Casino gambling has been legal in New Jersey for more than four decades. From the opening of the first legal casino outside of Nevada–Resorts–in 1978 to the present day with nine Atlantic City casinos, the industry has been in a continuing state of flux.
Here are five important developing stories affecting the Atlantic City casinos cited in the 1/2/20 edition of PressofAtlanticCity.com.
NJ Online Casino will also follow each of these stories closely this year. Any of them can have a major impact on the Atlantic City casino industry.
Caesars – Eldorado Merger
The pending $17.3 billion dollars acquisition of the giant casino conglomerate Caesars Entertainment Corporation by the Reno-based Eldorado Resorts, Inc. still awaits approval from federal and state regulators.
Assuming they give the green light, the result would be the largest gaming company in the US. It would include nearly 60 properties in 18 states.
Caesars Entertainment already owns three Atlantic City casino properties. They include Caesars, Bally’s, and Harrah’s. Meanwhile, Eldorado Resorts owns just the Tropicana. However, if the merger becomes finalized, Eldorado Resorts would own four Atlantic City casinos, although all four would operate under the Caesars name. The newly formed company would also hold deed restrictions on three non-gambling hotels in Atlantic City which have previously housed casinos.
Reasons for concern
Some state legislators fear that the dominating presence of a single company in Atlantic City would result in “undue economic concentration.”
However, the affected gambling entities submitted a joint petition last year to the NJ Division of Gaming Enforcement (DGE) stating that an expert would present evidence to the contrary.
Meanwhile, Daniel Heneghan, an industry consultant and retired public information officer for the Casino Control Commission, voiced another concern. Heneghan pointed out the likely implementation of operating efficiencies such as reducing the number of employees.
Eldorado CEO Tom Reeg has already publicly stated that it intends to implement nearly $500 in “synergies” once the merger is completed.
However, Atlantic City casino employees might not be the only group of people to be adversely affected. The cutting of expenses following the merger could also affect players at these casinos (changes in the rewards programs, for example), as well as the Atlantic City community and overall gaming industry.
Sports betting and online gaming
The enormous popularity of NJ legalized sports betting together with the growth of online gambling has had a huge impact on the bottom line. Sports betting and online gaming together account for nearly 18 percent of total revenue in New Jersey for the first 11 months of 2019.
During 2019, gamblers spent more than $4 billion on legal sports bets in New Jersey. This has generated more than $111 million in revenue and $13.7 million in taxes.
2019 NJ internet gaming revenue was also very impressive. The first 11 months generated a nearly 61 percent increase compared to the just short of $433.4 million in revenue for the first 11 months of 2018.
The huge growth in NJ internet gaming in 2019 occurred during the first full year of legalized sports betting in the state. It is no coincidence since more than 80 percent of all sports wagers placed in NJ last year have been online. That trend should continue in 2020.
Regional competition with Atlantic City casinos
2019 was a banner year for Atlantic City casinos. However, regional competition continues to be a major concern. Atlantic City casinos have already shown their vulnerability to competition from nearby states. With added and enhanced gambling and tourism alternatives becoming available in 2020, Atlantic City needs to prepare accordingly.
A specific example is the 2 million square-foot LIVE! Hotel and Casino expected to open in Philadelphia this year.
According to Bob Ambrose, an industry consultant and adjunct professor of casino management, “the uptick in revenue this past year from product diversification has helped to stabilize this fragile market temporarily.”
But Ambrose cautions that Atlantic City can’t afford to be complacent because “on the horizon for 2020, the economic-competitive pressures continue from an already oversaturated northeastern market.”
Furthermore, despite all of the talk projecting that New Jersey will overtake Nevada as the No. 1 state for sports betting, other states are also competing for their slice of the pie. Sports betting is now legal in 20 states and Washington DC, and at least nine more states will probably join the fold in 2020. So sports betting will continue to expand in neighboring jurisdictions, both in retail casinos and online.
Diversification of the casino industry
In recent years, Atlantic City casinos have begun emulating Las Vegas in putting greater emphasis on non-gaming amenities.
The switch is based on the realization that the nature of the market has changed, that casinos need to target millennials, and they can’t rely on gambling revenue alone to maintain profitability, Accordingly, nearly 70 percent of all revenue at La Vegas casinos now comes from amenities other than gambling.
The percentage is currently significantly less for Atlantic City casinos, but they could be headed in that direction.
Rummy Pandit, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University, believes that continued diversification on the part of the Atlantic City casinos is essential to the resort’s long-term stability.
He pointed out that 47 percent of the Atlantic City casino revenue generated in the third quarter of 2019 came from non-gaming offerings, as compared to 27 percent in 2017.
Pandit also had this to say about the growing trend towards diversification being evidenced in Atlantic City.
“I anticipate that number is going to continue to grow as Atlantic City books more meetings and conventions and other leisure market segments continue to expand. The product is constantly being refreshed by operators, creating a buzz about Atlantic City. That is further strengthening our position as a destination resort and helps to differentiate us from other locations.”
Partnerships between Atlantic City casinos and outside businesses
In addition, several Atlantic City casinos have partnered with other businesses in the area to showcase what the city has to offer. For example, Hard Rock Hotel & Casino, Resorts Casino Hotel, and Ocean Casino Resort have partnered with various other nearby businesses to create the collaborative promotion North Beach Atlantic City designed to draw more traffic to the area.
Atlantic City continues to be under state control resulting from the 2016 takeover. Its financial state has recently improved, but there is still much room for further improvement.
Michael Pollock, managing director of Spectrum Gaming Group, envisions the ongoing presence of the state as an opportunity for the Atlantic City casino industry to realize its full potential. He equated the potential of Atlantic City to the horizon that you never reach but is always out there.
Pollock believes that what he describes as the “unprecedented public-private partnership” can serve as a catalyst for reaching that potential. More specifically, with the help of the state’s resources such as tax incentives, along with the contributions of private investors, Pollock is confident that “Atlantic City can again be the preeminent gaming destination on the East Coast.”