened smoking ban at Atlantic City casinos to declining consumer confidence of their finances."

Atlantic City gaming annual revenue tumbles in 2007 for first time ever

By Donald Wittkowski
Press of Atlantic City

ATLANTIC CITY - "The Streak" is finally over.

From the opening of the first casino in 1978, Atlantic City's gaming industry could always be counted on to rake in more money from gamblers than it did the year before.

But 2007 proved to be a real downer - the first year ever that casinos suffered a decline in annual revenue. Figures released Thursday by the New Jersey Casino Control Commission showed that revenue fell 10.6 percent in a dismal December and was off 5.7 percent for the entire year.

Altogether, the 11 casinos posted $4.92 billion in revenue last year, compared with the record high of $5.22 billion in 2006. Slot winnings slumped 8.9 percent to $3.46 billion, but table-game revenue was up 3 percent to $1.46 billion.

Casino executives blamed the newly opened gaming parlors in Pennsylvania and, to a lesser degree, New York for stealing slot customers traditionally monopolized by Atlantic City.

"In my opinion, all of 2007 can be summed up in one word: Pennsylvania," said Mark Juliano, chief executive officer of Trump Entertainment Resorts Inc., operator of Donald Trump's three casinos. "The slot parlors there were much more impactful than we had ever thought."

Other factors driving down revenue included the sluggish economy, higher gas prices and a partial casino smoking ban that scared away some customers. Under a new law that took effect in April, smoking is prohibited on 75 percent of casino floors.

"What happened to the industry in 2007 was clearly the result of new competition and a partial ban on smoking in Atlantic City's casinos," said Linda M. Kassekert, chair of the Casino Control Commission.

Kassekert also cited the loss of the Sands Casino Hotel, which shut down in November 2006 to make way for development of a proposed $1.5 billion megaresort by Pinnacle Entertainment Inc.

Atlantic City's recovery plan centers on transforming itself into a more Las Vegas-style overnight tourist destination replete with hotel towers, upscale retail shops, restaurants and nightclubs to complement the gambling.

"I think it's forcing us to evolve, which is a very good thing. This is hastening our evolution into a destination market," Michael Osanloo, Harrah's Entertainment senior vice president of marketing, said of the competitive pressures Atlantic City is facing.

Harrah's Atlantic City, Borgata Hotel Casino & Spa and Trump Taj Mahal Casino Resort will all open new hotel towers this year - adding a total of 2,500 rooms - to draw more overnight guests in place of the daytripping slot players now heading to Pennsylvania and New York.

"I'm very hopeful and excited about Atlantic City's future, given all the new buildings that are going up," Kassekert said. "If the end result is that Atlantic City becomes a full-service resort, so much the better.

"Maybe something like this, with revenue on the decline, will motivate the casinos to focus on a different type of customer. Maybe the emphasis won't be so much on the gaming floor, but in other areas of the casino where they can generate more revenue," she continued.

Borgata, Harrah's and Caesars Atlantic City were the only casinos that bucked the downward trend in 2007. All other casinos had revenue declines ranging from 1.5 percent to 12.1 percent. Borgata, Harrah's and Caesars benefited from double-digit increases in their table-game winnings. The city's growing emphasis on table games includes more attractions aimed at well-heeled Asian gamblers from New York, Philadelphia and Washington, D.C.

"If you're not going to develop a more robust table games business and you're not going after ethnic marketing opportunities, then you're going to die," Osanloo said, referring to Asian customers.

New nongaming attractions also helped to boost results at Borgata and at Harrah's Entertainment sister properties Harrah's and Caesars. Borgata continues to enjoy the benefits of a 2006 expansion project that included three gourmet restaurants by celebrity chefs Wolfgang Puck, Bobby Flay and Michael Mina. Caesars is getting spillover business from The Pier, the posh $200 million retail, dining and entertainment mall directly across the Boardwalk. Harrah's is in the midst of a $550 million expansion that added a Red Door spa and a huge pool complex under a 90-foot-high glass dome.

"Caesars and Harrah's have been the best stories for us," Osanloo said. "It's no coincidence that we put a lot of capital into those properties."

Among 2007's decliners, Tropicana Casino and Resort stumbled the most. Its revenue was down nearly 21 percent in December and 12.1 percent for the year, the only casino that had a double-digit decline in 2007.

Tropicana's owner was denied a new gaming license in December following mass layoffs and complaints of unsanitary conditions and poor customer service. The casino currently is under the control of a state-appointed conservator, who will oversee its sale this year to a new owner.

Meanwhile, Spectrum Gaming Group, a casino consulting firm based in Linwood, is predicting that gaming revenue will increase to $4.99 billion for 2008. Although that figure represents modest growth over Atlantic City's 2007 performance, it still falls short of the record set in 2006.

"Within that forecasted increase, there are powerful forces dampening our projections," said Harvey B. Perkins, Spectrum's senior vice president of analysis. "These range from continued competition from Pennsylvania casinos to a tightened smoking ban at Atlantic City casinos to declining consumer confidence of their finances."

Competition will grow even more intense in 2009 and 2010, when Atlantic City feels the brunt of two brand new slot parlors expected to open only an hour's drive away in Philadelphia and another in Bethlehem, Pa.

Atlantic City plans to counter the extra competition with a $10 billion building boom that includes the three new hotel towers and possibly three or four new gaming resorts opening by 2012.

Revel Entertainment Group has started construction of a $2 billion casino scheduled to open in late 2010. Next in line to open are Pinnacle's casino at the old Sands site in late 2011 or early 2012, and a colossal $5 billion development by gaming giant MGM Mirage Inc. in 2012.

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