No Certainty as 2 New Casinos Opening This Summer Will Magnify Competitors for Reduced Gaming Business
The Hard Rock Atlantic City is banking on the re-emergence of Atlantic City. Credit: Hard Rock International
Putting their bets on a gradually rebounding regional economy– and the potential customers for legalized sports gambling in the state of New Jersey in the future– financiers are planning to re-open 2 shuttered gambling establishments in Atlantic City this summertime.
Hard Rock International and an affiliate of Integrated Residence in Denver are moving forward with strategies to open new gambling establishments along the well known boardwalk after obtaining the closed residential or commercial properties at rock-bottom pricing. The openings are not without danger as they will contend for video gaming income that is still nowhere near exactly what it was Ten Years earlier at the city’s peak.
Competition for gaming dollars is already warming up. Gambling Establishments in Atlantic City have been dropping their hotel space costs to those you may see along a lonely stretch of an interstate highway (rooms from $44/night)– that is about 30 percent lower than formerly offered lows. Guests are likewise being lured with increased medical spa and dining credits, totally free drinks while gambling and approximately $400 in online poker deposits.
In spite of the increased competitors, owners of existing gambling establishments in Atlantic City stated they hope the addition of new attractions assists generate more traffic.
“We see the openings as a net favorable for Atlantic City,” stated John Payne, president and chief operating officer of VICI Characteristics, which owns the realty under two Atlantic City casinos. “As real estate owners, we see exactly what’s occurring in the market through a different lens than operators. We anticipate our possessions to take advantage of the increased traffic. Entirely, these openings help further construct out and bring more favorable attention to Atlantic City.”
More visitors and more betting mean enhanced property worths genuine estate owners, Payne said.
“Our 2 Atlantic City homes– Caesars Atlantic City and Bally’s Atlantic City– lie on the boardwalk in proximity to The Acid rock, which is owned and run by among the video gaming industry’s premier operators,” Payne said. “We anticipate The Hard Rock will be extremely proactive about driving brand-new business to the Boardwalk location, and its unique concentrate on entertainment will be a crucial differentiator in the marketplace.”
The unknown for Caesars and the other casino operators is what happens with New Jersey’s bid to legalize sports betting. The United States Supreme Court heard oral arguments last December in a case brought by the state of New Jersey arguing for the right to enable sports betting in the state. The Supreme Court has yet to release a ruling.
“We believe [sports wagering] will benefit our gambling establishments in New Jersey,” Eric Hession, chief financial officer of Caesars, said last month. “We know for instance that here in Las Vegas, some of our leading days are the Super Bowl and NCAA [Final Four] weekend and some other sporting occasion days. Individuals will want to go to Atlantic City on weekends to view football and wager in our sports books, which will become possibly larger components of the home.”
The first brand-new gambling establishment arranged to open will be the Hard Rock Hotel & & Casino opening June 28. The home, formerly called Trump Taj Mahal, was taken control of out of personal bankruptcy by affiliates of Carl Icahn’s Icahn Enterprises. The Seminole Tribe of Florida, which owns the Acid rock chain, bought the home a year ago for $300 million.
Last month, Icahn cashed in his other Atlantic City casino, after accepting offer its majority-owned subsidiary, Tropicana Entertainment Inc. and its seven gambling establishments, for a total cost of $1.85 billion. That deal amounts to a price of $370,520 per hotel space Tropicana owns. Icahn paid exactly what totaled up to $106,270 per room for the 1,882-room Tropicana Casino & & Resort in Atlantic City when he acquired control of it in 2009.
The buyer of the Tropicana realty, publicly-held REIT Video gaming and Leisure Characteristics, said in a current conference call to go over first-quarter monetary outcomes that it is aware of the brand-new competition, however believes the Atlantic City market has somewhat stabilized.
“I’m not going to tell you that we completely concurred with our renter in terms of exactly what the effect may be of the Hard Rock and the [previous] Revel openings, but the proof is in what they wanted to put on the table,” stated Peter Carlino, the REIT’s chairman and chief executive.
Tropicana agreed to pay Gaming and Leisure 5 years of ensured 2-percent lease increases, a warranty that made the REIT more comfy about the increased competition.
Jim Allen, Hard Rock International chairman and CEO, likewise highlighted the benefits of drawing in larger crowds.
“The Grand Opening of Hard Rock Hotel & & Casino Atlantic City will set the tone for a new period of entertainment in Atlantic City. Our $500 million, newly-reimagined home will use something for everyone,” Allen said.
The 2,000-room property will provide a multitude of gaming chances, consisting of 2,200 slots and 125 table games, and its 150,000 square feet of event area can accommodate meetings of up to 7,000 people.
The other hotel-casino home slated to open in Atlantic City this year the 1,399-room Ocean Resort Casino at 500 Boardwalk. Denver-based AC Ocean Stroll acquired the previous Revel Casino for $200 million this previous January. The home once brought a $3 billion appraisal. Hyatt Hotels Corp. is partnering with AC Ocean Stroll, an affiliate of Integrated Residence, in the venture.
At 60 stories, it is the highest structure in Atlantic City. The expansive 6.4 million-square-foot resort is to feature a 138,000-square-foot gambling establishment, 160,000 square feet of indoor conference and convention space, another 90,000 square feet of versatile outside unique event area, five swimming pools and a 32,000-square-foot gym.
The previous Revel Casino supplies a fresh tip of how a property gamble can go bad. The Revel initially opened in April 2012 and declared personal bankruptcy and closed 2 years later on, ending up being the third of 4 Atlantic City casinos to close in 2014.
“Atlantic City is coming back with a vengeance and with the foundation for the legalization of sports betting, we visualize a fantastic chance to bring a state of the art sports book to a city which caters to a large and diverse sports market,” said Bruce Deifik, chairman of AC Ocean Walk.
Deifik is making sports home entertainment a big part of the casino’s differentiation strategy. He is bringing the biggest Topgolf Swing Suite to the Boardwalk, featuring 11 bays, a first-of-its-kind virtual putting green, and other interactive multi-sport games.
Meanwhile, state and local casino data do not necessarily reveal a comeback. Atlantic City this month released brand-new bonds to help pay postponed pension contributions. The bond offering documents spell out the degree of the city’s financial mess.
Over the previous five years through in 2015, the city has experienced decreasing profits, mostly attributed to the reduced assessed assessments of gambling establishments resulting from the five closures. After revealing a structural budget deficit, the city has actually been subjected to state supervision of its financial resources and multiple credit rating downgrades.
What the city and new gambling establishment operators intend to improve is the number of visitors coming to the city, which has dropped from 24.7 million people in 2013 to 20.6 million last year.
More recently, financial conditions have begun to look up, or at least support.
Video gaming income in 2017, totaled $2.4 billion compared with $2.4 billion for 2016, a boost of 0.3 percent, still a far cry from the city’s gaming revenue peak in 2008 at$4.5 billion.
Internet gaming revenue, which became legal in New Jersey in 2013, posted a more considerable boost of 24.9 percent to $245.6 million, according to the New Jersey Division of Video Gaming Enforcement.
Together, onsite and internet gaming revenue reflect an overall gambling establishment gaming revenue increase of 2.2 percent compared with 2016. Casino employment also increased in 2017 for the very first time in four years with nearly 22,200 individuals used in the city of 39,000.
It’s clear that other investors will be viewing Hard Rock and AC Ocean really closely, particularly MGM Resorts International. The owner of the Borgata revealed strategies last year to partner with Caesars Entertainment Corp., which runs Caesars Atlantic City, for a new gambling establishment development job. No additional details have been revealed.