Atlantic City’s woes may not be over as more competition is slated to open within the next several years. Experts believe more casinos need to close before the market bottoms out.

Things might get tougher for Atlantic City casinos before they level out, or get better, at least that’s the impression after last week’s East Coast Gaming Congress.

A lot will depend on whether New York decides to allow casinos in the Orange County portion of the Catskill Mountains region, or whether it places them deep into the mountains in Sullivan or Ulster Counties.

The region is allowed one casino, but could get two if the wild card fourth license is awarded there, which is likely.

The problem for Atlantic City is that Orange County isn’t really in the Catskills. It’s much closer to New York City, with proposed casinos less than an hour north of New York City, and even closer to wealthy and populous West Chester County.

But even more important for Atlantic City casinos is that Orange County actually borders New Jersey and is just a 15-minute drive from Bergen County, the heart of Atlantic City’s North Jersey feeder market.

If one or two casinos are put in Orange County, the effect on AC would be significant. Combine that with new casinos opening in Baltimore and suburban Washington, DC, and another downward spiral could be expected along the Boardwalk.

But the damage to AC could be even greater. Rapacious New York casinos probably would be the last straw for North Jersey legislators who would finally win approval for gaming at the Meadowlands and perhaps elsewhere in their bailiwick.

The damage has been done to AC, and now the rest of New Jersey is bleeding business out of state, so let’s keep the money home with gaming at the Meadowlands, they’ll say.

The Orange County proposals aren’t just upsetting for AC. They are vexing for the prospective casino developers further north in Sullivan and Ulster Counties.

A casino in Orange undermines a mountain region casino to the point that, Mohegan Sun CEO Mitch Etess said, a Catskills casino would never be built.

The question of Orange County thus divides two groups – prospective developers there, Caesars with local developer David Flaum, Penn National and partner Cordish, and Genting – and the deep Catskills proposers, Empire Resorts, Mohegan, Foxwoods, Nevelle Investors and Greenetrack.

Both sides have their arguments.

The Catskills guys say the casino law was explicitly written to help dormant upstate economies, not prosperous southern communities.

The Orange County proposers say the greatest economic benefit to the state is the much larger revenues they could generate than Catskills’ operations.

Meanwhile, the conversation in Atlantic City isn’t about growth, or even necessarily bottoming out.

AC advocates continue to plug away at convention business, air transportation, diverse entertainment and lauding the cluster of casinos no other Eastern market can offer.

But now they talk about downsizing the number of casinos in town to match market demand, with the usual short list being the smallest properties and the smallest companies.

Showboat, Trump Plaza, Resorts and Golden Nugget are most often mentioned. Revel, though not small, is considered especially difficult because the building might need a retrofit to be productive from a gaming perspective.

Our take is that the reduction in capacity might come more from scaling back properties than from closing them. Certainly, Caesars already has sold the Claridge portion of Bally’s, and would do no harm in shutting the Wild Wild West section.

Showboat and Resorts could be reduced to basically seasonal properties.

Whatever happens, AC will remain a major market, and will have to continue to fight for its share.

Articles by Author: Frank Fantini

Frank Fantini is principal at Fantini Advisors, investors and consultants with a focus on gaming.