House of cards

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By 1987, less than a decade after the first casino opened in Atlantic City, 12 gaming halls dotted the skyline of the historic resort, signaling the swift rise of an industry that pumped billions of dollars into the state’s economy.But the 25 years since have been far less smooth for the nation’s second-oldest gaming market, with the arrival of surrounding markets ending Atlantic City’s monopoly and leaving gaming revenue well off its 2006 peak of $5.2 billion.
Gaming options in surrounding states first appeared in 1992, when Foxwoods Resort Casino, in Connecticut, introduced table games. The Indian gaming hall was the first of several regional competitors that took gamblers from Atlantic City, but their presence “didn’t turn our fortunes from positive to negative,” said Tony Rodio, CEO of Tropicana Entertainment.
It wasn’t until 2006 when the city’s uninterrupted winning streak was challenged. Rodio said the opening of Pennsylvania’s first racetrack casinos in 2006, coupled with the economic crisis that followed, created a “double whammy” for the industry.
“Obviously, it was a wake-up call,” said Rodio, also president of the Casino Association of New Jersey. “And I think that we’re still dealing with the effects of that.”
Citywide gaming revenue fell for the first time from 2006 to 2007, according the Division of Gaming Enforcement. The slide gave way to a trend that has not been reversed in the five years since, especially as casinos and so-called racinos grew in Pennsylvania, New York and other states.
But the 2000s also saw another major trend that stunted Atlantic City’s growth, said Steven P. Perskie, a former regulator, judge and state lawmaker who authored the 1977 bill that legalized casino gaming in New Jersey. National operators started to merge around mid-decade, creating gaming conglomerates that often had multiple properties in each market.
“In that context, it’s much more difficult for a place like Atlantic City to attract investment capital, because the dynamic is always, ‘Well, I’m already in Atlantic City,’ ” Perskie said. “And most of them are.”
The South Jersey resort has not been without any new investment during the past quarter-century. In May 1997, the $268 million Atlantic City Convention Center opened, giving way to the luxury retail complex known as The Walk that opened six years later.
The state also added its first new casino in more than 15 years in 2003, when Borgata Hotel Casino & Spa opened its doors. While the luxury resort cannibalized some of the city’s weaker properties, Perskie said, it showed the market could reward new investment on the gaming side.
“To a certain extent it broadened the base, and more importantly, it signaled to the world that a new development in Atlantic City … could be a dramatic success,” Perskie said.
The Borgata quickly became the top player in Atlantic City, but the success of Revel, the market’s newest property, is far from certain. The $2.4 billion resort casino opened with great fanfare in April after several years of financial setbacks, but posted a disappointing $35 million loss in its first three months of operation.
Still, Revel Entertainment and stakeholders are hoping to hit their stride through a business model that is far less reliant on gaming. In May, CEO Kevin DeSanctis laid out a plan that has a heavier emphasis on group and leisure customers than other Atlantic City gaming halls.
State officials, meanwhile, have taken steps to revitalize Atlantic City. Reforms signed into law last year ended the casino industry’s yearly subsidies to racetracks and shifted the funds to a five-year, $150 million marketing campaign for the resort’s nongaming amenities.
The reform legislation also significantly deregulated the state’s casino industry, while creating an Atlantic City tourism district to be overseen and developed by the state. Rodio, the Tropicana CEO, said the moves have helped reverse what historically had been “almost an adversarial situation” between the industry and regulators.
“Now, the situation isn’t us against them,” he said. “The regulators look at it as a partnership, that we need to work together for the betterment of the state. That type of cooperation never really existed.”