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Atlantic City tries to turn its fortunes around
Posted in: In The News on Friday, April 07, 2017

At its peak, Atlantic City had 12 casinos. Now, the Jersey Shore gambling and entertainment destination has just seven, the lingering result of the economic downturn as well as competition from neighboring states that have legalized gaming in recent years. But the city is hoping its fortunes will change, thanks to a few promising developments. This week, Hard Rock International unveiled plans to spend $375 million to renovate the shuttered Taj Mahal building. The new Hard Rock Hotel and Casino Atlantic City will reopen in summer 2018 on 17 acres of prime Boardwalk real estate. “I agree that the market has had challenges in recent years,” says Jim Allen, chairman of Hard Rock International. “But it’s still the second largest gaming market in the United States. And when you look at the asset … with more than 2,000 rooms and a lot of amenities—certainly it will need a renovation—but we believe the building on a long-term basis will have a tremendous opportunity to be successful.” The city finally saw an upturn in 2016. Internet gambling, which began in 2013, is what put them over the edge. Last year, revenue from internet gambling in New Jersey increased 32% to nearly $197 million. The city has also expanded into mobile gaming, skill-based games and fantasy sports play. That came after the state enacted legislation in 2011 that included sweeping deregulation and regulatory reform to help the Atlantic City casino industry cope with a competitive and saturated gaming market, says David Rebuck, director of the New Jersey Division of Gaming Enforcement. “It is important to emphasize that gaming is a growth market in the United States and in order for Atlantic City to remain competitive, it is crucial to stay on the leading edge of this evolving industry,” Rebuck says. It used to be that Las Vegas and Atlantic City were the only players in the gambling world. Atlantic City had such a storied history that the first version of the Monopoly board was based on the seaside town. They city inspired the hit cable show Boardwalk Empire. Founded in the 1850s, Atlantic City was a getaway for wealthy east coasters. To attract the elite, developers built high-rise luxury hotels with names such as Ambassador, President and Ritz-Carlton. President Ulysses S. Grant once vacationed there. By the 1920s, the movie stars and musicians started rolling in. Marilyn Monroe could be seen cavorting about town. Frank Sinatra had some of his first gigs there. Once he was famous, he returned with his Rat Pack buddies. The Miss America Pageant took place there every year. The gangsters also showed up—Meyer Lansky, Al Capone, and Lucky Luciano among them. Tourism reached its peak in that era, particularly during Prohibition because officials did not enforce the alcohol ban. Up until the 1960s, the town was also home to famous nightclubs such as the 500 Club, one of Sinatra’s favorites. The city’s run as a Boardwalk Empire ended in the mid-1900s, when improvements in transportation meant people who craved the beach could head to Florida. After years of neglect, gambling was approved in 1976, and the luxury hotels were torn down to make room for large casino resorts, such as Caesars Atlantic City. President Donald Trump once had casinos there, including the Trump Plaza Hotel and Casino. His venues became popular for hosting wrestling and boxing matches, including many of Mike Tyson’s. Even Sinatra returned, performing for 25 years at various casinos including the Sands. But by 1992, casinos began opening elsewhere as other East Coast states began to pursue legalizing gambling. Foxwoods Resort Casino ushered in the era of gambling outside of Atlantic City when it opened that year. And in 2006, the first Pennsylvania casinos opened, providing even more competition for Atlantic City, which drew much of its clientele from that state. That year was the first time Atlantic City saw its revenues drop. “Atlantic City was built up during a period when it had a monopoly in the East,” says Doug Walker, who specializes in the social and economic impact of gambling as a professor of economics at the College of Charleston. “Since casinos began spreading outside of Vegas and Atlantic City, it was inevitable that they would see more regional competition.” So far this year, the city is reporting that revenues are continuing to increase. But it remains to be seen if more casinos will join the Hard Rock in making an investment in the city. “Revenues at surviving casinos have increased since a few years ago,” Walker says. “This is how markets work; the weakest firms may go out of business or are replaced. It seems particularly drastic in Atlantic City … It would have never been built so large if casinos had always been a more competitive market.” The competition for Atlantic City will continue to increase as states such as New York consider opening more casinos. Already in Massachusetts, Wynn Resorts and MGM Resorts International are developing properties. But Allen of Hard Rock says he's not concerned about what's happening elsewhere. He points out that the tax rates in surrounding states are much higher than Atlantic City’s and that investors will be more willing to invest in Atlantic City properties and bring more jobs to the city. “It's Atlantic City that has a competitive advantage,” he says. “It’s a very welcoming area to do business." Top U.S. casino and racetrack markets 1. Las Vegas Strip, $6.3B total revenue in 2015 2. Atlantic City, $2.4B 3. Chicagoland, $2B 4. New York City, $1.4B 5. Detroit, $1.4B 6. Baltimore/DC, $1.3B 7. Philadelphia, $1.2B 8. Miss. Gulf Coast, $1.1B 9. St. Louis, $1B 10. The Poconos (Pa.), $965M

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Atlantic City Casino Profit Is New Evidence of Stabilization
Posted in: In The News on Friday, April 07, 2017

Atlantic City's casinos saw their gross operating profits increase by 7.3 percent in 2016. Figures released Friday by the state Division of Gaming Enforcement show the eight casinos that began the year collectively earned an operating profit of more than $587 million. The figures provide new evidence that Atlantic City's casino industry is stabilizing after a brutal three-year period in which five of its 12 casinos shut down. When the now-shuttered Trump Taj Mahal casino is removed from the equation, the figure rises to a 9 percent profit increase for the surviving seven casinos. The Taj closed in October. The Borgata posted the largest profit with nearly $245 million. Gross operating profit reflects earnings before interest, taxes and other charges, and is a widely accepted measure of profitability in the casino industry.

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Atlantic City casino revenues remain stable in 2016 despite Taj Mahal closure
Posted in: In The News on Friday, April 07, 2017

Casino revenues remained stable last year despite the closure of the Trump Taj Mahal Casino Resort in October, according to casino gaming numbers released by the state Department of Gaming Enforcement Friday afternoon. Total casino revenue, including internet, gaming and hospitality, totaled more than $3.71 billion in 2016 compared to $3.70 billion last year, an increase of less than a percent, according to the report. Gross Operating Profit for the industry increased 7.3 percent for the year to $587.4 million. "The casino industry was able to grow net revenue and improve its cost efficiency, which led to a 7.3 percent improvement in gross operating profit," said David Rebuck, director of the Division of Gaming Enforcement. It is significant, in my view, that every casino hotel was able to show improvement in gross operating profit in the historically slower fourth quarter of the year." Taj Mahal ownership closed the facility, once known as the “eighth wonder of the world,” in October. The casino’s management had accused striking Unite Here Local 54 members of preventing a “path to profitability.” The occupancy rate in the city’s casino hotels in 2016 was 81.5 percent, a 0.7 higher than 2015.

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Christie celebrates some good news for Atlantic City
Posted in: In The News on Wednesday, April 05, 2017

Things are starting to look up in Atlantic City, and Gov. Chris Christie is embracing it. The governor showed up to a press conference announcing the planned Hard Rock Hotel and Casino on the boardwalk, which will occupy the tower left vacant by the closing of the Trump Taj Mahal in October— the fifth and most recent Atlantic City casino to close its doors since 2014. Hard Rock’s reopening of the shuttered tower was cited in a report last week by the South Jersey Economic Review, which said the city is “digging out from a lost decade.” It also comes as a state takeover of the city — led by Christie confidant Jeff Chiesa and spearheaded in the Legislature by Senate President Stephen Sweeney — is underway despite fierce local resistance. The state is in court with the city’s police and fire unions over layoffs and unilateral changes to their contracts. “Before Steve [Sweeney] and I started working together in 2010, only easy things were being done in Atlantic City. And that was not only from the state level but from the local level as well,” Christie said as Atlantic City Mayor Don Guardian, an opponent of the state takeover, looked on from the audience. “Hard Rock’s willingness now to come in and invest in Atlantic City shows you that they appreciate the hard things that have been done to restructure the city and to make it a place where investing makes sense.” It was a celebratory atmosphere at the Hard Rock Café at the casino’s base, where a Springsteen cover band played and where E Street Band member Steven Van Zandt mingled. “It’s always easy to say yes to people and give them what they want, and then you wind up with what we had,” Sweeney said. “We made tough decisions. We made the right decisions. And Atlantic City is alive and well.” Hard Rock is partnering with developers who are politically connected in New Jersey: Jack Morris and the Jingoli family. Hard Rock CEO Jim Allen is an Atlantic County native. The company is promising 1,000 construction jobs and 3,000 permanent jobs when the casino is slated to open in 2018. The project is expected to cost more than $300 million. “We recognize that there are those who are still a little skeptical about what the next step is,” Allen said. “We’ve closed on the project and funding is in place to move forward. So we are out designing, we are moving forward.” Christie ducked out of the press conference early. As he talked to staff outside of his SUV, a reporter from a New York City television station tempered the good news by asking the governor if he had anything to say to NJ Transit commuters, who have been enduring delays since a derailment Monday at Penn Station in New York. NJ Transit has suffered funding cuts under Christie, and this was its second minor derailment at Penn Station in two weeks [the first involved an Amtrak train]. The delays have also provided a stark reminder of the state’s outdated infrastructure and Christie’s 2010 decision to cancel a new rail tunnel into New York City. Christie ignored the reporter’s question.

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Atlantic City continues to recover from 'lost decade'
Posted in: In The News on Saturday, April 01, 2017

The past 10 years have not been kind to the resort. Local economist Oliver Cooke has a name for it: “The lost decade.” Property values fell by a third, the casino industry shed more than 21,000 jobs and the poverty rate increased dramatically. “By any metric, the last several years have been grim for the greater Atlantic City area,” said Cooke, associate professor of economics at Stockton University. “The great recession didn’t help, but the fall of the (casino) economy played a huge role.” But the next decade may mark an improvement, according to the South Jersey Economic Review, a biannual report released last week in conjunction with the William J. Hughes Center for Public Policy at Stockton. Cooke warns it could be a slow process because of how far the city has fallen over the past decade. But the announcements of a tax settlement between the city and Borgata Hotel Casino & Spa and a $300 million Hard Rock Hotel and Casino at the former Trump Taj Mahal Casino Resort have increased confidence the city’s economy may be starting to turn around. “The fact remains that Atlantic City’s redevelopment will take many years,” Cooke said. Among the biggest questions is which of the recent redevelopment projects and proposals are likely to most help the city in the long run, he said. There are other questions, too, in a city whose primary industry was hammered when casinos opened in Pennsylvania, New York and elsewhere in the past decade. These siphoned gamblers from Atlantic City properties and contributed to the closings of five casinos since 2014. The decrease in local competition generally benefited the surviving Atlantic City properties. But Jim Kennedy, former executive director of the Casino Reinvestment Development Authority, said adding Hard Rock to the casino market could put the city back in the same situation it was in at the start of the decade. “It will make for a much more spectacular trip, but you are still in the end going to hit the iceberg,” Kennedy said. “The continuing expansion of casinos in the surrounding states guarantees a sinking Atlantic City casino industry. The really good idea for Atlantic City would be to create economic diversification.” That has been the goal of the city and Atlantic County for years, particularly in the past few years. The reasons are in the economic data. During the past decade, payroll employment in the city dropped by more than 25,300 jobs, or 16.5 percent, according to The South Jersey Economic Review. The gross domestic product of the metropolitan area that includes Atlantic City fell by 21 percent from 2006 to 2015, the report states. That is the largest decline recorded among the nation’s 382 metropolitan areas, according to the report. While the casino industry continued to retract, reliance on government safety-net programs increased, according to the report. In 2000, unemployment insurance, Medicaid benefits and other income-maintenance programs totaled $374 million, or 4.7 percent of the personal income in the city. By 2015, that number had spiked to $907 million, or 7.6 percent of total personal income, according to the report. Despite the dire situation, Mayor Don Guardian never gave up hope the city would return to its former glory. “We have been planting seeds and rebuilding Atlantic City block by block so that our new beginning would lead to a brighter future,” Guardian said. “Our residents never lost hope in the greatness of Atlantic City. We are rebuilding Atlantic City together. One day, many years from now, we will all be able to enjoy the fruits of our labor in a revitalized Atlantic City.”

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Atlantic City appears to be on the rebound, according to study
Posted in: In The News on Tuesday, March 28, 2017

After a lost decade, which featured a housing crisis, a recession, and the closing of five casinos, the resort's redevelopment appears to be moving in the right direction, according to a biannual report released Tuesday. The South Jersey Economic Review, released in conjunction with the William J. Hughes Center for Public Policy at Stockton University, said the city appears to be gathering monument. Oliver Cooke, associate professor of economics at Stockton, said the decision of Hard Rock International to buy and reopen the closed Taj Mahal property, as well as the recent state-brokered settlement of a tax dispute between Borgata and the City of Atlantic City, as positives as the city looks to bounce back. “The impact of the local area economy’s lost decade on its residents’ welfare has been stark,” Cooke said. “The metropolitan area’s poverty rate climbed from 9.2 percent in 2006 to 14.3 percent in 2015, while the poverty rate for those younger than 18 years old rose to 22.3 percent from 13.2 percent.” During the last decade, the casino industry has shed more than 21,000 jobs, according to the report. Despite Hard Rock's pending arrival and the tax settle, the Cooke warns that the city's rebirth could take some time. “The fact remains that Atlantic City’s redevelopment will take many years,” Cooke said.

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