All Bets Are Off

ATLANTIC CITY - It was a sobering moment for Lynne Nagy last Tuesday evening, as she found herself surrounded by 30 empty slot machines at the Trump Marina casino.

Just three years ago, the Edison woman said, she had to wait in line to play her favorite machine off season.

"It's pretty dead," she said at 9:30 p.m. "They've even cut back on the comps."

As Atlantic City marks its 30th year as a casino town tomorrow, there's no clear bet on its future.

Gaming here is trying to position itself to survive a perfect storm: soaring gas prices, a smoking ban, a soft economy, stiff slots competition from Pennsylvania and New York, and the expansion of gaming in Delaware and Connecticut.

The Queen of Resorts, as Atlantic City once dubbed itself, is in crisis mode.

"We are at a critical junction in the history of gambling in Atlantic City," said Tony Rodio, regional president for the Atlantic City Hilton and Resorts, the first casino to open here, on May 26, 1978.

At last week's East Coast Gaming Congress, a two-day affair at the Atlantic City Convention Center focusing on trends in the industry, several top casino executives lamented the impact of Pennsylvania slots - even as they showed splashy videos of their coming projects.

Instead of playing to the diminishing slots audience - largely day-trippers who still bring in 69 percent of the Shore town's casino revenue - executives want to lure more affluent visitors with upscale restaurants, luxurious spas, and hotel towers reaching to the sky.

"Atlantic City has run out of the convenience customer," said Kevin DeSanctis, chief executive officer of Revel Entertainment Group L.L.C., which is developing a $2.5 billion casino on the Boardwalk next to Showboat.

"The reality is, if it doesn't move to an overnight customer, it will be very difficult for us to be successful in the future."

He added: "The outlook in Atlantic City is pretty bleak. The monthly revenue numbers are horrible."

Atlantic City's reinvention began in 2003 with the opening of the $1.1 billion, Las Vegas-style Borgata Hotel Casino & Spa. The idea was to attract a younger, more affluent customer, with everything from nightclubs to couturier clothes under one roof.

The strategy has promise. Among the city's 11 casinos, the Borgata has suffered minimally and remains the market leader. Four Borgata-like super casinos, including Revel's project and a $5 billion casino by MGM Mirage, are in the pipeline.

The Borgata has doubled its nongambling attractions since opening, said Larry Mullin, its chief operating officer and president. There are 12 restaurants, up from six. Six stores are being added to the current eight. A second spa is on the way. And the $400 million Water Club, a Las Vegas-style hotel, will debut early next month, adding 800 rooms to the casino's 2,000-room inventory. An average stay at the Water Club will cost $300 per weeknight and $400 to $500 per night on weekends.

"People will not come to this market unless you give them a compelling reason to come," Mullin said. "Everybody has slot machines now. It's not that exciting anymore."

Gambling analyst Andrew Zarnett of Deutsche Bank A.G. in New York put it this way: "The problem with Atlantic City is it has old properties and it is no longer the most convenient. Americans tend to choose convenience first and amenities second."

But a huge investment is needed to build elaborate casinos, which cost $2 billion on average. To provide the capital it takes to remain competitive, two private equity firms stepped up in January to buy the world's biggest gambling company, Harrah's Entertainment Inc., which had four casinos in Atlantic City.

Four other casinos - Trump's three and the Tropicana - are now for sale.

And Pinnacle Entertainment Inc., of Las Vegas, announced in February that it was putting its $1.5 billion casino proposal on hold because of difficulty getting financing.

Meanwhile, the casinos bleed.

For the first four months of this year, Atlantic City's gambling houses took in $1.5 billion, down 6.7 percent from the same period in 2007. Slot-machine revenue was off by 8.6 percent, and table-game revenue dropped 2.3 percent.

Last month's slots revenue was less than in April 2002.

No wonder comping - the practice of giving loyal customers freebies - is down.

Mark Juliano, chief executive officer of Trump Entertainment Resorts Inc., said the Trump casinos were being more selective this year.

"What we are trying to get away from is giving rooms to those who really don't gamble" and make them available to cash-paying customers, he said.

If the casinos make less, there's less payoff to the people.

Over 30 years, the casinos, which pay New Jersey a 9.25 percent tax on their gross gaming revenue, have turned over $9.3 billion, mostly aimed at seniors and the disabled, low-income housing, and redevelopment projects statewide.

For the first time, those dollars are falling.

"We are victims, in many respects, of what the true effect of the economy in the nation is having on everyone," said Tom Carver, executive director of the Casino Reinvestment Development Authority, which oversees some of the money. "No one knows what that impact is yet."

Jeff Butler, 47, one of many whose business depends on the casino trade, has no doubt about the impact.

"Since the Philadelphia casinos came, it's crushing," said Butler, manager of Ocean Rolling Chairs, which leases the chairs that transport customers between casinos and to shops along the Boardwalk.

"Nobody wants to drive to Atlantic City anymore."

Rolling-chair operator Mohamed Khouidmi, 44, was more hopeful in Friday's sunshine than he had been all winter. He had two customers by noon.

"People are not coming down like before," he said. "They're broke. . . . We're struggling."

So is Ahmet Kahraman, a manager at Zeytinia, a gourmet food market inside the Quarter complex at the Tropicana. "We do feel it."

Down the hall, Tropicana dealer Al Welenc said bets were "a lot lower than we've had in previous years." And, after 22 years at the casino, he fears losing his job. Last year, the Tropicana had the steepest revenue decline of any casino in the city - 12.1 percent - and laid off more than 1,000 workers to trim costs. That its former owner was stripped of its casino license over claims of uncleanliness, among other violations, didn't help.

Economics, plus the threat of automated table games, have given the United Auto Workers a tailwind in its efforts to unionize about 8,000 table dealers in Atlantic City, including Welenc.

This month, a virtual table game - Rapid Roulette, where players make their bets on a video screen - was introduced at Bally's, Caesars, Harrah's Resort and Showboat. And on June 13, Trump Plaza will unveil PokerPro, which uses no real dealers; the cards are dealt electronically, on a big screen.

Despite the turmoil, Mayor Scott Evans, sworn in last year, is among many who are upbeat.

"Don't count us out," Evans said. "We will be the jewel of gaming on the East Coast."

On the upside, he said, Atlantic City is adding nearly 3,000 hotel rooms this year, including two noncasino hotels - a Courtyard by Marriott and the Chelsea Hotel on the Boardwalk.

At least $10 billion of construction on the four mega casinos is planned over the next five years. In addition, the city is planning to auction Bader Field, a 150-acre parcel a half-mile from the Boardwalk, for about $1 billion, possibly for more casino resorts.

"We still see that visitors are coming to the Walk, and it's crowded every single day," Evans said, referring to a $204 million, 13-block downtown outlet mall. "You are seeing the nongaming revenue increase. The formula is working."

Jacob Oberman, gaming analyst with CB Richard Ellis' global gaming group in Las Vegas, said gaming could rebound if Atlantic City created "a critical mass of high-end Las Vegas-style properties."

But, he said, it will also need to modernize infrastructure by adding more trains from New York and other East Coast cities, improving roads, and expanding its underutilized airport.

Donald J. Trump, no stranger to brinkmanship, was among the first to gamble on Atlantic City. His casino company emerged from bankruptcy twice, and his three casinos here are now on the block.

He feels the corruption-plagued city, where four of the last eight mayors have been investigated, has lacked "good political guidance."

"If it gets that," said Trump, "it will have success with the onslaught of competition."

Carver, at the Casino Reinvestment Development Authority, is optimistic the city will remake itself.

"We're getting bigger, better and more attractive, and we will continue to put that face on.

"Concern is one thing. Panic is another."

Resorts Atlantic City will cap its 30th-anniversary festivities at 11:30 a.m. tomorrow when 30 skydivers with Freefall Adventures form the number 30 in the air. After that, a block party will be held on North Carolina Avenue.

EndText