By JOSEPH A. CORBO JR.
President of the CANJ
Atlantic City, NJ, December 2007 — Mark Twain once said that reports of his death were greatly exaggerated. The same might be said about New Jersey’s gaming industry. Reports of our ill health are indeed greatly exaggerated.
Of course, it is true that 2007 was the first in our industry’s 29-year history in which casino revenues did not increase year over year. Whether you attribute that to slot machine competition from Pennsylvania and New York, higher gas prices or the partial smoking ban, or some combination of all of the above, you may conclude that the prognosis is dim.
However, the Casino Association of New Jersey (CANJ) believes that the future is very bright for Atlantic City. Atlantic City is in the midst of a transformation from a predominantly day-trip market to an overnight destination resort. The improved offerings include celebrity chef restaurants, high-energy nightlife, upscale retail, first-rate headline entertainment, luxurious spas, and a significant addition of first class hotel rooms. Together, these new offerings have set Atlantic City on the path to becoming a full-fledged destination resort, attracting a different level of customer who stays longer and spends more. This is, of course, a welcome evolution.
And while slot revenues were down in 2007, other significant segments of our business were up, notably table games, which had been in decline for years. Also, Atlantic City made strides in increasing its non-gaming revenues, which bodes well in terms of diversifying our businesses. Competition has prompted our New Jersey casino operators to look within to improve our products. This will allow us to compete more effectively, and will ultimately lead to a stronger and more vibrant industry.
Perhaps the most positive news in 2007 was the announced new projects. Revel (which has started construction), Pinnacle (which imploded the Sands to make way for its planned Boardwalk resort) and MGM MIRAGE (which recently announced plans for its destination resort in the Marina District) announced approximately $10 billion of collective capital investment. The result of this incredible investment will be three state-of-the-art, fully integrated destination resorts. These developments underscore the incredible potential in Atlantic City as it continues to evolve into a destination resort.
This potential is also likely to translate into other casino sites, such as Bader Field, that could support billions more of investment. This cycle, where success begets additional investment and further success, is a positive development and is reminiscent of the incredible winning streak that Las Vegas has enjoyed for the last generation.
These new market entrants will be welcome additions to the Atlantic City’s offerings that will grow our market by attracting new customers who are interested in upscale experiences and who will stay overnight — a business segment that generates significantly more revenue than day-trip business.
The existing casinos will respond to these new operators by expanding and improving upon each of their current offerings, which will help retain existing customers, attract new customers and, yes, win back customers who might be trying out our competitors in Pennsylvania and New York.
Atlantic City’s bright future is no accident. This is the only gaming destination in the East that enjoys a stable, fair tax rate, which Wall Street favors, and has led to a concentration of capital investment in one location that no other state on the eastern seaboard could hope to match. Greater capital investment allows for development of destination-type resorts that attract customers from surrounding areas. On the other hand, in competitive states such as Pennsylvania and New York, gaming is proliferating under a different model— namely, high taxes and a limited number of licenses that spawn one-dimensional slot parlor casinos sprinkled at various locations throughout those states. This permits the Atlantic City experience to differentiate itself. Will these competitors from New York and Pennsylvania be able to compete with us on a convenience basis? Yes. Will they be able to compete with us as destination resorts? No. There are 30 million adults within a tank full of gas who are our potential customers, and we have only scratched the surface of this populace in terms of those interested in an upscale full destination resort experience. That is where the growth potential for Atlantic City lies.
Looking back at 2007, CANJ believes the proverbial “glass” is actually “much more than half full” and soon will be overflowing. All we need to do is to keep on doing what we are doing to make it through the bumps in the road such as we experienced in 2007. There is much to look forward to in 2008 and for years to come.
Our prescription? Break out the sunglasses. The future looks awfully bright.
Reprinted with the permission of Casino Connection.
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