The Revel casino in Atlantic City has not been saved by a last minute buyer and is scheduled to close September 1 putting 3.100 employees out of their jobs.
The casino had been in a bankruptcy auction, but no qualified bidders emerged forcing casino officials to announce the shutdown.
“We regret the impact this decision has on our Revel employees who have worked so hard to maximize the potential of the property,” Revel said in a statement. “We thank them for their professionalism and dedication; however we are faced with several unavoidable circumstances. Despite the effort to improve the financial performance of Revel, it has not proven to be enough to put the property on a stable financial footing.”
When the $2.4 Billion casino opened on the Atlantic City Boardwalk in April 2012, it was hoped the megaresort would signal a renaissance for Atlantic City, which has seen its casino revenue decline sharply every year since 2006.
But the Revel never performed up to expectations and was plagued by a flawed design and faulty marketing plan, and has consistently ranked among the lowest performing casinos in Atlantic City. When it first opened, the casino marketed itself as a luxury resort first and a casino second, but that plan never gained any traction. New owners brought a switch in focus to casino gambling, but it was not enough to turn the property around.
The casino was also hampered form the outset by more than a billion in debt to construct the facility. At one point, construction stalled until Governor Chris Christie and the state of New Jersey stepped in with more than $260 million in tax abatements to kick start construction.
The casino has twice been in bankruptcy since opening. Revel’s most recent Chapter 11 filing listed assets of $486.9 million and liabilities of $476.1 million.
And in what many see as a sign that the Northeast casino market is over-saturated, the casino has not been able to find a buyer despite being available for what many saw as pennies on the dollar.
Revel officials say they still hope to find a buyer for the 1,399-room hotel through the bankruptcy process, but said a sale would only happen after the shutdown.
The casino was due to be sold at a bankruptcy court auction. After bids were received the auction was postponed to allow Revel to review the bids more closely, but in the end Revel’s board met before the new auction date and decided to close the casino.
For Atlantic City, the closing is a serious blow and one of four likely casino closings in the resort this year. The Atlantic Club casino closed in January and Trump Plaza and the Showboat casinos are also scheduled to close at the ended of the summer. Nearly 6,500 total jobs will be lost through the closings.
But as the city reels from the pending closures, officials expressed hopes that the Revel’s building will find a new use.
“This might be Revel’s last chapter, but not the last one for this building,” Atlantic City Mayor Don Guardian said in a statement. “My administration remains committed to the workers, the businesses, and the visitors who are impacted by the news.”
CCC Can’t Stop Closures
Local officials, however, got some more bad news on casino closings from the state Casino Control Commission involving the pending closing of Trump Plaza and Showboat.
Several area legislators had asked the CCC to force those casinos to stay open for four more months to continue to look for buyers and ease the massive job losses coming at the end of the summer.
But the commission has determined that is beyond its power.
“The commission simply does not have the authority to direct a casino licensee to forestall a business decision to cease its gaming operations,” Matthew Levinson, commission chairman said in a letter to legislators.
Levinson said that the state’s Casino Control Act gives the commission authority to address the orderly shutdown of casino operations, but does not give the commission the right to force a casino owner to keep a gambling hall open or to give employees more advance notice than required by state and federal law.
Trump Plaza is slated to close September 16th and there has been little hope that the casino would find a buyer before that date.
There had been hope, however, that Showboat—scheduled to close August 31—could find a buyer as interested parties have reportedly been in negotiations for the property with owner Caesars Entertainment.
But the company recently filed a report with federal securities regulators that shows Caesars is still planning to close the casino.
“In June, we announced the difficult decision to close Showboat at the end of August,” the company wrote in the report. “Other participants in the market have followed suit in what we believe to be a painful but constructive development for the market. We are hopeful that rationalization of capacity in Atlantic City combined with concerted effort to attract mid-week traffic and hospitality guests will help stabilize the market.”
Levinson also said the commission can’t stop casino companies selling their properties from putting deed restrictions into the sale saying new buyers can’t run the properties as a casino. Caesars Entertainment has sold two former resort casinos—The Atlantic Club and the former Claridge casino—with such deed restrictions.
Area legislators had objected to that practice as well.
“While the commission understands your concerns regarding the impact of the deed restrictions on the long term growth of the Atlantic City gaming market, the limits of the commission’s jurisdiction prevent it from directing Caesars to cancel the existing deed restrictions,” Levinson said. “Deed restrictions are private, contractual covenants and enforcement of them is a matter for the courts, not the commission.”
Atlantic City Casino Revenue Falls for July
Revel’s closure was announced the same day that state regulators reported Atlantic City’s casinos took in 11 percent less from gamblers in July than last year.
According to the state Division of Gaming Enforcement, the city’s 11 casinos won $274 million in July, compared with $297.1 million in July 2013. The 2014 figures includes $10 million in revenue from online gambling, which was up by about $500,000 from June.
When the July revenue numbers are adjusted to exclude the Atlantic Club, the year-over-year decline is 6.6 percent.
The three city casinos scheduled to close had the worst month in revenue.
Revel posted the biggest decline with revenue down more than 36 percent to $14.8 million. Trump Plaza was down 34 percent to $5.3 million, and the Showboat was down more than 19 percent to $15 million.
The imminent closing of these casinos likely sent some gamblers to other casinos where they could start new loyalty programs. Several city casinos saw a bump in revenue after accepting Atlantic Club patrons into their programs after that casino closed.
The Golden Nugget posted the biggest increase of city casinos, up 40.5 percent to $18.2 million. The Tropicana Casino Resort was up more than 34 percent to $27.7 million.
So far in 2014, the casinos have taken in $1.55 billion.
The online gambling market continues to be led by the Borgata Hotel Casino & Spa, at nearly $3.2 million for the month, and Caesars Interactive, close behind at $2.7 million. The Tropicana—which does not offer online poker—continues to grow its share of the market and took in more than $1.9 million.
For the year, internet gambling in New Jersey has taken in $73.1 million.
And in a rare bit of good news for the city, reports have surfaced that PokerStars and Full Tilt Poker could launch in the state as early as October 1.
State regulators had blocked PokerStars—which is partnered with Resorts casino hotel—from entering the state, but reconsidered the site’s application after Amaya Gaming purchased the site’s parent The Rational Group.
Amaya is already licensed for online gaming in New Jersey and approval of PokerStars by the DGE is expected by most analysts.
PokerStars is the most successful online poker site in the world and is expected to give the state’s online gaming a boost.
Christie to Hold Summit
The continuing decline in casino revenue, however—coupled with the casino closings—led Moody’s to downgrade the city’s municipal credit rating to junk status earlier this month. In a note to investors Wall Street agency Fitch Ratings said Revel’s anticipated closure “illustrates the depth of distress for the Atlantic City gaming market.”
In response, Governor Christie announced he will hold a summit and appoint a working group of state and local officials, casino and labor leaders to help plot Atlantic City’s future at a September 8 meeting.
“We know that the transformation taking hold in Atlantic City is about more than just gaming and gaming-related attractions,” Christie said in a press release. “Important signs are evident of the progress taking hold in the non-gaming development and economic activity we are seeing in AC, including businesses opening, attractions being added, and key non-gaming revenue streams rising.”
In 2011, Christie announced a five-year push to help diversify Atlantic City as a destination resort including an emphasis on non-gaming attractions.
While that effort has been slow to start, it has begun to get some results. Officials note that revenue from non-gaming sources has risen in the resort over the last two years.
The Atlantic City Alliance—the city’s casino-funded marketing arm—recently promoted two successful free beach concerts starring major country acts Blake Shelton and Lady Antebellum. Now the huge crowds those acts attracted are part of a new marketing campaign.
The alliance is running full-page ads in the Wall Street Journal, the Star-Ledger of Newark and the Philadelphia Inquirer highlighting the city’s non-gaming attractions.
The ad features a photo that was shot from the stage of the Lady Antebellum concert with a huge crowd spreading out along the beach. Sharp-eyed observers, however, figured out that the photo is actually a composite shot of the crowd taken from different angles and the same crowd sections are shown more than once.
Alliance officials said the composite is of three shots of the crowd from three different vantage points and does not change the message of the ad since the crowds at three concerts did, in fact, fill up the beach.
Still, the Lady Antebellum concert, when the picture was taken, was hampered by rainy weather and attracted less of a crowd than the Shelton concert, which was held on a clear evening. That concert drew 65,000 people.
The ad also promotes the city’s beach, shopping, dining, big-name entertainment and other attractions.
“Atlantic City isn’t just a destination for gaming,” it reads. “No wonder our beaches, Boardwalk and hotels have been full of people doing AC all summer.”
