Casino revenues in Atlantic City are declining for the first time in history, but that isn't deterring three major developers from spending billions of dollars to create mega-resorts that aim to broaden the beach town's appeal.
Their goal is to build up the city's image as a glitzy vacation destination and lure the kind of affluent, entertainment-loving patrons that have made Las Vegas casino-hotels so successful.
MGM Mirage, Revel Entertainment Group and Pinnacle Entertainment plan a combinedof about $10 billion over the next five years. The projects would add thousands of jobs and help diversify an economy that has been largely driven by gaming since 1978.
The loss of customers to parlors in Pennsylvania, New York, West Virginia, Connecticut, and Delaware dropped gaming revenues 5.3% over an 11-month period ending in November 2007. But casino operators believe that the long-term prospects for Atlantic City are bright, says Joseph Weinert, senior vice president of Spectrum Gaming Group, a New Jersey-based consulting firm.
They see the opportunity to attract visitors who prefer more of a resort lifestyle that includes spas, shopping, high-end dining and entertainment to complement a unique attraction — the beach and Boardwalk where people can stroll, dine and shop.
“There is a lot of upside in the non-gaming revenue,” Weinert says. “If you look at Las Vegas it is inching up to 60% of overall revenue, whereas in Atlantic City it is 10%.”
The largest project is the MGM Grand Atlantic City, a $5 billion venture slated for completion in 2012 on a 72-acre site next to the Borgata Hotel Casino and Spa. A joint venture between MGM Mirage and Boyd Gaming, the Borgata has succeeded in attracting well-heeled, younger patrons with its top-notch entertainment, nightspots and gourmet restaurants.
“The Borgata opened eyes to what the market could be,” Weinert says. “The conventional wisdom was that Atlantic City had limited growth prospects. They brought in a new class of customer — younger more affluent people who want to come down and party.”
Every casino in Atlantic City that has invested in the entertainment concept has increased market share, says Anthony Graziano, associate managing director of the coastal New Jersey office of Integra Realty Resources, an appraisal and consulting firm. Between 2000 and 2005, higher-tier casinos that made major investments saw winnings jump 21% while casinos that remained unchanged only increased 10%.
Like the Borgata, the MGM Grand Atlantic City aims to lure a diverse customer base with more than 3,000 hotel rooms in three towers, a 1,500-seat theater, restaurants and clubs, a convention center and 500,000 sq. ft. of retail space.
Revel Entertainment Group's $2 billion casino project next to the Showboat Hotel-Casino is designed to appear as if it were sculpted by ocean waves. Backed financially by Morgan Stanley, the project will add 3,800 hotel rooms and 500,000 sq. ft. of dining, retail and entertainment space to the city's inventory. The project is scheduled to be delivered in 2010.
The third casino project, by Pinnacle Entertainment, was ushered in with brilliant fireworks and a spectacular eight-second implosion of the Sands Casino Hotel in October, the first demolition of an Atlantic City casino. The resort, still in the design phase, will be built on 18 acres of oceanfront property that includes the former Sands location.is scheduled to start in late 2008 and to be completed by 2012.