It’s Not Necessarily A Bad Thing If Another Atlantic City Casino Fails

Posted By Steve Ruddock on August 14, 2018

The Atlantic City casino market is up to nine casinos following the dual openings of Ocean Resort Casino and Hard Rock Atlantic City in late June. The addition of the two properties saw AC casino revenue hit an eight-year high in July.

But some analysts believe the revenue bump is fool’s gold, and the market will be unable to sustain nine casinos.

They might be right.

Twelve was definitely too many casinos for the AC market, and you’d be hard-pressed to find a single analyst who thinks the city can support 10 casinos.

On the flip side, the average occupancy rate in Q3 2017 was 96 percent, so seven is likely too few — unless more rooms are added.

So the question is, is eight or nine casinos the right number? The correct answer is: It really doesn’t matter.

Even if one goes under, or causes an existing casino to shut its doors, both of the new casinos are a positive for Atlantic City.

Here’s why.

Atlantic City is an open, hyper-competitive market

Some gaming markets place hard caps on the number of casinos and/or setup geographical exclusivity zones. That’s not the case in Atlantic City.

AC is an open market, and that comes with some advantages and some disadvantages.

Its biggest advantage, fostering competition, also happens to be its biggest disadvantage. Because it’s a hyper-competitive market, there’s always going to be a lot of turnover.

And when businesses fail, people like to point fingers and cast blame. That said, in an open market, a failed casino can be a sign of a healthy market.

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Saturated markets shouldn’t be off limits

Imagine a town of 10,000 people with seven restaurants. Each restaurant is making money, with a couple just barely scraping by. Every so often a new restaurant opens up in town and either fails or causes one of the existing restaurants to go under.

For all intents and purposes, the market is saturated at seven eateries. That doesn’t mean no new restaurants should open.

When a new restaurant opens the market works itself out, and customers are left with the seven best options.

And there’s always the possibility that a new establishment could expand the market if it’s good enough to attract non-local customers.

More importantly, if everyone viewed the market as saturated and never challenged the existing restaurants, they could become complacent. With no threat from the outside, their market position is relatively safe.

There’s nothing wrong with failed casinos either

This is essentially the same argument some analysts make about the AC casino market. No new casinos should open because the market can’t support them. When a new casino fails or causes an existing casino to close its doors, they are quick to say, “See, I told you so!”

What this doesn’t take into consideration is the impact on the market.

Set aside the construction jobs and the other positive impacts of a casino project for a moment and just focus on the following question: If a poorly managed or rundown casino gives way to a newer, better-run property, isn’t that a good thing?

Like our hypothetical town, isn’t it better for Atlantic City residents and visitors to choose from the seven best options rather than the same seven options?

Companies are investing hundreds of millions of dollars in Atlantic City because they think they can either expand the market or do things better than one of the existing operators.

Whichever comes to pass, that’s a good thing.

If the market is saturated at seven casinos (debatable), let’s make sure it’s always the best seven. And let’s keep new investment capital coming into the city.

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Steve Ruddock

Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.

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