The historic gambling city of New Jersey, Atlantic City, is in crisis. It seems it’s biggest draw; it’s casinos, have reached a point of saturation. Of the twelve that were open at the start of 2014, it looks likely that only nine will remain by September.
Caesars Entertainment, which has bemoaned the fact that there are too many casinos in New Jersey, will shut the Showboat on August 31st. This is one of four it maintains in the area. Meanwhile the Revel, the newest casino in Atlantic City which filed for bankruptcy protection last week, has openly stated it will close if a buyer cannot be found. The Atlantic Club shut its doors in January.
Mayor Don Guardian, in his first year in office, refuses to accept the closures as wholly negative. He explained how Atalantic City is currently undergoing a challenging but necessary makeover from gambling resort to one with a wider appeal where betting is only one part of the draw. He justified this by highlighting how, though the gambling industry is suffering, the convention business is strengthening, hotel occupancy rates remain strong, and non-gambling revenues are up.
“There is pain as we go through this transition, but it’s critical for Atlantic City to realise we are no longer the monopoly of gaming on the east coast. If you build more and more casinos and don’t increase the amount of people coming to them, you’re sharing that wealth. We’re just going through a very difficult time,” Guardian stated.
It is true that the golden days are behind them. The heights of casino revenue which reached$5.2bn (£3.04bn) in 2006 had declined to $2.86bn (£1.67bn) last year. Competition from further afield such as Pennsylvania, which has now replaced it as the no.2 US casino market after Nevada, and online casinos in New York and Maryland, have saturated the market and made success ever more challenging. A casino analyst at Fitch Ratings, Alex Bumazhny, stated that: “There’s definitely room for consolidation. People recognise Atalantic City won’t disappear, but the declines aren’t over yet.”
In addition Fitch Ratings viewed the closures in a positive light. In a note to investors they said how; “the closure makes financial sense for Caesars and is positive for the oversupplied Atlantic City market.”
“Caesars will most likely recapture most of the Showboat customers at its three other resorts in Atlantic City,” they continued.
At the East Coast Gaming Congress in May this year several Wall Street analysts also backed up these assertions by stating that it’s a market which is in the process of correcting itself, which they claimed is positive for its long term viability.
On the flip side of this viewpoint there have been outcries against the closures. Bob McDevitt, President of Local 54 of the Unite-Here casino workers’ union, referred to the decision by Caesars’ to close a profitable casino as “a criminal act.” Prior to the opening of the Revel, McDevitt warned that adding a twelfth casino was dangerous in terms of over-populating the market.
The tax rate on casinos is 9.25 percent in Atlantic City, this is lower than casinos in Pennsylvania and the electronic slot parlours in New York. For this reason alone it’s an industry that will not die out in its entirety. The immediate future of some casinos however currently remains uncertain.