Despite the flurry of recent media reports proclaiming the downfall of the East Coast’s sin city, Atlantic City is taking the right steps to reinvent itself as a diversified resort destination. The problem is that the process to build a new economy not wholly dependent on casino gaming should have started 30 years ago.
With gaming revenues steadily declining since 2006, the city has commendably recognized that cleaning up unsavory parts of the town, cracking down on crime, and providing more non-gaming attractions to draw visitors is the only way to build a more sustainable and prosperous local economy.
The Casino Reinvestment Development Authority, with a strengthened mandate from governor Chris Christie to reinvest gaming revenues into the city, has made great strides in making the city more pleasant and amenable to visitors.
But make no mistake: the transition to Atlantic City’s next chapter is and will continue to be painful. New competitive realities necessitate consolidation within the local casino industry, and because of the city’s failure to foresee that its 30-year gambling monopoly might someday end, there is no place to put 8,000 potentially displaced workers.
The sad part is that, like many other sectors that get hit by competition, many of the workers have devoted their entire working lives to helping Atlantic City become the East coast’s gaming Mecca, and have no plan B.
With the Atlantic Club already closed, and the potential closures of the Showboat, Revel, and Trump Plaza, 25 percent of the region’s gaming workforce could be put out of work in just one year. Given the city’s current unemployment rate of 15 percent, adding thousands more to the rolls will have enormous ripple effects across the region’s economy in the form of lower consumption and sagging property values and tax assessments.
The workers are understandably upset and are demanding answers from casino owners, whom they accuse of anticompetitive behavior by forcing the closure of underperforming casinos. At a labor rally last month, protesting Showboat and Trump Plaza workers argued that the casino owners were to blame for neglecting the properties and putting corporate greed over the needs of the community.
They point out that the Showboat, which Caesars wants to shut down, still made $8m in profit last year. Surely if properties like the Trump Plaza, which sits on prime real estate at the intersection of the Boardwalk and the expressway, had been adequately invested in and not allowed to deteriorate, they would not have trouble drawing out-of-town visitors.
Donald Trump expressed similar sentiment in his candid, if not overly boastful, remarks to the Associated Press last month.
The workers have a point. The properties that are faring the best since 2006, like the Borgata, are those that have been intentional about appealing to more than just the traditional busloads of seniors and convenience gamblers who used to keep the city afloat throughout the week.
But as the Revel has learned the hard way, there is only room for one high-roller casino in Atlantic City. Still, the principle is clear: in a competitive market, especially one with high fixed costs such as casino gaming, firms must continually improve their product in order to survive. A stroll through the Trump Plaza and its dilapidated hotel rooms and gaming floor makes one ponder how it has managed to stay open so long.
Optimism exists, however, among city leaders, casino owners, and unaffected workers that fewer casinos – along with more non-gaming attractions – will bolster the performances of the remaining properties.
This is an unfortunate situation where everybody is right. The mid-Atlantic casino market’s $6 billion gambling pot is unlikely to expand anytime soon and is absurdly oversaturated, meaning that supply rationalization is an absolute necessity. Yet, the social contract forged between the state, workers, and gambling companies when casinos first arrived in 1978 has been violated, and casino owners are at fault for being too complacent and over-leveraged during the monopoly years to provide necessary investment and innovation.
While there is reason to speculate that newer casinos in eastern Pennsylvania and Delaware might close at some point amidst sagging revenues and high taxes, Atlantic City understands that its only way forward is to find ways of replacing the convenience gamblers that used to fill hotel rooms during the week and offseason. Accordingly, it is working overtime to attract new conventions, expositions, and special events such as triathlons. Construction is underway on a new Bass Pro Shop, which is being lauded as the next big non-gaming attraction.
The key question is whether these non-gaming jobs will be good enough to make up for the loss of casino jobs, which are generally quite well-paying for blue collar work. While the U.S. as a whole has added more jobs in travel and tourism than almost any other sector since the economic recovery began, these types of jobs – generally in retail, restaurants and hospitality – tend to be lower paying and seasonal in nature.
But Atlantic City’s competitive advantage is still its beach and getaway appeal, and it still attracts 25 million visitors each year. Though this figure is down from 34 million during the boom years, it is still far more than any other beach resort on the East Coast.
To facilitate further visitation, New Jersey has beefed up its infrastructure to make it easier for visitors from the mid-Atlantic and elsewhere to visit, including offering new direct flights out of the Atlantic City airport to Chicago and elsewhere.
Most importantly, after 30 years of complacency, Mayor Don Guardian and other city leaders now recognize that tourists need a reason to come to Atlantic City other than to gamble. The city still has nostalgic and getaway appeal that is unlike anywhere else in the United States and it is taking the right steps to harness that. By diversifying its economy and using gaming as catalyst rather than a crutch, Atlantic City will remain the economic engine of southern New Jersey.
Aaron Stanley is a writer based out of Washington, DC, where his works have appeared in the Financial Times and elsewhere. He holds a degree in Social Sciences from the College of St. Scholastica in Duluth, MN and is finishing a Master’s Degree in Public Policy at George Mason University.”
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