The Real Deal New York

Atlantic City goes all in

The struggling town is set for a renaissance thanks to the opening of new casinos and a slew of offerings not related to the gambling scene
By Pia Catton | July 12, 2018 11:00AM

The spa pool at Ocean Resort Casino, which opened in June at the former Revel

Atlantic City seems to be getting back in the game.

The recent legalization of sports betting can only help the casino-driven local economy, experts say. But developers are also looking beyond gambling to attract a broader mix of travelers and diversify the city’s revenue stream.

“New business is on a parallel track with gaming,” said James Wood, president and CEO of Meet AC, a marketing bureau launched in 2014 to position the casino town as a convention destination. “We want to maintain a vibrant economy, just as Las Vegas has a strong non-gaming component.”

On the gaming side, the Hard Rock Hotel & Casino, formerly the Trump Taj Mahal, opened in June. In addition to drawing guests who want to gamble, the venue hopes to appeal to music lovers with its focus on entertainment, including at least 50 acts a week and a theater that can seat 7,000, according to a spokesperson.

The Ocean Resort Casino, formerly the Revel, also opened last month. The two launches mark a reversal of the 2014 wave of casino closures. The result of that spate of closings was financial trouble so dire that in 2016, state officials took over fiscal control of the city. With the state’s help, the city reached an $80 million tax settlement — related to tax appeals — with casinos; the move helped Atlantic City avoid bankruptcy and positioned it for a rebirth.

Room for more?

In 2016, revenue per available room (RevPAR) grew 19 percent and occupancy grew 45.7 percent year-over-year as the casino closures resulted in a drop in supply. In 2017, occupancy and revenue per room was nearly equivalent to 2016; the number of rooms grew by 324 in the same period. The increased inventory led to a 9 percent dip in Atlantic City’s revenue per available room, down to $51.96, in the first five months of 2018 versus the year-ago period, according to STR, a data and analytics specialist.

Industry insiders see the push to diversify attractions in the city as the key to fueling more demand for the added room supply. Sports betting is a significant part of that diversity, said Dan Hanrahan, a director with CBRE Hotels Advisory, Capital Markets.“It may well attract a patron or visitor that might not have come to Atlantic City.”

But even stronger help could come from beyond the casinos, he said, such as conventions or the nascent corporate presence: “You need non-high-season business.”

The opening of the Hard Rock and the revamped 6.4 million-square-foot Ocean Resort Casino — which developer AC Ocean Walk acquired in January 2018 for $200 million — will add about 3,500 rooms to the supply pool, as well as about 6,500 jobs, according to Mayor Frank Gilliam.

The Tropicana Casino and Resort recently changed hands as well. In April, Carl Icahn announced a $1.85 billion deal to sell Tropicana’s real estate to Gaming and Leisure Properties, Inc., and to combine its gaming and hotel entities into Eldorado Resorts, the casino entertainment company.

And Showboat owner Bart Blatstein said recently that after reopening the 852-room property as a hotel only — without the original casino — the full capacity of 1,300 rooms will be available this summer.

City officials are looking to fill some of those rooms with convention-goers. The Atlantic City Convention Center has 486,600 contiguous square feet of exhibition space, with 45 meetings rooms and five exhibition halls ranging in size from 29,400 to 199,500 square feet.

All those exhibitors and guests need places to sleep, and the hotel market appears to have seen gains through the marketing of the convention center. In 2016, the number of rooms booked increased 22 percent year-over-year, to 213,189, coinciding with wider marketing of the center and new amenities. In 2017, the total number of rooms booked due to conventions or shows rose to 219,839, an additional 3 percent increase over the prior year, according to data provided by Meet AC.

In addition to trade shows and new casinos, events involving multiplayer video games and other e-sports are an area for growth, according to Meet AC’s Wood. He also said that large amateur competitions that bring in beach volleyball and basketball teams are spurring demand. Then there are emerging sports such as beach pole vaulting or long-drive contests, an offshoot of golf in which participants try to hit the longest drive. Last month, the World Long Drive Association convened in Atlantic City.

Getting to betting

As for the potential impact of tourism driven by sports wagering, one variable for hotels will be the length of stays generated by the bettors, Hanrahan said.

Day trips by bus to Atlantic City are easy to book from all over the East Coast, so the question is, will sports bettors go that route, or will they arrange for overnight stays to coincide with sports events? Keeping sports bettors overnight may be as simple as providing in-play betting, which allows for wagers throughout the games in real time. It’s a factor that brings a new activity to hotels, said Hanrahan, and more activity adds more demand. But it’s too early speculate on numbers.

Although the growth of online sports wagering could keep bettors at home, experts see online activity as supporting in-casino activity.

“Early fears that Internet gaming would cannibalize land-based casino revenues have largely been dismissed,” according to Rummy Pandit, executive director of the Lloyd D. Levenson Institute of Gaming Hospitality & Tourism. Pandit’s 2017 report on the issue cited gains in land-based gaming in 2015 and 2016.

As the market matures, the real competitor may not be online sports betting, said Hanrahan, but sports books in other states. “As more states come online, [Atlantic City’s draw] may become diluted,” he said.

Away from casinos

Visitors to Atlantic City may be surprised at the new string of hip food destinations on South Tennessee Avenue.

Local developer Mark Callazzo, CEO of Alpha Funding Solutions, is opening the Tennessee Avenue Beer Hall this summer. That debut follows the Hayday coffee shop and the just-opened Made Atlantic City Chocolate, a bean-to-bar chocolate shop where desserts and cocktails are served. The impetus for it all, he said, came from a conversation with a group of millennial employees who said they choose not to live in Atlantic City because it lacks walkability.

“There is no main street. If you walked between the bars, it would be like seven miles,” Callazzo said.

Joining him in raising the hip quotient is Asbury Park developer Patrick Fasano, who is working to bring new restaurant options nearby. Fasano’s arrival is an important vote of confidence, according to Callazzo. “Here’s an out-of-area guy believing in Atlantic City,” he said.

Another major part of diversifying the town’s economic base is the $220 million Stockton Gateway Project, which contains a six-acre campus for Stockton University, and the new, 72,000-square-foot headquarters of South Jersey Gas. New industry could also bring overnight guests to the area. 

Stockton’s beachfront campus, which will support 1,000 students and provide apartments for more than 500, is scheduled to open in the fall of 2018. Stockton’s neighbor, South Jersey Gas, will work out of a new six-story office tower with about 200 employees. It is scheduled for completion in late 2018.

The developments all add up to evidence that revitalization is coming, block by block, said Mayor Gilliam. “We are going to continue to tackle the blight.”