AC: Moving forward

A few more thoughts about Atlantic City, culled from a few

Advisers to Gov. Chris Christie have called for casino regulatory reform, a public-private Atlantic City marketing initiative and possible state intervention in city government as ways to save New Jersey’s casino industry from competition and its “failed” business model.

On Friday, Christie released 19 transition team reports containing dozens of recommendations for reducing and reforming state government. The detailed proposals include making Atlantic and Pacific avenues in Atlantic City one-way streets, accelerating Atlantic City International Airport expansion and building an Atlantic City Expressway interchange for the airport and a new aviation research facility.

Another idea mentioned, although not endorsed, is to privatize the state lottery and have it work with New Jersey racetracks, which have sought to install video-lottery terminals, which operate like slot machines. The report calls for consolidating New Jersey’s declining racing operations.

In a report critical of Atlantic City government’s handling of finances, transition team members called for an unexplained “state presence” in city government to ensure fiscal efficiency.

via Christie advisers call for casino regulatory reform, marketing of Atlantic City – : Today’s Top Headlines.

I believe that proposals to make Pacific Avenue one-way have been floating around since before World War II. I’ve come across them going back decades. These infrastructure issues don’t address the main problem, which is declining appeal for the city as a whole.

The report boils AC’s decline down to four issues:
1) Increased competition in “Convenience Gaming” in the 5 State mid-Atlantic region.
From 1990 to 2009, Atlantic City has gone from a “monopoly”, to a scattered
competitive marketplace of 26 existing alternatives of VLT/Slots with close to a
doubling of the supply of gaming product in recent years. Atlantic City remains the
only alternative in New Jersey, but has been surrounded by a “picket fence” of
competitive interests in surrounding states; the vast majority of which are
principally stand alone warehouses of slot machines with little non-gaming product
(no hotels and little in the way of night life, retail and food offerings). The newest
generation of increased Atlantic City competition through convenience gaming is
New York’s Aqueduct Racetrack pending 4,500 VLT facility. This needs to be
2) Impact of the “Great Recession” on customer’s spending.
3) Partial Smoking Ban has material revenue impact (est. 10% decline).
4) Perception of Atlantic City as unsafe and unclean arising from a failure to invest in
the areas surrounding the casinos, and local government’s inability to manage this
current reality, in spite of unparalleled tax revenue per capita on a statewide peer


Here’s my take:
1. Competition: It’s not going away, and it was inevitable. National casino expansion really took off circa 1990, so the city’s casinos have had 20 years to prepare. One way to fight it, as this report suggests, is to follow the Las Vegas model and add unique attractions. That’s not going to be perfect–it increases dependence on fly-in and high-spending customers, who are more sensitive to economic fluctuations than moderate-spending day-trippers–but it’s a start. If you doubt that, compare the 20-year trends for Las Vegas and Reno.

2. Recession: Not much you could have done about this.

3. Smoking ban: Even a complete ban would lead to a temporary decline, but Delaware’s history suggests that the numbers will rebound within 3-4 years. If the current anti-smoking trend continues, I wouldn’t be surprised to see most American casinos limiting smoking within ten years.

4. Perception: This is an area where the city’s casinos can make a difference. The city needs a message, and needs to stick with it. I don’t think that people come to Las Vegas because it has a reputation as a particularly clean or safe place; most big cities, in fact, have issues with crime and blight. People come to Las Vegas to have fun. Can you have fun in Atlantic City? I think so, and potential visitors need to find that out.

The best thing for the people trying to restore Atlantic City to do at this point would be to take a long look at what Las Vegas has done right. Once, Las Vegas was primarily a gambling destination, with a heavy reliance on Southern California. In the past ten years, Indian casinos have cut into the Southern California market. But even with the recession, Las Vegas is in a better place now that it was in 2000–which is more than Atlantic City can say at this point. Why?

Las Vegas was able to transition into areas as disparate as business meetings and nightlife: Atlantic City should make investments in these, particularly in the meetings market, since that will boost mid-week occupancy and keep hotels full. A combination of business travelers spending more on f&b, lodging, and entertainment, supplemented by what remains of the day-tripper market, can give a mid-week base for both non-gaming and gaming revenues. Then on the weekend resorts can focus on attracting higher-end destination gamblers and travelers. The convention room rates will provide a base that will let the resorts offer better-class rooms that can make money seven days a week, not just two.

It won’t be easy–there are many negative perceptions to overcome, as well as some serious renovation and construction work–but at least it will give the city a chance.

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