Some see implications for Mass. in N.J. casino woes
ATLANTIC CITY — Cash vouchers in hand, Edna Kozakas poked around the gambling floor at the Showboat casino last week, looking for the last bits of luck among the penny slots.
“My last hurrah here,” she said, in a sad little obituary for a casino that brought her many hurrahs.
The Mardi Gras-themed hotel and gambling hall — as tacky as flypaper to some, but lovable to many — was the place Kozakas and her gal-pals often visited from New York, a bus ride of more than two hours.
But that was before New York’s Resorts World casino opened three years ago, offering the convenience of thousands of slot machines close to home.
With revenue down due to competition from around the region, Showboat closed on Sunday, the first of two casinos that will shut its doors this week along Atlantic City’s famous boardwalk. Another casino closed earlier this year. Still another will shut down in two weeks, which will leave Atlantic City with eight.
The contraction and painful layoffs in New Jersey — amid disappointing revenues in the casino industry elsewhere in the United States — come at an inauspicious time for casino supporters in Massachusetts, a little more than two months before voters will decide whether to repeal the state’s casino law in a ballot referendum.
Casino opponents in Massachusetts have seized upon Atlantic City’s troubles as a campaign issue, arguing that the Northeast cannot support the abundance of casinos that already exist, so why build more?
“Atlantic City is just the latest example in an ongoing trend brought by oversaturation and broken promises,” said David Guarino, spokesman for the casino repeal campaign.
The industry’s supporters argue that Massachusetts’ casino marketplace would be a much different animal — a maximum of four facilities, not a dozen. With more than 6.5 million residents, the Bay State has enough potential customers to support up to three resort casinos and a slot parlor scattered around the state, as called for in the 2011 expanded gambling act, supporters say.
“All four facilities can do very well and you would not have a supply-and-demand imbalance,” said Jay Snowden, chief operating officer of Penn National Gaming, the company building the state’s slot parlor in Plainville.
But while the Massachusetts model may look nothing like the boardwalk, the state is not immune to the same competitive pressures that are squeezing Atlantic City, specialists say.
Competition has shrunk casino markets, and new jurisdictions should look soberly on how much tax revenue casinos can produce, said Israel Posner, an expert on Atlantic City and director of the Levenson Institute of Gaming, Hospitality, and Tourism at Richard Stockton College of New Jersey.
In Atlantic City’s case, new casinos in neighboring states have intercepted customers and devastated the city’s gambling profits. After peaking at $5.2 billion in 2006, total gambling revenue at Atlantic City casinos declined each year, to $2.8 billion in 2013.
Other casino jurisdictions are also suffering in the face of competition, and less interest in gambling among younger people, said Posner. Ohio’s casino profits, for example, have not lived up to projections. Closer to home, the Connecticut tribal casinos, Foxwoods and Mohegan Sun, have seen declining gambling revenue.
Mohegan Sun is looking for more of the emerging Massachusetts market, submitting a proposal for a Revere casino. That project is competing with a Wynn Resorts project in Everett for the sole Greater Boston casino license. The state gambling commission will choose a winner around Sept. 12.
Casino consultant and author Gary Green said what happened to Atlantic City, “is going to happen to Mohegan when Massachusetts opens, so their choices are to be completely cannibalized by another operator or to be part of that cannibalization themselves and get a piece of that. It’s going to happen either way.”
Foxwoods, in a similar position, has expressed interest in the state’s Southeastern license, scheduled to be awarded next year.
The commission granted the slot parlor license to Penn in February, and promised the Western Massachusetts license to MGM Resorts.
But that might not be the end of casino expansion in the region, a possibility that may cause Massachusetts regulators to think hard about whether to issue the southeastern license.
The Mashpee Wampanoag continue to pursue a tribal casino in Taunton, under a federal process that is mostly out of the state’s control. The state’s other federally-recognized tribe, the Aquinnah Wampanoag, has floated the idea of a boutique casino on Martha’s Vineyard. In New Hampshire, lawmakers continue to flirt with legalizing casinos, using the same argument gambling supporters used so successfully in Massachusetts: If our people are going over the border to play, why not build our own casinos and keep that money at home?
With so many states in the casino business, or considering it, gambling markets must be viewed regionally, said Posner. Atlantic City, the site of the gambling industry’s original expansion on the Eastern Seaboard in 1978, sits in a roughly $6.5 billion regional gambling market, he said. That market traditionally included the New York, Philadelphia, and Baltimore-Washington metro areas. Back when Atlantic City had 100 percent of the casinos in the market, it could expect 100 percent of the revenue.
Now there are about 25 casinos in that region, he said, and Atlantic City’s revenue has declined proportionately: The city has roughly 45 percent of the region’s casinos, and gets roughly 45 percent of the revenue.
“It’s really a market-share battle, unless someone creates a better mousetrap, or a mousetrap that’s closer to the mice,” Posner said. “That’s really what it’s about.”
Right next door to Showboat, the enormous and ultramodern Revel casino will close Tuesday morning, just two years after opening. The boardwalk’s Trump Plaza casino is due to close Sept. 16. The Atlantic Club casino shut down in January.
In their final days, Showboat, which opened in 1987, and Trump Plaza, which opened in 1984, became must-see stops for gamblers on nostalgia tours.
“Lately there have been quite a few people who have come through that we haven’t seen in quite a few years,” said Dawn Inglin, who has worked at Trump Plaza for 30 years.
Visitors to Revel in its final days sunned themselves at the resort’s rooftop pools, and gawked at one of the biggest busts in gambling history. The $2.4 billion palace of glass features soaring spaces, spectacular ocean views, and few gamblers.
“Look at it, it’s a ghost town,” said Roy Brachfeld, 48, looking at the casino while visiting from upstate New York last week on a free-room offer from Revel. “It’s such a beautiful place. Just a shame.”
The three casinos shutting down this summer were among the city’s worst performers.
Revel earned $85 million in gambling revenue this year through July 31, less than a quarter of what Atlantic City’s top casino, the Borgata, took in during the same time period, according to figures compiled by the University of Nevada Las Vegas Center for Gaming Research. Showboat was not much better, with $95 million in gambling revenue through July 31. Trump Plaza ranked last in the city, at $32 million.
John Palmieri, head of the New Jersey Casino Reinvestment Development Authority, said he hopes Revel will be bought by new ownership, and relaunched.
“Rumors abound,” said Palmieri, former head of the Boston Redevelopment Authority. “I think they’ll find a buyer.”
Potential investors are looking at Showboat, too, he said; and Trump Plaza has a prime location.
If the casinos do not reopen, that may be OK, too, providing more revenue for the remaining casinos to be successful.
“We are not outliers,” said Palmieri, speaking generally about Atlantic City’s troubles. “We became the story line, but a lot of casinos are struggling with lower revenue.”
Atlantic City aims to continue to be what it has been since the 19th century: A getaway destination for beach lovers. There is talk of a cruise ship port, more midweek conventions, and some efforts to diversify an economy almost wholly dependent on tourism.
“You have to pick yourself up and try to reinvent yourself and figure out a way to move on with your life,” said 57-year-old beverage server Mary Creedon, laid off in January after 33 years at the Atlantic Club.