ATTORNEY AT LARGE: On the comeback trail in Atlantic City
by Lloyd Levenson
February 1, 2011
With the right message and right products, Atlantic City can turn its dire situation around.
Atlantic City has long carried the label of being a one-horse town, where gambling dwarfs the other entertainment options. The numbers have provided credence to that reputation, as gaming net revenue as a percentage of total net revenue historically has hovered around 90 percent. And, obviously, Atlantic City has become a three-legged horse over the last four years, as 30 percent — or $1.5 billion — of its gross gaming revenue has evaporated amid the dual crush of regional competition and the recession.
Atlantic City critics — and they are legion — like to pounce on such numbers to bolster their case that the city is overly reliant on gambling and is indeed caught in a death spiral.
While there is no denying those numbers, I and others who truly know this market submit that they represent a glass-half-full scenario. That is, Atlantic City’s comparative pittance in non-gaming revenue is not a negative but rather an enormous opportunity. Even with the declining revenue, imagine how dramatically the city’s fortunes would change if it could achieve even a 60-40 split in gaming/non-gaming revenue, let alone the roughly 40-60 split operators on the Las Vegas Strip now enjoy.
Well, such a scenario may now be unfolding. Spectrum Gaming Group, a global research and consulting firm based in the Atlantic City market, found that despite the decline in gambling revenue since 2007, visitor spending on hotel rooms is up 21 percent, and food and drink is up 6 percent. Further, the privately held Atlantic City Outlets — The Walk, a massive retail, dining and entertainment center in the middle of the city — is now completing a third phase of expansion due to the high demand.
This plainly demonstrates that Atlantic City can, in fact, cause patrons from Washington to Pittsburgh to Boston to drive past their local gambling-centric casinos and visit the full-service casino resorts at the southern New Jersey shore.
The key to sustaining this trend is twofold: having the right products and the right message.
Atlantic City casino hotels were built for the primary purpose of attracting gamblers, and from 1978 to the mid-1990s it was a business model that served the city and its operators well. But when Delaware, New York and Pennsylvania introduced high-tax/low-amenity casinos of their own it was incumbent on Atlantic City to give patrons different reasons to visit — just as Las Vegas so successfully did amid the introduction of dozens of Indian casinos in Arizona and Southern California.
This need for multifaceted, entertainment-oriented resort hotels in Atlantic City was recently addressed by Jim Allen, CEO of Seminole Gaming and chairman of Hard Rock International:
“The problem with Atlantic City isn’t the market, it’s the product.”
Indeed, a better product attracts Atlantic City rejecters. Just ask Borgata. Retrofitting Atlantic City’s old-school casino hotels for today’s realities won’t be easy, but it can be done. Just ask neighboring Harrah’s.
However, there must be a concomitant commitment to an effective and sustained citywide marketing program. Such efforts have historically been underfunded and piecemeal — and thus largely ineffective. One glaring example was reported earlier this year in “Gaming Industry Observer”: The annual marketing budget of the Atlantic City Convention & Visitors Authority is about $4 million, whereas the advertising and marketing budget for the Las Vegas Convention & Visitors Authority is about $116 million. The newsletter reported that even adjusting for the different sizes of the two markets, Atlantic City spends around $205 in marketing and advertising per hotel room versus Las Vegas’ $779. Non-gaming Orlando spends about $306 per room.
Right now, elected officials from Gov. Chris Christie to Sen. Jim Whelan, representing both parties, are committed to the city’s future and recognize its importance to the entire state. The casino industry is on the same page. Those are hopeful signs that indicate a bright future amid the present gloom.
Lloyd Levenson is CEO and chairman of the Casino Law Department of the Atlantic City/Las Vegas law firm Cooper Levenson (www.cooperlevenson.com). He can be reached at (609) 344-3161.
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