ATLANTIC CITY - Can this casino resort be saved?
This Memorial Day weekend, it's easy to see all is not well here. Eight of the 12 casinos predate the mid-1980s - carpets are grungy, paint is chipping off the walls, and far fewer employees are working the gaming floors.
As the sun broke through after a blustery Friday and Saturday, the Sunday crowds picked up on the Boardwalk. By midafternoon, it teemed with strollers and patrons at the outdoor restaurants.
But parking was available at several casino garages, a telltale sign this was not the hoped-for blockbuster weekend. Business volume varied among properties.
At the newer Borgata, for example, there was a waiting list in the poker room and a steady stream of traffic throughout the casino. At the barely year-old Revel, which just emerged from bankruptcy and opened new smoking lounges Friday, the sixth-floor casino parking level was filled with cars for the first time. At dowdy Trump Plaza, meanwhile, an older generation half-filled the intimate gaming floor, and people in their 20s and 30s packed its outdoor beach bar.
"Everything is old here," Andrew DeJoy, 80, of Staten Island, said as he sat playing an antiquated penny slot machine that he joked had been there since the casino, the city's least profitable, opened on May 26, 1984. Gaudy old chandeliers still hang from the ceiling.
But on Sunday, something else irritated DeJoy more: "I've been here close to four hours," he said, "and I haven't had one cocktail server ask me if I wanted something to drink. The service is horrible."
The larger picture is not much better. Consider these sobering statistics since 2006, the dawn of conveniently located Pennsylvania gambling:
Atlantic City gaming revenue has tumbled 42 percent, from $5.2 billion a year to barely $3 billion.
About 10,300 casino jobs have been pared through layoffs and attrition.
New Jersey gaming-tax revenue - derived from the 8 percent tax on gross gaming revenue, which goes to statewide programs for seniors and the disabled and toward economic revitalization - has been cut in half.
Hotel-occupancy rates average 92 percent in the peak summer months, but drop off to 67.3 percent after Labor Day. Still, casino hotels here boost room rates year-round by three or four times for Friday- and Saturday-night stays.
"You could stay a week in Vegas for what they charge you here for two days," said Frank Rubinetti, 31, a lawyer from Basking Ridge, N.J., who slept in his Nissan Altima in Borgata's garage on Saturday. He said he was unwilling to pay $500 for a room there that night.
The downward slide shows no sign of stopping; competition has only increased with the opening of casinos in Maryland and New York and, come fall, online gambling in Delaware. Philadelphia plans a second casino. Atlantic City gaming revenue was down 13.2 percent in January, 12.5 percent in February, 12.8 percent in March, and 12.1 percent in April.
The vibe Sunday among those who have been coming here over Memorial Day weekend for years was that traffic was lighter this year and crowds smaller. There were no long lines at the buffets.
"Because there's so much competition, you wonder if a few [casinos] will fold," Florence Shwereb, 55, of South Brunswick, N.J., said as she stopped into the renovated Golden Nugget (formerly the Trump Marina) with husband Joe for the first time Sunday.
Gaming-industry observers predict a Darwinian process of natural selection over the next few years: The fit casinos will thrive, the weak will die off, and the rest will have to adapt by finding new market niches.
"You'd rather have eight strong performers than 12 hangers-on," Michael Busler, an associate professor of finance at Richard Stockton College of New Jersey, said.
Efforts to stem the bleeding now - such as Gov. Christie's plan to rebrand Atlantic City as a family-friendly resort with new non-gaming attractions - "at best, will stop the decline of revenue," Busler said.
"The ones that are successful [today] are the large mega-resorts - Borgata, Harrah's Resort, Tropicana - that offer spas, top-notch shops, rooftop pools. Those that are copying what Vegas is doing will be really successful," Busler said. "For the bottom ones, they have to significantly reduce their large capital costs, and four have done that or are looking to, by being sold at 90 percent what they were built [for] - Resorts, Trump Marina [now the Golden Nugget], the Atlantic Club, and Trump Plaza.
"The casinos that are doing poorly and are sold off cheaply can survive as hotels," he said. "The ones I worry about are the ones in the middle - Taj Mahal, Showboat, Caesars - which are too small to compete against the mega-resorts, but too big to operate only as hotels."
At a major gaming conference here last week, a panel of Wall Street analysts talked about downsizing.
"The market will be stronger if a few properties did close. But really, what these [weaker] properties have to do is reposition themselves," said John Kempf of RBC Capital Markets L.L.C. "You can't be just a slots place anymore. Instead of giving a room away, you sell the room because you have a conference in your hotel. . . . You make Atlantic City a place to go for conferences and conventions."
Adam Rosenberg of Goldman Sachs suggested better use of casino space. "What the whole industry has to do is a better job of being able to modulate the supply up and down, and being more thoughtful about [hotel] room capacity," he said, citing Borgata's 800-room Water Club tower - which is closed midweek during much of the winter - as a good example.
Said Cory Morowitz of Morowitz Gaming Advisors L.L.C. in Galloway, N.J.: "Stronger casinos that have invested in their product will remain viable despite the number of competitors." An example is the Borgata, which has undergone about $1 billion in upgrades since it opened in 2003.
Joe Lupo, Borgata's senior vice president of operations, acknowledged the huge competitive challenge. "The Jersey Shore will never be quite the same due to the fact we are completely surrounded by gaming on all sides," he said.
But increasing saturation of the East Coast gambling market and decaying casino-hotels are not the only problems.
Though Hurricane Sandy had little physical impact on Atlantic City, it managed quite a punch nonetheless: The prime feeder market of North Jersey and New York gamblers have spent the last six months digging out and cleaning up; mistaken perceptions of a demolished Boardwalk persist, and some observers say the storm pummeled the resort's biggest project in nearly a decade - Revel, built at a cost of $2.4 billion and open just a few months when Sandy struck. The casino emerged from bankruptcy last week.
And then there's Atlantic City's perennially poor image.
Nick Franzi, 61, a retired reinsurance underwriter from Princeton, said the state-run tourism district Christie established last year had done too little to improve things outside the casinos.
"They've addressed pockets, like the Boardwalk or the marina, but the rest of the city they've abandoned," Franzi said recently at the Borgata. "Atlantic City isn't a destination. Each casino is. People go to their favorite casino, and nowhere else."
Said retiree Jeremy Martin, 70, of Roxborough, who owns a second home in Ventnor: "You can't go two blocks off the Boardwalk. It's not safe, especially at night."
When Christie announced a state takeover of the city's tourism district two summers ago, he said the resort must evolve into a year-round, overnight destination to survive.
"He still believes that," Christie spokesman Michael Drewniak said last week.
"We prefer to be optimistic about Atlantic City. It's doing the right things finally. It's using gaming revenue to advertise, smartly and aggressively, and it's attracting new capital investment, including developers willing to refresh older properties in addition to new construction and attractions," Drewniak said.
On Thursday, Christie cut the ribbon for the $35 million Margaritaville, a dining and entertainment complex at Resorts, Atlantic City's oldest gambling hall. The casino also put in new carpets, two VIP lounges, a food court, and retail shops, and is renovating its hotel bathrooms.
"I don't think Atlantic City is doomed," said Mitchell Etess, chief executive of the Mohegan Tribal Gaming Authority, which became co-owner of Resorts last year. "We wouldn't be here . . . if we thought that.
"There are tons of people who live and work and still want to visit Atlantic City. Let's give them a reason to come here."