Atlantic City – Decline and Fall of Gambling

Atlantic City has fallen on such hard times that bankruptcy chatter permeates the air. The city’s primary industry, gambling, has been decimated as newer casinos in nearby states have lured gamblers away from the New Jersey shore with its famed boardwalk.

New Jersey Governor Chris Christie is not taking this turn of events lying down. He has appointed a turnaround team, including former Detroit emergency manager Kevyn Orr, to review the alternatives. Is this only a step away from an autopsy? After all, Kevyn Orr is the guiding light who launched Detroit into bankruptcy.

Truthfully, can anyone perform magic on a city that saw 4 of its 12 casinos close last year? Then there’s the Trump Taj Mahal, which barely avoided closing, remains on life support, and is seeking a white knight investor. Caesars Entertainment, which owns Bally’s Atlantic City and Caesars Atlantic City, filed for bankruptcy last month.

“No one should expect that the appointment of a very competent fiscal manager is the solution for Atlantic City,” said Peter Reinhart, professor and director of the Kislak Real Estate Institute at Monmouth University, as it would not solve the underlying problems of a stagnant tourism and casino industry.

Besides the downward spiral of casino gambling, there is also the threat of online gaming. You can now add New Jersey to the number of states who allow online gaming. The Garden State joined Nevada and Delaware as the only states with legalized online gambling, and is now the biggest in population.

How does that impact destination gambling? It doesn’t help. However, many don’t go for gambling alone. The resorts offer shows, seminars and conventions — both for recreation and business. Ultimately, the casinos may be the biggest winners because as it now stands, online gambling web sites must operate through casinos. But, for how long? And, as states seek revenue, some will inevitably turn to online gaming as a source to help fill their coffers which may prompt them to loosen this restriction. Anytime a gambler can place a bet online rather than having to go to a physical place is one less gambler available to all casinos, including Atlantic City casinos.

Atlantic City is a town of 40,000 people, 48 blocks long, three-quarters of a mile wide at its widest. Its budget is about $270 million. About one-third of its residents live in poverty. More than two-thirds of its adults age 25 and older have a high school diploma or less. Atlantic City remains the only place in New Jersey where casino gambling is legal.

Is any casino doing well? “Well” may be a relative term. The casinos left are, at least, still open. They are the Borgata, Tropicana, Resorts, and Golden Nugget. The decline started in 2007, the year after Pennsylvania opened slots. Within four years, Pennsylvania bumped Atlantic City out of second place behind Nevada in annual gambling revenue. In 2013, Pennsylvania’s gross gaming revenue was $3.1 billion. There is also competition from New York which allows gambling in the Catskills and various counties.

No matter how you look at it, hiring a turnaround team knowledgeable in municipal bankruptcy is a sign of Atlantic City’s times.