Vol. 5 No. 1, January 2008
RSS Feeds
2008 Forecast: Mostly Sunny
Atlantic City is on the verge of a big change; it’s a change for the better
Mark Twain once said that reports of his death were greatly exaggerated. The same might be said about New Jersey’s gaming industry. It is true that 2007 was the first in our industry’s 29-year history in which casino revenues did not increase. Whether you attribute that to slot machine competition from Pennsylvania and New York, higher gas prices, the partial smoking ban or some combination of all of the above, you may conclude that the prognosis is grim.
But CANJ believes that the future is very bright for Atlantic City. Atlantic City is in the midst of a transformation, from a predominantly day-trip market to an overnight destination resort. The improved offerings include celebrity chef restaurants, high-energy nightlife, upscale retail, first-rate headline entertainment, luxurious spas and a significant addition of first class hotel rooms. Together, these new offerings will attract a different level of customer who stays longer and spends more. This is, of course, a welcome evolution.
And while slot revenues were down in 2007, other significant segments of our business were up—notably table games, which had been in decline for years.
Atlantic City also made strides in increasing its non-gaming revenues, which bodes well in terms of diversifying our businesses. Competition has prompted our New Jersey casino operators to look within to improve our products. This will allow us to compete more effectively, and will ultimately lead to a stronger and more vibrant industry.
Perhaps the most positive news in 2007 was the announced new projects by Revel (which has started construction), Pinnacle (which imploded the Sands to make way for its planned Boardwalk resort) and MGM Mirage (which recently announced plans for its destination resort in the Marina District). This trinity has announced approximately $10 billion of collective capital investment. The result of this incredible investment will be three state-of-the-art, fully integrated destination resorts. These developments underscore the incredible potential in Atlantic City as it continues its evolution.
This potential is also likely to translate into other casino sites (such as Bader Field) that could support more investment worth billions. This cycle, where success begets additional investment and further success, is a positive development and is reminiscent of the incredible winning streak that Las Vegas has enjoyed for the last generation.
These new market entrees will be welcome additions to Atlantic City. They will grow our market by attracting new customers interested in upscale experiences. The new overnight customers comprise a business segment that generates significantly more revenue than day-trip business.
The existing casinos will respond to these new operators by expanding and improving upon each of their current offerings, which will help retain existing customers, attract new customers and, yes, win back customers who might be trying out our competitors in Pennsylvania and New York.
Atlantic City’s bright future is no accident. This is the only gaming destination in the East that enjoys a stable, fair tax rate, which Wall Street favors. That’s led to a concentration of capital investment, all in one location, that no other state on the Eastern seaboard could hope to match. Greater capital investment allows for development of destination-type resorts that attract customers from surrounding areas.
On the other hand, in competitive states such as Pennsylvania and New York, gaming is proliferating under a different model— namely, high taxes and a limited number of licenses. This system spawns one-dimensional slot parlor casinos sprinkled at various locations throughout those states.
It also permits the Atlantic City experience to differentiate itself. Will the competitors from New York and Pennsylvania be able to compete with us on a convenience basis? Yes. Will they be able to compete with us as destination resorts? No.
There are 30 million adults within a tankful of gas who are our potential customers. We’ve only scratched the surface of this populace, which is interested in an upscale, full-destination resort experience. That’s where the growth potential for Atlantic City lies.
Looking back at 2007, CANJ believes the proverbial glass is much more than half full, and soon will be overflowing. All we need to do is to keep doing what we’re doing to make it through the bumps in the road. There is much to look forward to in 2008 and for years to come.
Our prescription? Break out the sunglasses. The future looks awfully bright.
