Originally published Aug. 19, 2012
ATLANTIC CITY - Revel has failed thus far to grow the gambling market here, and despite massive state subsidies it is teetering on the brink of bankruptcy.
Some blame the casino's poor timing, coming on the scene amid a still-weak economy and bruising competition from surrounding states. Others say it has simply overreached, trying to be too like Vegas in a middle-of-the road, drive-in market. And still others are turned off by its lack of buffets, its no-smoking policy, its expensive rooms (averaging $210.96, versus $133.13 at next-priciest Borgata), and its dearth of moderately priced restaurants.
For whatever reason, it's a formula that is just not working.
Carol Lehman has this simple message for Revel: Cut back the video machines, substitute quarter slots for some $1 and $5 slots, and maybe things will pick up.
"I was grateful it was a nonsmoking casino," said Lehman, 60, of Levittown, Bucks County, who suffers from asthma. "But it was so disappointing. . . . [Revel] forgot that it's the middle class that goes to Atlantic City."
On two visits, in April and June, Lehman said, she found that there was nowhere to get a cheap sandwich, and that she got lost easily in the sprawling, 6.3 million-square-foot complex.
She has not been back.
Of the $2.4 billion mega-casino and its all-glass facade, 10 swimming pools, cabanas and massive spa, her husband, John Lehman, 62, said, "It's too fancy for me. It's over the top."
Last week, they found sandwiches for $6.95 each next door at Showboat, and they stayed three comped nights (free, that is) at Resorts.
That Revel has not gained traction is clear from the revenue figures for its first four months in operation: It has been in eighth place among Atlantic City's dozen casinos every month since its April 2 soft opening.
"Clearly . . . results continue to fall below our modest expectations, which is concerning given this is Atlantic City's 'bread-and-butter' summer season," said gaming analyst Dennis Farrell, of Wells Fargo Securities L.L.C.
Revel may have something in common with the Pier at Caesars, a high-end retail mall attached to Caesars Casino on the 50-yard line of the Boardwalk. The Pier, like Revel, aimed primarily for affluent New Yorkers, banking that there were enough of them to want to come down and plunk their cash at the likes of Louis Vuitton and Tiffany's.
The Pier, which opened in 2006, defaulted on its mortgage two years ago and is still looking for a buyer. It failed to attract the minimum bid of $25 million at an online auction this month - a far cry from 2007, when it was valued at $200 million-plus.
Bob McDevitt, president of 14,500-member Unite Here Local 54, the union that represents Atlantic City casino and hotel workers, hates to say it, but "I told you so."
McDevitt has locked horns with Revel's owners from the beginning over its nonunion status and the hefty state aid provided to finish building the casino, add road improvements, and train its employees - more than $300 million in various state assistance.
"As we had predicted, they were only going to cannibalize the existing market," he said. "No one in our organization was convinced Revel was going to grow the market, and unfortunately, we were correct."
Instead, McDevitt said, it is "absolutely endangering two or three possible casinos in Atlantic City, including Trump Plaza and Atlantic Club."
"The math is simple," he said: "If Revel didn't exist, there would be $17 million more in the market for the other casinos, which would put all of them in a somewhat better position." (Revel generated $17.5 million in casino revenue last month.)
Total gaming revenue has been so low that Revel recently started matching the top-tier status of gamblers with loyalty player cards from other Atlantic City casinos - which means those players don't have to start from scratch at Revel. It also began paying $750 cash to Titanium Club members from Borgata and Seven Star Caesars Entertainment Club members - the top-level gamblers at those casinos - just so they would try out Revel, according to some operators.
Joe Lupo, senior vice president of operations at Borgata, does not agree with the notion that Revel is too Las Vegas-like to succeed. And with good reason: Market-leading Borgata is Vegas-like, too. But it generated $54 million in casino revenue last month, triple Revel's.
"I really don't know what's going to happen," Lupo said, discussing Revel last week at Gypsy Bar, one of Borgata's signature cocktail lounges. "Maybe a new operator will come in and have a more favorable financing deal. Their numbers need to improve, and they need to bring new customers to the market. Only time will tell."
Steven Lonegan, state director of the New Jersey chapter of Americans for Prosperity, a political-advocacy group focused on free-market economics and educating lawmakers about government subsidies, has been a critic of Revel for two years.
"Initially, Revel was supposed to be a winner that got all these state-funded advantages that no one else got. The real loser are the taxpayers," he said last week.
"Revel's a terrific example of government intervention supporting an inefficient operation," he said. "It should be allowed to collapse, file bankruptcy, and let people take their lumps and have a skilled investor come in and buy it for 5 or 10 cents on the dollar and make it work using dynamic marketing skills."
Katie Schuman, 22, of Center City, blamed Revel's poor performance on the economy, in part, as she played roulette at Borgata last week with boyfriend Tristin Robinson, 29.
"They have such a big space to fill and not enough people to fill it," Schuman said. "In this economy, it's tougher for people to have the resources."
Elmer Pette, 86, of Manhattan, said he shudders at the thought of a bankruptcy.
"That would be really bad since it was supposed to be the savior of Atlantic City," Pette said as he sat on a bench outside Showboat with his wife and daughter Wednesday during a weeklong vacation.
The Pettes said they have been inundated with ads on New York TV, radio and newspapers to "Do A.C." - the $30 million-a-year marketing campaign to boost tourism and tout non-gaming activities.
When July's revenue figures came out earlier this month, Revel chairman and CEO Kevin DeSanctis said he remained hopeful that the casino was on the right track.
"Two months after our premiere, we are continuing to see steady increases in our business volumes across both our gaming and non-gaming segments," he said, citing better total visitation, revenue and hotel occupancy over June's levels. "Taking a step back, we have built a great product, our operations are improving, and we remain confident in our economic model."
Figures for second-quarter non-gaming revenue released Friday by the New Jersey Division of Gaming Enforcement showed that net non-gaming revenues for Atlantic City's casinos, including Revel, rose 13.3 percent from a year ago and occupied rooms increased 4.2 percent. Revel's net revenue for the second quarter was $55.1 million, of which $18.2 million was derived from rooms, food and beverage, entertainment and other non-gaming sources.
But it had a gross operating loss of $35 million, or $18 million excluding one-time preopening charges, the Division of Gaming Enforcement said. Gaming analysts say that means Revel was unable to cover its cash operating expenses for the quarter.
It also isn't helping to fix Atlantic City's larger problem, as Gov. Christie, among others, envisioned it would.
"Adding one more high-end casino is not going to change the market. We said three years ago that the only thing that was going to change the market is attracting meeting and convention business. [Revel has] done nothing on that," said McDevitt, who still intends to unionize Revel's 3,800-plus employees - down from an expected workforce of 5,500.
"Here's the problem: The governor, the state and the city all put everything on Revel and ignored the fact that Atlantic City had to be a destination resort for all the properties. . . ."
"They kept calling Revel 'a game-changer,' and we kept saying they are not a game-changer, just another nice casino. And that's how it's panned out."
By the Numbers
New Jersey's support for the $2.4 billion Revel casino
in state tax credits
in state funds for widening roads leading to Revel
in state funds for employee training
estimated rebate on the luxury sales tax for the next 20 years EndText