ATLANTIC CITY: WORST IS YET TO COME
By Joe Brancatelli
August 21, 2014 -- The lodging industry was aghast when the $170 million Ritz-Carlton Lake Las Vegas closed in 2010 after just seven years. You can imagine what they're saying now that the $2.4 billion Revel in Atlantic City is shutting after little more than two years.
Among the words I've heard: nightmare, disaster, inconceivable, absurd, tragedy, farce and ludicrous.
But, wait, there's more: The Lake Las Vegas property has reopened as a Hilton, but almost no one thinks the twice-bankrupt Revel will host travelers again after it locks the hotel on Sept. 1 and empties the casino on Sept. 2.
"It's an inefficient building," explains Tony Isaac, a born-and-raised Jerseyite and Chicago-based hotel developer. Isaac calls the 1,400-room, 52-story Revel "beautiful," but insists "it isn't designed to run as a hotel. It's not on anyone's radar to save, even for pennies on the dollar. It would cost too much to fix."
But, wait, there's still more. One Atlantic City casino has already closed its doors and Revel along with two more will shut down in the next few weeks, delivering a succession of blows to the woebegone oceanfront community. The citywide gambling "handle" is down 44 percent since 2006, regional casino competition is growing fast and no one knows how Atlantic City can survive.
"Atlantic City has failed because of the short-sightedness of politicians and bureaucrats," says Bob Ingle, co-author of The Soprano State, a New York Times best-seller about New Jersey. "They had in their closed minds that Atlantic City is an East Coast gaming destination without competition even after it had plenty of competition."
The story of the Revel disaster and the gambling remake of Atlantic City are similar. Both were desperate rolls of the dice — literally and figuratively — and both have failed miserably.
Pre-war Atlantic City justifiably called itself "the World's Playground." It had the Steel Pier, the Miss America pageant, fine hotels, a fantastic beach and a fabled boardwalk. The board game Monopoly made its streets famous.(And HBO's Boardwalk Empire retroactively lionized its Prohibition era.) The city was also blessed geographically, only 60 miles from Philadelphia and 100 miles from New York City. Leisure travelers from around the East and business travelers nationwide visited.
But the growth of Interstate highways and cheap air travel after the war made Atlantic City less relevant. The city's physical factory deteriorated and many oceanfront hotels were demolished. The crime and unemployment rates skyrocketed. Atlantic City seemed obsolete with Miami, the Caribbean, Las Vegas or Disney World just a flight away.
Left for dead, Atlantic City turned to casino gambling. The logic was tempting: With Las Vegas then the only other legal venue for gaming, an East Coast gambling mecca — with a beach, no less — couldn't miss. And it didn't. At least for a while. Several old hotels and the boardwalk were revitalized, new lodgings and condos were built and casino revenue soared.
Even at its casino-fueled height in the late 1980s and early 1990s, however, Atlantic City wasn't nearly as popular as Las Vegas. Casinos changed names and owners with distressing frequency. As Ingle's book so vividly documents, both the New York and Philadelphia mobs got their cuts. And the city never successfully gained a foothold in the business-travel or convention and meetings markets.
Worst of all, the gaming industry and the politicians who supported it reneged on promises to revitalize the surrounding community. Crime remained stubbornly high and frightened tourists rarely ventured off the boardwalk or far from the casinos. Atlantic City's unemployment rate of 14.9 percent is among the highest in the nation and about 30 percent of residents live below the poverty line.
Then came the competition. First two purpose-built mega-casinos in nearby Connecticut. Then smaller operations in New York, Maryland and especially close-by Pennsylvania. According to industry statistics, the gaming take in Atlantic City declined to $2.8 billion last year from a high of $5 billion in 2006.
Revel was supposed to reverse Atlantic City's flagging fortunes. Conceived by Morgan Stanley, which purchased a 20-acre parcel in 2006, Revel was always part fantasy and part disaster. The original plans called for a 3,800-room, two-tower complex. Then came the blunders and the bad luck: six executives working on Revel died in a 2008 plane crash; a cash crunch in 2009 slowed construction; Morgan Stanley took a $1 billion loss in 2010 and exited the project; and, almost prophetically, a Revel construction worker was struck by lightning and died in 2011.
When the slimmed-down, glass-sheathed Revel tower finally opened in April 2012, critics praised the design, guestrooms and restaurants. But hoteliers were critical of its dicey location at the far end of town, the hotel's stark and empty public areas and the poor nuts-and-bolts operational flow. Marketers questioned the initial decision to position Revel as a luxury resort and treat the casino as an afterthought. And gaming pros warned that Revel's cavernous casino wasn't lively, inviting or even easily accessible.
And while Revel was the first casino built in Atlantic City in nearly a decade, the customers didn't come. The casino's take consistently ranked at the bottom of the list of 12 gambling venues in the city. Less than a year after opening, Revel filed for Chapter 11 and last year's reorganization left lenders with an 82 percent stake in the flailing operation.
Revel and Atlantic City have both been sinking fast despite pledges from New Jersey Governor Chris Christie to right the ship. Huge tax breaks haven't helped. New flights by United Airlines to Atlantic City's nearly moribund airport haven't moved the dial. A "DO AC" advertising campaign got good notices, but didn't bring customers.
The ACH Casino, which had five other names in 34 years, closed in January. Revel declared bankruptcy again in June. The Showboat closes on Aug. 31, the day before Revel. The Trump Plaza shuts two weeks later. The four closures will put more than 8,000 additional workers on Atlantic City's already mean streets. Gaming analysts say there's probably only room for four of the eight remaining casinos. Rating agencies have downgraded the city's debt and some social observers liken Atlantic City to Detroit. Gov. Christie has called a crisis summit for Sept. 8 to try to salvage what's left.
But the bottom line is that there's precious little reason to visit Atlantic City. The Connecticut casinos are better and safer for gamblers. There are good beaches and hotels elsewhere for leisure travelers. And nothing in Atlantic City attracts business or business travelers.
"I'll never forget the first time I drove my kids to Atlantic City," says David Danto, a New Jersey resident and frequent- flying technology consultant. "They said to me, "So that's why Mediterranean and Baltic Avenue are so cheap in Monopoly, they're full of dilapidated buildings."
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT This column is Copyright © 2014 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2014 by Joe Brancatelli. All rights reserved.