It’s been roughly a week since two new Atlantic City casinos officially opened for business mere hours apart.
The two new properties, Hard Rock Atlantic City and Ocean Resort Casino, pulled out all the stops, and are convinced they have what it takes to survive in the rough and tumble Atlantic City casino market.
They’ll be fighting history. Atlantic City has chewed up and spit out the likes of Steve Wynn, Donald Trump, and other big-name developers who thought they had the secret recipe to survive on the AC Boardwalk.
Atlantic City casinos have been hit and miss
The Atlantic City casino market is and always has been something of an enigma.
AC was the second US market to legalize casino gambling, but even when it had a monopoly on the East Coast (from 1978-1992), gaming was often in distress in the seaside town.
Unlike Las Vegas, Atlantic City wasn’t built around gaming. Rather, the once popular resort destination was force-fed gaming as a way to bring back its former glory.
It worked, and at the same time, it didn’t.
Casino closures (nine) and sales (12) are far too commonplace in Atlantic City, as are bankruptcies.
Since 2008, Tropicana, Trump Plaza, Trump Taj Mahal, Revel (twice), and Atlantic Club have all found themselves in bankruptcy court.
Another 11 casino projects were never completed — and most have become vacant lots.
Yet through it all, developers continue to flock to Atlantic City. More and more casinos were built or purchased, even though there were scant few success stories.
The casino industry soldiered on. But it wasn’t until the mid-2000’s that the real warning signs began to appear.
The revenue decline begins
In terms of revenue, 2006 was the apex of the Atlantic City casino market, with the city’s casinos generating a record $5.2 billion in revenue. But it was already being stressed from competition in neighboring states.
By 2015, that revenue number had been halved: $5.2 billion fell to just $2.6 billion over that period of time as total gaming revenue declined each and every year.
The AC casino contraction
By 2013, the proverbial chickens had come home to roost. At that time, the city boasted 12 casino properties.
Even in good times, that’s a lot of casinos for a “city” that’s population has hovered right around 40,000 for 30 years.
It’s also a city:
- that can have harsh winters and is more or less a summer town.
- where the nearest major airport is over an hour away in Philadelphia.
- that lacks adequate public transportation. Try finding a cab in AC compared to Las Vegas, never mind a bus.
- that’s seeing competition spring up in neighboring states.
As revenue declined, there was no longer enough money to go around. For the struggling properties, the years of neglect could no longer be covered over with some paint and appropriately colored duct tape.
Not surprisingly, when things went sour, casinos began to close at an alarming rate. Between January 2014 and August 2016, the number of operational casinos in Atlantic City shrunk from 12 to seven.
- The Atlantic Club closed in January 2014
- Revel Casino closed in September 2014
- Showboat closed in September 2014
- Trump Plaza closed in September 2014
- Trump Taj Mahal closed in August 2016
What’s the magic number?
If the goal is to thrive, the proper number of casinos is likely somewhere between three and five.
Unfortunately, if five casinos are thriving in the market, more people are going to want to open casinos. And that’s basically been Atlantic City’s problem from the outset.
There’s no limit on the number of properties (a lesson states such as Massachusetts have learned from Atlantic City), so anyone who thinks they can make a buck, even if that means taking from others, is a casino license away from seeing if they have what it takes.
Seven has been working, and an eighth seemed doable. But there’s some genuine concern that nine casinos are too many.
Two of the shuttered casinos have reopened. The Trump Taj Mahal has been reborn as Hard Rock Atlantic City and Revel as Ocean Resort Casino. And just like that, Atlantic City is back up to nine casinos.
Whether it likes it or not, Atlantic City is going to find out precisely what the right number is. And chances are it will be one or more of the older casinos that are the casualties.