Atlantic City has to share its jackpot
has been on a one-way trip - straight up. But for the first time, annual
revenue from Atlantic City's casinos could decline in 2007. The industry
faces increased competition from slot machines in neighboring states, new
restrictions on smoking and the closing of one casino. The first monthly
revenue figures of the new year were down, raising concern that it could be
the start of a yearlong trend. If revenue does go down, it could have
negative consequences for the industry, its customers and the state of New
Jersey, which relies on casino taxes. ''There will be an impact, no doubt,''
said Carlos Tolosa, eastern division president for Harrah's Entertainment
Inc. ''The Pennsylvania slots parlors will certainly cause competition. In
the past, people just came to Atlantic City. That's the part that always
scares you. Atlantic City relies on high-frequency customers.'' Already,
Pennsylvania slots parlors are cutting into Atlantic City's pie. Figures for
January, when Atlantic City went head-to-head with two new Philadelphia area
slots parlors, had New Jersey casino executives reaching for the antacid
tablets. Overall revenue at Atlantic City casinos declined 2.9 percent
compared with a year ago, but the decline in slots revenue was even sharper
at 7.2 percent. Philadelphia Park, in Bensalem Township, about 20 miles
north of Philadelphia, opened Dec. 19. Harrah's Chester Casino and Racetrack
opened on Jan. 22. Executives of those gambling halls said they targeted
gamblers who otherwise would have gone to Atlantic City. Figures from
Pennsylvania show that just three months after the state opened its first
casino - Mohegan Sun at Pocono Downs near Wilkes-Barre - wagers at slots
parlors hit, and then passed, the $1 billion mark. According to the
Department of Revenue and the Pennsylvania Gaming Control Board, casino
patrons wagered $1.06 billion and won $960.8 million by the week ending Feb.
11. On the Atlantic City Expressway, among the billboards featuring local
entertainers, one billboard for Delaware Park Racetrack in Wilmington
beckons departing drivers to ''come play with us'' next time. But what's bad
for the casinos may be good for their customers, at least in the short term.
Many observers say they expect casinos to be even more aggressive about
offering financial incentives such as free rooms or show tickets to keep
players coming.
Also, a revenue dip may only accelerate a movement already well under way
here: Making sure there's a lot more to do in Atlantic City than just
gamble. ''Clearly, Atlantic City recognizes that for its overall revenue to
grow, it has to become less gaming-centric,'' said Joseph Weinert, vice
president of Spectrum Gaming Group, a casino consulting firm. ''A majority
of Atlantic City's customers will be able to play slots somewhere closer to
home. Atlantic City has to give them a compelling reason to drive farther,
stay longer and spend more.''
Lorrie Harm came to the Borgata Hotel Casino & Spa to play the slots, when
she easily could have gone to a Philadelphia area facility near her home in
Cherry Hill.
''The restaurants are great, and I love to shop,'' she said. ''I like the
atmosphere here. There's more to do.''
Barbara Sieminski, a retiree from Mountaintop in Luzerne County, comes to
the Borgata at least once a month for amenities like the manicure she
treated herself to last week.
''It's difficult to just spend time on the gambling floor morning to
night,'' she said as a manicurist rubbed her hands up and down Sieminski's
wrists. ''I come for the total package. Coming to Atlantic City is like a
vacation for us.''
Weinert said he expects overall 2007 revenues to be about flat, with a
possible fluctuation of 1 percent above or below the break-even point. But
Frank Fantini, publisher of The Gaming Morning Report, says a decline of as
much as 5 percent is possible this year.
In 2006, Atlantic City's revenues came in at $5.2 billion, up 4 percent from
the year before.
The closing in November of The Sands Casino and Hotel is also expected to
hurt the bottom line. ''Some of that money will flow to other casinos, but
some of it won't be recovered until another property takes its place,'' said
Fantini. There are now 11 Atlantic City casinos, down from 12 last year.
Smoking restrictions are another wild card. As of April 15, casinos must
designate at least 75 percent of their gambling floors as smoke-free. The
industry is worried about losing its smoking patrons, as well as the
millions of dollars it will cost each property to wall off smoking areas and
install expensive ventilation systems.
The state has an interest in keeping casino revenues flowing as well. The
casinos pay 8 percent tax on their gross revenues, and pay another 1.25
percent toward projects approved by the Casino Reinvestment Development
Authority. Last year, that worked out to $417.5 million in revenue taxes,
and $65.2 million in reinvestment obligations. But even if revenues decline
this year, almost no one thinks it would be an irreversible trend. Tolosa,
the Harrah's president, noted that casinos shut down last July during a
state budget crisis, a revenue loss he doesn't expect to recur this year.
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