[toc]When New Jersey voters go to the polls this November, they’ll not only be deciding who will lead the country for the next four years, they’ll also be tasked with determining the future of casino gaming in the Garden State.
On election day, residents will have the final say on whether or not the state authorizes casinos to be built outside of Atlantic City, thanks to a ballot referendum that would authorize the construction of up to two casinos in North Jersey.
The proposal was passed by the legislature in March by wide margins: 34-6 in the senate and 53-15 in the assembly.
The ease of passage in the legislature is misleading, as this has been a hotly debated issue in New Jersey over the years. One side sees expansion as the only way to bolster New Jersey’s flailing casino industry, while the other side sees it as the death knell for Atlantic City.
I broke down the arguments for and against expansion in this column.
The referendum has always been viewed as an uphill climb, but after tightening in June, polling in July suggests the referendum is in dire straits.
However, a new group has launched a new campaign and website to promote the benefits of expansion, and recent events in Atlantic City could shift some ‘no’ votes into the ‘yes’ column, where they belong in my opinion.
The need to be first and do it right
The biggest argument against North Jersey casinos is the cannibalization they would inflict on Atlantic City’s remaining properties. However, this point of view assumes no other casinos will pop up along New Jersey’s borders.
North Jersey casinos would certainly create a chokepoint that cuts off visitors from New York City and locales further north to Atlantic City. This seems like an inevitability at some point down the road, and the best case scenario is for the casino to be inside New Jersey’s borders, instead of just across them.
Another important factor is what kind of casino North Jersey would attract. To frighten off New York, the casino needs to be owned and operated by a major casino company that will not only build a billion-dollar-plus destination casino, but will maintain it.
If the North Jersey casinos are more of the regional type, it leaves the door open for someone to sell New York on the idea that it can build a casino in or just outside of New York City that would make the ones across the border look second-rate by comparison.
The primary fear has already been realized
After losing four casinos in 2014 (and some 8,000 jobs), there is a real fear that North Jersey casinos would further erode Atlantic City’s casino industry, and cause more closures and job loss.
The problem with this line of thinking is that Atlantic City is experiencing further contraction without any in-state competition.
With the announcement that the Trump Taj Mahal will close in early October, and with Revel’s chances of reopening anytime soon starting to look like a long shot, the most likely scenario is there will is be just seven operational casinos in Atlantic City when New Jersey residents enter the voting booth.
And perhaps even fewer.
How Caesars could tip the vote towards yes
If Caesars decides to further trim its Atlantic City assets, and closes Bally’s, the city would be left with just six casinos. With eight casinos, we’ve already seen that less competition leads to greater revenues for the individual operators, and more importantly, greater profits.
As I’ve said in the past, the chaff needs to be discarded in Atlantic City.
Atlantic City really can’t afford to lose any more hospitality jobs, but as with new casinos being built, it’s inevitable.
The good news is the other casinos will need to hire more staff. And with the loss of two more casinos (Trump Taj Mahal and Bally’s), there would be a need for non-casino hotel rooms and workers — Showboat recently reopened as a hotel — throughout Atlantic City.
Furthermore, the casino construction in North Jersey would create construction jobs and afterwards hospitality and casino jobs. These new casinos could offer struggling Atlantic City residents new opportunities.
How many casinos can AC support?
If the North Jersey casino referendum passes, I think the number is five or six. If it doesn’t pass, the number is seven or eight. As noted above, the remaining casinos in Atlantic City may not be thriving, but they’re on far less shaky ground than they were just a few years ago.
So the question is, if New Jersey can support up to eight casinos, should they all be in Atlantic City (essentially the status quo)? Or is it preferable to have six in Atlantic City and two others to the north where they’re more likely to thrive?
If Atlantic City does drop to six casinos, the conditions would be ideal for North Jersey casinos:
- The market will have right-sized on its own, and the remaining casinos would all be healthy and ready to reinvest.
- Any cannibalization that does occur can be mitigated by New Jersey online gambling websites, which have helped bolster revenue numbers for Atlantic City casinos, and the subsidy from the North Jersey casinos.
Consider for a moment the landscape:
Atlantic City’s Boardwalk would no longer be merely a place to gamble, and the current non-gaming economic development taking place could continue.