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Atlantic City May Need To Find Another Way To Make Money

New Jersey Shore Market Faces Its Fourth Casino Closure This Year
July 14, 2014
Fans of HBO’s hit series Boardwalk Empire will likely recall main character Nucky Thompsons’ quote from last season’s ending finale: "The only thing your people and mine have in common, we both know what a dollar's worth and if we can't make it one way, we'll make it another."

Modern-day Atlantic City, NJ, appears likely to take that attitude to heart as this past weekend news broke that a potential fourth casino closure this year is imminent.

The Trump Plaza Hotel is the latest in Atlantic City to announce plans to shut its doors. The Press of Atlantic City said in a story posted online late on Friday that an official from Trump Plaza called New Jersey state Senator Jim Whelan and told him the casino, which is owned by Trump Entertainment Resorts, expected to issue layoff notices this week ahead of a Sept. 16 closure.

Towering 39 stories at the center of the world-famous Atlantic City Boardwalk, Trump Plaza Hotel and Casino contains over 86,000 square feet of casino floor space and 906 rooms, all with ocean or bay views.

The seashore casino is one of the poorest performers in Atlantic City, which began the year with 12 casinos. Trump Plaza booked less than half its rooms in the first quarter of 2014, and had the lowest gaming revenue of any of the city’s casinos in May, according to state documents obtained by Reuters.

Its expected closure follows a series of blows for Atlantic City, and would mean the city would have a third fewer casinos than at the start of the year.

So far this year, Atlantic City has seen three other hotel casinos pull the plug or seek bankruptcy reorganization.

The Atlantic Club casino owned by Colony Capital filed for bankruptcy reorganization last fall and was sold and shut down in January. Ownership of the 807-room hotel/casino reverted to Caesars Entertainment, which had sold it to Colony Capital.

Caesars then sold it to TJM Property Management of Clearwater, Florida, for just $14.25 million in May of this year. TJM operates its hotels under the Sette-McCarthy Hotels name and is planning a grand re-opening for some time this year.

Then last month, Caesars Entertainment announced it will close Showboat Atlantic City next month and layoff 2,140 workers. Showboat is a 1.05 million-square-foot hotel casino built in 1999 at 801 Boardwalk. The property contains 108,900 square feet of casino space and 1,330 rooms.

Caesars has not yet determined what will become of the property and land. It intends to collaborate with city and state officials as it evaluates alternative uses.

In January of this year, Revel Entertainment Group LLC, filed for bankruptcy reorganization. It has said its casino will close next month if a buyer is not found.

Revel Casino Hotel is Atlantic City’s newest and most spacious casino resort and convention destination. The casino resort offers 130,000 square feet of world class gaming, and 1,399 ocean view rooms.

Revel opened in April 2012 and according to bankruptcy court filings nearly immediately faced problems.

"While the resort and convention center segments performed reasonably well in the first year of the Revel Casino Resort’s operations, the casino segment struggled to attract the traditional Atlantic City patron who does not stay overnight," the company’s restructuring officer said in court filings. "Among other things, the property lacked a player’s club and affordable food and beverage options, which are important to attract that critical segment of the customer base. Additionally, the casino segment experienced start-up issues in the marketing and technology areas."

The filings also noted how the devastation of Hurricane Sandy exacerbated the situation. The Revel Casino Resort was forced to close for six days after a mandatory evacuation was ordered and state of emergency declared for Atlantic County. The lost revenue from the closure, along with the prolonged impact on travel to Atlantic City and the financial hardship experienced by residents in the area, significantly impacted the company’s earnings, the filings stated.

In announcing the Showboat closure, Caesars Entertainment said the property faced challenges stemming from persistent declines in business levels in the area, and compounded by the high property-tax burden in Atlantic City.

"Since 2006, revenue in Atlantic City has declined by more than $3 billion and competition in the city has increased.” said Gary Loveman, chairman and CEO of Caesars Entertainment.

In addition, the national casino entertainment business has become more highly competitive with the opening or expansion of casinos in markets outside of Atlantic City and Las Vegas. Casinos in New Jersey face increased competition from the expansion of legalized gaming operations in Maryland, New York and Pennsylvania.

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