New mega resorts could jeopardise existing casinos
Plans for two new large casino resorts in northern New Jersey look set to forever change the Atlantic City landscape, potentially forcing existing casinos out of business. Fitch Ratings have suggested that a minimum of four casinos could close down if the plans are to go ahead. The casinos under immediate threat include the Trump owned Taj Mahal, Resorts, and the Golden Nugget. Baily’s AC is also thought to be in a worrying position if the plans move forward.
Credit debt watchers give the Golden Nugget a 25% margin for gambling downturn before they would be in serious trouble, and the opening of two major resorts would certainly take away a significant part of their business. The Taj Mahal seems more perilous, with a 10% fall in gambling revenue putting them in jeopardy. The critical number for Resorts Casino Hotel is 20%.
Taj Mahal by night – Photo taken by Jesper Rautell Balle
The long decline
Atlantic City was the gambling mecca of the U.S. East Coast for more than 30 years with casino revenues hitting a peak of $5.2 billion in 2006. The situation began to deteriorate when casinos opened in Delaware, Maryland, and Pennsylvania. These all dragged custom away from Atlantic City, which had previously been the only serious casino offering for many miles. Once the recession hit, times grew harder. Casino Revenues which had peaked at USD$5.2 billion in 2006 were hitting just USD$2.5 billion in 2014, and the city simply isn’t bringing in enough money from other means to cover this expanding black hole in profits. Of the twelve casinos that initially operated in Atlantic City, four went out of business in 2014. The Revel, which occupied 47 storeys and cost $2 billion to build, closed its doors after only 2 years. The Showboat, Trump Plaza and Atlantic Club have all now shut up shop for good, leaving their former employees unemployed.
Troubling times lie ahead for Atlantic City.
Article by Craig B.