Prospects growing bleaker for Boardwalk

The damage to Atlantic City associated with Superstorm Sandy in 2012 amounted to a few broken windows compared to the economic tornado tearing through the Boardwalk this year.

Four casinos could be closed by fall, displacing more than 8,000 workers — 25 percent of the city’s workforce — and leaving the famous seaside resort looking more like a boarded-up slum.

Since 2006, Atlantic City’s annual gaming revenue has tumbled roughly 55 percent, a reflection of the sour U.S. economy, casino competition from neighboring states and lack of attention by state and city leaders.

The venue didn’t keep pace with changes in the gaming industry. Until recently, casinos didn’t give customers more reasons to visit besides gambling.

Atlantic City was slow to embrace Las Vegas-style nongaming entertainment. On the Strip, gaming accounts for roughly 37 percent of the market’s overall revenue. In Atlantic City, gaming is 71 percent of the revenue total.

“Many mistakes were made by government, tremendous mistakes, including no reinvestment in town,” New York developer Donald Trump told The Associated Press.

Trump was once king of the Boardwalk. The billionaire built three Atlantic City Casinos bearing his name. He left gaming seven years ago and owns less than 10 percent of Trump Entertainment Resorts. By September, there may be just one casino, Trump Taj Mahal, using his name.

Atlantic City began 2014 with 12 casinos. The Atlantic Club closed in January after failing its way through six different owner groups in 26 years.

Meanwhile, operators of the bankrupt 30-month-old Revel said they will close the resort this summer if they can’t find a buyer. An auction is set for next month. Caesars Entertainment Corp. will close the Showboat on Aug. 31. Trump Plaza is now expected to close on Sept. 16.

That’s one quarter of Atlantic City’s casino industry going by the wayside in nine months.

The closures would also eliminate two nongaming attractions that bring in visitors — House of Blues at the Showboat and the Rainforest Cafe at Trump Plaza.

Only Wall Street sees a silver lining.

“We view the potential closures and restructurings as a positive for the long-run health of the Atlantic City gaming industry,” Wells Fargo Securities analyst Cameron McKnight told investors.

There is no shortage of blame — regulators, casino operators and state and local government — for this disaster.

Revel, whose futuristic design was widely criticized and cost $2.4 billion to build, should never have opened. The casino was one of the city’s worst-performing properties and filed its initial bankruptcy before its first birthday.

Unless a buyer is found, it will become a gleaming eyesore on the Boardwalk’s northern end.

Caesars Entertainment is partly culpable for Atlantic City’s troubles. Besides Showboat, the company owns Caesars, Bally’s and Harrah’s.

Earlier this year, Caesars Chairman Gary Loveman said Atlantic City had too many casinos. That pronouncement came after the company and Tropicana Entertainment jointly bought and closed the Atlantic Club, selling off everything that wasn’t nailed down.

Yet, Caesars helped reduce Atlantic City’s East Coast customer base. It expanded its Harrah’s Philadelphia racetrack casino and will open a $442 million casino in Baltimore next month.

Caesars took a public relations hit over the Showboat plans and later said it would sell the hotel-casino if a buyer surfaces. The clock is ticking.

State gaming regulators also bear some blame.

New Jersey gaming authorities kept several potential casino operators out of the market in recent years, depriving Atlantic City of new investment and potentially innovative attractions.

The Division of Gaming Enforcement gave MGM Resorts International an ultimatum in 2010: Sell its Atlantic City holdings or end its investment in Macau with Hong Kong businesswoman Pansy Ho.

The answer for MGM was easy. Atlantic City lost a casino operator contemplating a $5 billion resort near the Borgata.

The failing economy might have kept MGM Grand Atlantic City on the shelf, of course.

Regardless, MGM has thrived in Macau. The company invests profits from China in nongaming Strip developments, the kind that might have turned around Atlantic City’s fortunes.

Meanwhile, online gaming giant PokerStars wanted to buy and operate the Atlantic Club. Regulators said no to the tarnished Gibraltar-based company, and the deal fell apart.

Now that PokerStars is being bought for $4.9 billion by Canadian Internet wagering firm Amaya, New Jersey is taking a fresh look at the company. But saving the Atlantic Club has come and gone.

Fitch Ratings Service gaming analyst Michael Paladino said Tuesday that New Jersey’s online gaming market — where actual results are nearly 45 percent below expectations — played a role in the casino closures.

Paladino said hope of better returns from online gaming kept several casinos open.

“However, with online gaming revenues plateauing early in the ramp-up cycle, online prospects are now depressed and unprofitable land-based operations are discovering that closing is their best option,” Paladino said.

Howard Stutz’s Inside Gaming column appears Wednesdays and Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. Follow on Twitter: @howardstutz.