Atlantic City boosters nervous about online gaming

ATLANTIC CITY - When Internet gaming launched last week in New Jersey, the Atlantic City Alliance - the resort's chief marketing arm - was noticeably silent.

There were no new alliance ads touting online gaming's arrival, though New Jersey became only the third state to offer it, after Nevada and Delaware.

The reason: Online gaming and the alliance may be at cross purposes. The two-year-old alliance is spending $30 million a year to encourage visitors to come and spend money in the city's casinos, restaurants, and hotels. One can't "Do AC" - the name of the alliance's marketing campaign that began last year - by staying home and gambling from an iPhone or laptop.

As of Friday, there were 37,277 online gaming accounts statewide, according to Lisa Spengler at the New Jersey Division of Gaming Enforcement.

Half of the city's dozen casinos - Borgata, Tropicana, Trump Plaza, Trump Taj Mahal, Bally's, and Caesars - launched gaming websites with their software partners Tuesday to offer online versions of their casino games and poker.

Only the Atlantic Club and Revel have not obtained online gaming licenses. The former is in bankruptcy, and the latter emerged from bankruptcy this year and is "exploring strategic options," including a sale.

"Our view is that there will be some cannibalization, primarily in the poker room," said gaming analyst John Kempf of RBC Capital Markets L.L.C. "But [online gaming] is not a very profitable area for the bricks-and-mortar casino. The cannibalization on the casino floor will be minimal.

"I am not even sure this will be a big revenue generator online," he added.

Atlantic City is entering its slowest time of the year as online betting gets underway. Developments over the last two years, including creation of a state-run tourism district and the return of the Miss America Pageant, were intended to make the city more of a year-round destination.

"We promote all the reasons for people to visit year-round: the beach, the Boardwalk, nightlife, live entertainment, dining, spas, and rooms with amazing water views and incredible deals," said Liza Cartmell, chief executive officer of the Atlantic City Alliance. "Gaming, of course, remains a central attraction, but not the only attraction."

Casino operators see I-gaming as a revenue generator at a time when their profits have sunk because of regional competition. They are eager to use Internet games to raise brand awareness and tap into a new, younger demographic.

"Online gaming will enable us to reach many new customers who may or may not have considered visiting Atlantic City in the past," said Joe Lupo, senior vice president of operations at Borgata, the city's top-grossing casino.

Like Jamie Kerstetter, 31, of Brigantine, a professional poker player who moved back to New Jersey from Mexico a month ago to play online. She plays on NJ.partypoker.com, which is teamed with Borgata.

"I think the ability to put $20 online and play micro-stakes cash and tournaments will drive new players into poker," she said in an e-mail, "which will eventually make them want to play bigger buy-in tournaments and cash in a live setting once they learn the game online."

But some said they feared online gaming could encourage people not to make the trek.

"We've already seen the detriment of convenience gaming," said Frank Dougherty, owner of three Atlantic City restaurants, one of which is at Bally's. "When they're just looking to gamble, that's where they are going to go, the closest casino. Now, they have the option of, 'I'm not going to drive at all. I'll just gamble online.'

"I'm hoping that if they are looking for an experience and a destination, they'll come here not just to gamble."

The launch of Internet gaming marked the most significant expansion of gambling in New Jersey since Atlantic City's first casino, Resorts, opened in 1978. But it comes at a precarious time.

The city's annual gaming revenue has plunged from a peak of $5.2 billion in 2006 to less than $3 billion in 2012. This year has brought more of the same, as third-quarter casino profits fell 8.1 percent from the previous year, the Division of Gaming Enforcement said last week.

Several casinos have petitioned to appeal their property taxes, as their values, along with their profits, have plummeted. The tax appeals threaten to bankrupt Atlantic City, and last month, Moody's again downgraded the city's credit rating.

Cartmell said that "there was no evidence as of yet that new or existing gamers would not come to Atlantic City because of online gaming," but that weather could be a factor: Gamblers who wouldn't head for the Shore in a snowstorm, for instance, could still play poker online.

Casino executives say one way to offset possible losses from online gaming is to extend their loyalty reward programs and points system and offer online players comped rooms, meals, and slots play to lure them to the resort.

"Customers will continue to come to Atlantic City for the added social benefits of live gaming, restaurants, spas, and entertainment," said Tom Pohlman, executive vice president and general manager of the Golden Nugget, which plans to launch its online gaming website, GoldenNuggetCasino.com, this week. "Online gaming will only provide a gaming experience.

"It will offer gambling to people who aren't able to get away during the week to gamble, or those who might not like to travel to Atlantic City on weekends."