Congratulations to Atlantic City Mayor-Elect Frank Gilliam, and welcome to a casino resort trying to rebound from too much gaming competition.
I was fortunate enough to be part of the birth of Eastern America’s first casino resort, and it was an amazing time. At Resorts International, we purchased and ran the Chalfonte-Haddon Hall Hotel for a year and a half as a convention hotel, and saw how bad the city’s economy had declined. But on Memorial Day 1976, Resorts International’s casino hotel opened, and the future looked bright, and was, in-spite of, distant competition in Delaware, Connecticut and West Virginia.
But we still grew, for 28 straight years, even surpassing the casino win in Las Vegas. And then in the Fall of 2006, Pennsylvania opened slot parlors, and those around Philadelphia and Eastern PA; started eating our lunch (stealing our casino patrons, even those on-line run buses). And the 10 years since, after also adding table games, Pennsylvania, as well as Maryland and New York, have caused an AC casino revenue decline of over $3 billion annually, by 2016.
We are fortunate to have Hard Rock, and its emphasis on entertainment, taking over the closed Taj Mahal, and creating a new reason to visit AC.
AC’s future success is going to be more dependent on attracting conventions and trade shows, than on the casinos.
All we need to do is look at the Strip in Las Vegas, to see how that casino resort successfully fought the introduction of casino gaming in its primary markets, Arizona, California, Oregon and Washington. Las Vegas no longer relies just on the casino department for their revenues and profits, but have become the top convention, trade show destination in North America, if not the World.
Where casino win once exceeded 70%, like Atlantic City still does, the larger Strip casinos are now under 35%, and their contribution to operating profits, only 26%. High hotel occupancies and average room rates, spurred by full rate mid-week convention demand, have allowed the 24 larger Strip resorts to enjoy annual occupancies of 93% at a $172 average rate. So the rooms department provides 41% of the operating profit, with food and beverage at 13% and the convention and entertainment departments adding another 20%.
In AC, casino resort occupancies are a respectable 85%, but the average room rate is only $106; with 54% comped, along with 48% of food and beverage. But the sad fact is the discounting of room rates, 200 mid-week nights in the Fall, Winter and Spring; that are generally 80% to 90% lower than Saturday nights; ant the non-casino departments contribute nothing to the AC resort profitability. These are the nights where the Strip has created a valuable customer base, of conventions, trade shows, corporate meetings and association events; with exhibitors and attendees that pay full rate for meals, accommodations, retail and even see the shows and visit the gaming floor.
Atlantic City has one gigantic advantage over Eastern cities in competition for the convention trades, and that is in rates for room accommodations.
Mid-week, in New York, the better hotels average room rates of over $500 per night, approximately 10 times our current mid-week rate (except the summer months). But we have one major problem, no commercial air service, that connects AC to the rest of North America. And our convention visitor’s employer is paying for transportation, accommodations and meals, so flying into Philadelphia International, and taking a bus or rental car is not a viable option. We just need air service into several hub airports, like Atlanta; that by the way, has over 90 flights a day just to Las Vegas.
In addition, AC can provide roughly 20,000 rooms, conveniently located in close proximity, along with ample convention, exhibit and showroom capacity, as well as a plentiful sup,ply of dining and function options.
One way to underwrite new air service into AC International, would be to make a deal with the State for North Jersey casino gaming, at a site like the Meadowlands, where a Pennsylvania casino tax structure would provide more than $400 million annually in casino taxes. And to give up our monopoly, the State could share the tax revenue with AC.
Air service would not only create new convention demand for AC, it would also provide transportation that would allow all South Jersey’s 50,000 resort accommodations to benefit.
I know live in California, and have been a casino executive for 50 years, at casino resorts, racinos and riverboats in the Bahamas, Atlantic City, Las Vegas, Laughlin, Colorado, Illinois, Indiana, Louisiana, Iowa and Missouri. In New Jersey and the riverboat states, I worked with the State Legislatures on drafting the casino bills and in several on the gaming rules and regulations, as well as state and local referendums. I would be pleased to offer assistance to any Tribal casinos in Southern California.