Atlantic City’s Boardwalk got notably dimmer this Labor Day Weekend as two casinos—the Showboat and Revel casino hotels—closed their doors.
A third casino—Trump Plaza—is scheduled to close September 16 costing the resort more than 6,000 jobs in total. New Jersey gaming regulators have already approved Trump Plaza’s closing plan. The casino will close at 6 a.m.
But all that was expected and announced weeks ago. What shocked the industry and the city last week was word that Trump Taj Mahal could also close down. GGB News confirmed reports that Trump Entertainment Resorts, which still operates the Taj Mahal in the city, will seek bankruptcy protection for that casino and send out WARN notices to its 2,825 employees this week saying the casino could close down within 60 days.
The Press of Atlantic City reported that Trump Entertainment Resorts has more than $280 million in debt secured by the two Trump casino hotels—Trump Plaza and the Taj—according to a recent filing with state regulators.
The subsidiary entered into a forbearance agreement with its main lender in late June, indicating it would have been unable to make a recent interest payment on the debt, Alex Bumazhny, a casino analyst at Fitch Ratings told the paper.
Trump Taj Mahal also recently told regulators it plans to indefinitely defer payment of its property taxes.
“Between paying interest payments and property tax it looks like the company overall is having a cash-flow crunch, hence a potential bankruptcy filing,” Bumazhny said.
Trump Taj Mahal also indicated in a quarterly report released in August that a restructuring could be on the horizon, according to the Press. The company said “significant revenue increases and improvements in its operating results” are needed.
According to another report in the New York Post, there was hope that Carl Icahn, who owns much of the Trump Entertainment debt and mortgages on both Trump properties, would agree to convert that debt into equity and keep the casino out of bankruptcy, but that hope has faded.
Still, a bankruptcy filing would not necessarily mean the casino is closing.
“Taj Mahal seems to be still profitable and will benefit probably from Trump Plaza’s closure,” Bumazhny said. “We still expect it to remain open.”
Trump Entertainment officials have not commented.
And in another development, Division of Gaming Enforcement Director David Rebuck said that he will permit Trump Plaza’s online gambling services through partner Betfair to continue after the casino closes. The partnership has brought in about $4.3 million through July. Rebuck said Betfair could operate until Trump Plaza surrendered its gaming license, which will not happen very soon.
The closure of Trump Taj Mahal would also impact Ultimate Gaming, which operates an online casino under the Trump license. Neither Betfair nor Ultimate Gaming has any sizeable market share in the New Jersey online gaming market.
Trump Plaza may also seek permission to let certain third-party vendors, including the Rainforest Café, keep operating on the casino property after the casino and its hotel shut down.
Adapt and Survive
Now the city must adapt to its radically shrinking casino market and hope that no more of its remaining eight casinos close in the near future.
The Showboat was the first to close on August 31, ending a 27-year run in the resort with more than $8.5 billion won from gamblers in that time.
The mood at the closing of the casino was bitter as the property was still turning a profit—the casino reported a $7.6 million profit for the second quarter of 2014—but was closed by its parent Caesars Entertainment to consolidate its customer base into its remaining three Atlantic City casinos.
The casino distributed Mardi Gras beads to its last-day visitors, reflecting the casino’s longtime theme. The casino stopped admitting new customers at 3pm and by 4pm guards taped “closed” signs to the casino’s doors.
“We’re all feeling a little betrayed,” Showboat cook Curtis Wade told the Associated Press. “We’re all walking around in a fog today. We worked really hard to try to keep it operating, and we’re still profitable. We still don’t understand why we were the one targeted to close, and nobody has given us an answer on that. There are too many jobs being pushed out of Atlantic City due to corporate greed.”
According to the AP, Caesars Entertainment CEO Gary Loveman sent a letter to Showboat employees thanking them for their service.
“I want to thank the Showboat Atlantic City team for their dedication, professionalism, and commitment to our guests—both throughout the years and especially over the past several weeks,” he wrote.
More than 470 of the Showboat’s 2,000-plus workers are transferring to other casinos the company owns in New Jersey or in other states, according to a press statement released by Caesars. But that may be small consolation for other employees, thousands of which—along with laid-off Revel workers—are expected to generate a mass filing of unemployment claims.
The city’s main casino union—Local 54 of Unite-HERE—is opening a special unemployment resource center at the city’s convention center to help workers file unemployment claims and extends health benefits. The New Jersey Department of Labor has also been holding career fairs for displaced workers.
Union officials expected about 5,000 workers to file claims after the two casino closings.
“Since we first heard news that these casinos were planning to close, we have worked relentlessly to keep these properties open,” union President Bob McDevitt told the Press of Atlantic City. “We are currently in the process of making plans to continue to advocate for these workers. Right now, we are focused on making sure that the basic needs of all of the affected workers are met.”
Revel Closes
While Showboat had closed on a Sunday, Revel, the city’s newest casino closed in the early morning hours of Tuesday, September 2. Its run in Atlantic totaled less than three years and in that time it never turned a profit.
It was a far cry from what was expected from the $2.4 Billion property that had been touted as a savior for Atlantic City, even as some analysts had warned that the resort’s shrinking casino market couldn’t absorb and at-the-time 12th casino.
The about 5:30am closing—the casino’s hotel tower had gone dark hours before—led to a less somber scene on the casino floor than at Showboat, but things were still pretty emotional for the 2,800 workers losing their jobs.
The Press of Atlantic City recounted one scene of a group of the casino’s slot workers joining together to exit the property in unison.
“I thought I was going to be here for 20 years. We never thought this was going to happen,” Philip Bookfor, a slot attendant from Margate told the paper. “People left their jobs to come here. Now they have no job.”
One of the last acts at the casino was the sale of opened bottles of liquor at the property’s bars for $5, according to various reports.
The parent company for the casino has been trying to sell the property for months, but has been unsuccessful. A bankruptcy auction last month did not turn up a buyer that could keep the casino open, though officials have said a deal could still happen after the closing.
While that might help Atlantic City, which now has two dark casino towers on the north end of the Boardwalk, it will come too late for the casino’s workers.
The 6.2 million-square-foot property was originally marketed as a luxury resort with little mention of its casino. When that plan faltered, the casino shifted to trying to attract gamblers, but was never able to get a foothold in the city’s shrinking casino market. The property was also plagued early on by massive debt for its construction.
When that construction had stalled, New Jersey Governor Chris Christie pledged about $261 million in tax incentives to kick start the project. While the casino’s failure is seen as an embarrassment for Christie, state officials are quick to point out that the tax incentives were tied to the property making a profit. Since Revel was never profitable, it never received any of its tax award, according to the state Economic Development Authority.
Looking to the Future
For city officials, the question now is how the resort will adapt to the closings, including Trump Plaza’s announced closing September 16, which will cost the city another 1,000 jobs and put yet another dark casino tower in the middle of the Boardwalk.
And while there are many dismal projections for the city’s future, surprisingly, some analysts see a glimmer of hope.
Wall Street firm Fitch Ratings issued a report predicting that the revenue from Atlantic City’s three closing casinos will largely stay in the city and help the bottom line of the remaining casinos.
The firm predicts that the city’s casino revenues will decline to $2.5 billion in 2015 from last year’s $2.86 billion, but with three less properties in the city, it does not expect any more casinos closing in Atlantic City for at least the next two years.
Fitch predicts that most of the revenue at Showboat, Revel and Trump Plaza will be spread among the remaining casinos based on revenue increases city casinos saw when a fourth casino, the Atlantic Club, closed in the resort in January.
After that closing, casinos such as the Golden Nugget and Tropicana Casino resort saw major increases in revenue.
The race is already on for Showboat, Revel and Trump Plaza customers as several casinos are offering deals for holders of those casinos loyalty cards.
Joe Lupo, senior vice president of the Borgata Hotel Casino & Spa, Atlantic City’s top casino, told the AP that the market is already responding positively to the reduced casino capacity in the city.
“After the Atlantic Club closed, places like the Tropicana and the Golden Nugget are doing very well, and we had a great summer,” he said. “While Revel has had a very difficult time, you have properties in Atlantic City that will become more profitable.”
One example is Resorts Casino Hotel, which has gone from a $1.3 million loss last year to a $1.9 million profit so far this year.
“I truly believe that eight remaining casinos can all do very well when the gambling market is right-sized,” Resorts President Mark Giannantonio told the AP.
Fitch Ratings predicted that 50 percent of Revel’s revenue, 60 percent of Trump Plaza’s revenue and 75 percent of Showboat’s revenue will stay in Atlantic City.
The company also speculated that the city’s three marina district casinos may benefit more than Boardwalk casinos because they represent the most recently constructed or renovated properties in the city. Still, Boardwalk casinos will also benefit, the firm’s report said.
“Most of the closings are at the ends of the Boardwalk, leaving a cluster of remaining casinos that should see a sizable lift in business from the closures,” the company wrote.
Immediate Impact
Still, for Atlantic City and the surrounding region the shutdowns—taking almost 10,000 jobs in total for the year—will create a short-term economic disaster.
The U.S. Department of Labor already reported that the Atlantic City region had the largest percentage loss of jobs for a metropolitan area in July at 2.6 percent. The bulk of the job losses came from the hotel industry, but these figures come before the three casino closings.
City officials now estimate that Atlantic City tax base will have fallen by more than half from 2010—from $20.5 billion to about $10 billion—in 2015. City taxpayers are already experiencing a 29 percent increase in municipal taxes for 2014.
The city also expects to sell up to $140 million of municipal bonds later this year to pay for successful property tax appeals by casinos. The city’s bond status has been downgraded to junk status, but these new bonds would be supported by a state program that backs the bonds with state aid.
Atlantic City Mayor Donald Guardian has also said that the city itself is looking at possible job cuts—totaling about 300—to offset the falling tax revenue.
The impact will also be felt throughout the regional economy, from workers selling their homes to relocate to new jobs—with many homes liable to sit vacant—to service industry businesses losing customers.
Officials estimate that between 20 to 30 percent of laid off workers will move out of the are to take jobs at casinos in other states, such as the new Maryland Live casino.
The city has received a $400,000 grant from the state Casino Reinvestment Development Authority for employment training programs through Atlantic Community College and hopes new and ongoing programs can train about 1,200 workers a year.
The city itself now has three casino towers sitting dark and has also lost some intangibles, like the Showboat’s House of Blues franchise, which has been a mainstay in the resort for bringing in popular concerts. Revel also had a good track record for big-name concerts.
The Philadelphia-based band the Hooters played the last concert at Revel and somewhat ironically, performed a cover of Bruce Springsteen’s “Atlantic City.”
Between the four casino closings in 2014, the city will lose about 4,400 hotel rooms leaving it with about 13,400 rooms in total. That may hurt the city’s announced plans to actively seek more convention business in the resort.
“The available inventory will shrink by 20 percent, so the existing operators have to contribute more rooms if we are going after the mega-city-wide conventions,” Jim Wood, chief executive of the new Meet AC entity, created to boost conventions and meetings told Philly.com. “They will have to provide a larger room block.”
Still, the city will have a hard time attracting major conventions with that room base as it’s likely to only be able to offer 8,000 rooms to conventions as casinos regularly comp a large number of rooms to gamblers. By comparison, Philadelphia can offer about 11,000.
Hope remains, however, that at least two of the closing properties—Showboat and Revel—can be sold and still operate as hotels.
Atlantic City Mayor Guardian said he is still confident that Revel will reopen as a casino hotel and that Showboat will also find a buyer. Caesars officials have confirmed that an “interested party” recently toured the Showboat, but did not release any specifics.
At the end of the week, Jacksonville-based Latitude 360 said it was considering the Showboat for a non-gaming entertainment venue. The company develops facilities that include restaurants, a sports bars, movie theaters, bowling alleys and live performance stages. Latitude 360 currently operates such properties in Jacksonville, Indianapolis, Pittsburgh and Albany, with another one planned near Minneapolis. None of them have hotels, but may utilize the hotel at Showboat as well. It is reportedly one of three locations being considered in Atlantic City.
Diversifying the Resort
However, most hopes for Atlantic City are now being placed on developing Atlantic City as a true resort rather than just a casino city. City and CRDA officials said as much as $1 billion in redevelopment programs have been started.
“We are on track to drive $1 billion into the Tourism District within these first five years, which is all part of our plan that focuses on four key initiatives: attraction visitation, building the visitor experience, targeting meeting and conventions and investing in neighborhoods and job training,” said CRDA Director John Palmieri at a recent press conference.
It should also be noted that the two casino closings came on a busy holiday weekend that packed the Boardwalk and included a major concert by Aerosmith at the city’s Boardwalk Hall arena.
And not everyone at the closing casinos has been suffering. Reports surfaced last week that the owners of the successful HQ Nightclub—which rented space at Revel—are trying to find a way to keep the club open.
Company officials have been meeting with state agencies in hopes of finding a solution. HQ’s owner, IDEA Boardwalk LLC, a division of Angel Management, actually operated three entertainment venues at Revel, all of which it called profitable. They have also petitioned Revel’s bankruptcy judge to stay open, but it is unclear if that can be done without the casino’s owner’s permission.
Still, the request fits in with recent trends that show Atlantic City’s non-gaming attractions have been growing.
The city also continues to be a major host for sporting events, from boxing and mixed martial arts to the upcoming Atlantic City Triathlon. The city, for example, has just landed the light-heavyweight boxing champions Bernard Hopkins and Sergey Kovalev unification bout, scheduled for November 8 at Boardwalk Hall
Guardian and other city officials have also pointed to a number of projects, such as a Bass Pro Shops store and Harrah’s Conference Center being built in the city that could create 1,300 jobs. The owners of Steel Pier—the city’s lone amusement pier—have also announced plans to build the country’s second largest observation wheel.
Fitch also noted some positives for Atlantic City in its report, including its diverse entertainment options.
“Atlantic City remains one of the few places in the populous tri-state area to offer a full suite of eat, play and stay options and has by far the lowest gaming taxes,” Fitch wrote. “Lower taxes give these casinos more room in the margin to spend on promotional activity, including free food and hotel stays.”
New Jersey Governor Chris Christie has also scheduled a summit this week to address Atlantic City’s future development. Officials feel the resort must continue to attract and build non-gaming attractions to turn the resort around.
Guardian noted that room occupancy in the city has been rising at that non-gaming revenue has been rising—as much as $160 million in the last year.
