A New Revel Casino Would Be Bad for Business in Atlantic City’s Casinos
The Revel Building’s owner, Glenn Straub, is contending with the New Jersey Division of Gaming Enforcement about a casino license. Meanwhile, industry analysts have suggested that a new Revel Casino would be bad for Atlantic City’s gaming industry.
Revel Casino was one of a wave of four Atlantic City casinos which closed in 2014. Those closures represented a contraction of 33% of Atlantic City’s casino industry. The city simply could not sustain 12 casinos.
Contraction and Financial Help
Since the closures, Atlantic City’s remaining 8 casinos have fared a great deal better. In 2015, 7 of the 8 casinos registered a net profit. The eighth casinos is expected to report profits this year. Whether the 8 casinos and a new gaming business in the Revel Building would all succeed is another matter.
Colin Mansfield, Fitch Ratings’s US Corporate Finance division’s associate director, said the introduction of a ninth casino is likely to introduce more instability. Mansfield said, “The market has been rightsized. But any more competition in the city would take shares from the existing properties.”
Increasingly Saturated Gaming Market
At the moment, the state of New Jersey is considering an electoral initiative which would approve 2 land-based casinos in North Jersey, likely in East Rutherford and Jersey City. Nearby states are set to build 8 new land casinos in the next few years, too.
None of those gaming venues would be good for the AC casino industry. Even the North Jersey casinos might have less of a direct effect on the business operations of the 8 other Atlantic City casinos, though.
Steve Callender, Tropicana Atlantic City’s general manager, strikes a similar chord as Colin Mansfield. Callender said, “There seems to be enough gaming. If you look at the gaming numbers, everyone seems to be doing well now. We are rightsized from a casino standpoint.”
Deutsche Bank Analysis
Andrew Zarnett of Deutsche Bank Securities analyzes the gaming and leisure markets. Zarnett says the market needs to have an increased demand, before more supply should be added. The analyst says there is no indication that demand is increasing.
In fact, says Zarnett, the data shows quite the opposite. He told The Press of Atlantic City, “When you have contracting demand and increased supply, that is not a good thing. Over the last 10 years, gaming revenues have dropped by 50 percent, but that number is close to 60 percent with inflation.”
Polo North’s Perspective
Glenn Straub likely does not want to hear it. Straub sees himself as a job provider in a city which needs jobs growth desperately. Also, there was much fretting when the Revel Casino closed and the Revel Building appeared as if it would be empty. Newspapers wrote how the city’s largest building being dark against the skyline would hurt business for the casino industry.
Straub suggests he is being held to a different standard. Straub’s company, Polo North, plans to lease the casino area to a gaming company used to operating casinos. It is Polo North’s contention that the tenant should be required to hold a casino license, but Polo North should only require a vendor license — which takes less time to acquire.
Revel’s ownership group feels as if regulators should try to help local businesses. Polo North released a statement which said, “Instead of welcoming this prospect, New Jersey’s Division of Gaming Enforcement has imposed a roadblock that is inappropriate and unnecessary.
“Despite Polo North only being a landlord, the division is requiring it to comply with the more extensive licensing standards imposed on casino operators as opposed to the less stringent standards imposed on vendors. This requirement is being imposed even though the proposed tenant will meet the licensing standards for casino portion of 6,000,000-square-foot property.”
Division of Gaming Enforcement Statement
The DGE does not see if that way. Kerry Langan, a spokesperson for the Division of Gaming Enforcement, told The Press of Atlantic City, “The division continues to work with Polo North and its gaming attorney to secure all appropriate licenses and authorizations. The division cannot comment on specific details regarding ongoing investigations.”
Both sides make points. Most of the casinos in Atlantic City are owned by international casino companies, like Caesars Entertainment and MGM Resorts. A handful are owned by private businessmen who have others run the operation for them: Morris Bailey at Resorts Casino and Carl Icahn at the Tropicana and Trump Taj Mahal.
Glenn Straub should be put through the same process that Morris Bailey and Carl Icahn underwent. If they needed full licensing, then Glenn Straub needs full licensing. If they received vendor licenses, then it would be appropriate for Glenn Straub to receive a vendors license. Regulation has many uses, but one of them is to uphold fairness in the process.
