Issue 304
July 10 - July 16, 2006
Volume 6
page 1
 

This Issue

Gaming News

Casino City's July Sweepstakes

Gambling Beyond Nevada: By-The-Sea Change

House Expected to Hold Online Gambling Debate

Tioga Downs Opens Gaming Facility with Record Breaking Numbers

Century Casino Opens Ahead of Schedule

Show Time Boyz II Men performs at the Orleans Showroom.

Column How to Read a Strategy Table by Elliot Frome.

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Atlantic City Casinos Reopen
As Reported by the Courier Post

TRENTON, New Jersey - "Thousands of New Jersey state employees are headed back to work this morning, formally ending the weeklong government shutdown that temporarily halted most state services and closed Atlantic City's 12 casinos for three days.

"… The shutdown, spurred by a budget impasse, … ended Saturday morning.

"… 'This (the shutdown) is something that should not have occurred and can never be repeated,' (Gov. Jon S.) Corzine said after he signed the budget into law Saturday night.

"… The casinos reopened (a few hours later). Meanwhile, the state lottery resumed selling tickets that day and New Jersey's four horse racing tracks also went back into business.

"… Some 36,000 casino dealers, cocktail servers and slot machine attendants were forced off the job after the gaming hall closings, the first in the 28-year history of legal gambling in New Jersey. The state also lost $1.3 million in daily tax revenue each day the casinos were closed..."


Gambling Beyond Nevada: By-The-Sea Change

By Howard Stutz - Our Partner at Las Vegas Gaming Wire

ATLANTIC CITY, New Jersey -- Atlantic City has taken a page from the Las Vegas playbook.

With last week's soft opening of The Pier at Caesars, a $200 million high-end retail-and-dining venue adjacent to Caesars Atlantic City, the southern New Jersey destination continues to morph into more than just a day-trip, gambling-intensive city.

Competition for its traditional visitors, which numbered almost 35 million in 2005, is expected to intensify in the coming years as neighboring New York and Pennsylvania make plans to open large slot-machine casinos.

Out of necessity, Atlantic City's casinos have been forced to invest financially in their plants beyond the gaming floors to give customers more than just gambling.

"It really comes down to Atlantic City needing to reinvent itself," Deutsche Bank gaming analyst Bill Lerner said.

The seaside gaming community dominated by Atlantic City's famous Boardwalk needs to give its customers other reasons to visit, he said.

"The typical Atlantic City casino customer, a high-frequency and convenience-oriented gambler, is going to find the same slot machines in closer proximity to their homes. That's going to become a real issue for Atlantic City," Lerner said. "The time is now to make that significant capital investment into their properties to build out those nongaming amenities."

Caesars Atlantic City, owned by Las Vegas-based Harrah's Entertainment, is participating in that transformation. The first retailers at The Pier at Caesars opened Tuesday. By December, it's expected to have 90 stores and 10 restaurants.

The Pier joins The Quarter at the Tropicana Atlantic City, which was the centerpiece of a $225 million expansion of the resort in 2004, and offers retail and dining options to Atlantic City visitors. The old Havana-themed Quarter, with 200,000 square feet, has 30 retail shops and more than 20 restaurants.

Gary Simpson, senior vice president of development and finance for Tropicana parent Aztar Corp., said The Quarter is responsible for the casino's jump in customer traffic and gaming revenue. In 2005, the Tropicana Atlantic City reported revenues of $490.1 million, compared with $384.6 million in 2004.

"Clearly, when you look at our numbers, the casino counts have risen dramatically," Simpson said. "More people are coming to the Tropicana because of The Quarter and those people are new to Atlantic City."

Simpson said The Quarter's upscale and trendy restaurants, such as Red Square, P.F. Chang's and The Palm, are attracting a younger and more affluent Atlantic City visitor.

"We've seen it both visually and statistically. Our database has gotten younger because of The Quarter," Simpson said.

Simpson said he didn't think the Pier's opening would affect the Tropicana. Although The Quarter is dominated by restaurants and entertainment venues, The Pier will bring high-end shopping to the Boardwalk.

Although some of the Pier's stores are standard on any mall directories, Victoria's Secret, Gymboree and the Apple Store, others are high-end, such as Tiffany & Co. and a Wolfgang Puck restaurant.

An entire level is dedicated to couture, where the floors are blue terrazzo marble and where Burberry clothes, Tiffany jewelry and Tourneau watches can be purchased.

Simpson said The Pier's retail is more upscale, while The Quarter's retail is for the "mass market." He said the offerings will easily be absorbed into the market.

"People want more than just gaming, and Atlantic City is definitely underserved," Simpson said. "There is clearly room for more restaurants and more amenities. I don't think there will be much of an overlap."

The gleaming, 900-foot Pier is in stark contrast to the nearby Boardwalk, where shopping is at stores that advertise "Everything's 99 cents" and where seagulls circle waiting for people munching pizza slices to drop a crust or pepperoni.

The developer of The Pier, Sheldon Gordon, built The Forum Shops at Caesars 14 years ago. The Strip shopping and entertainment complex is viewed as the catalyst in the city's transformation from a gambling mecca to a place to have fun and spend money without gambling.

After the Forum Shops, new resorts were built with major retail areas, the Grand Canal Shoppes at The Venetian and Desert Passage at the Aladdin.

Retail and other nongaming amenities have shifted Las Vegas visitor spending habits. In 2001, 50 percent of the casinos' revenues came from retail, restaurants, hotel rooms and other nongambling areas. In 2004, 51 percent of the revenues were nongaming.

Lerner said that in Atlantic City, 90 percent of a casino's revenues come from gaming.

"Nongaming revenues are lacking, and it's a major opportunity for the casinos," Lerner said. "But it's also going to have a major cost attached to it."

In Las Vegas, spending on retail has more than doubled in the past 10 years. The average visitor spent $66.18 on shopping in 1995; that figure grew to $136.60 in 2005.

Gordon said he thought The Pier at Atlantic City, which is connected by a skyway over the Boardwalk to Caesars Atlantic City, could have the same effect on the New Jersey Shore.

"That is going to change the whole attitude," he said.

Atlantic City today has more going for it than Las Vegas did when the Forum Shops opened, he said.

The resort has been upscaling for three years, since the Borgata opened in 2003. The property, a joint venure of Boyd Gaming Corp. and MGM Mirage, not only had a casino and hotel rooms, but a spa and restaurants run by out-of-town chefs such as Philadelphia's Susanna Foo.

While other casinos have themes such as the Wild West and ancient Rome, the Borgata emanates luxury and hipness. Scantily clad waitresses patrol the casino floor, the rooms have showers built for two and tour buses are not courted for their normally low-rent business.

Since the Borgata opened, there's been a building boom. Several of the city's 12 casinos got upgrades and added restaurants run by celebrity chefs.

The Borgata opened a $200 million expansion Friday, featuring restaurants by Wolfgang Puck, Bobby Flay and Michael Mina, along with a second nightclub, an upscale food court and an 85-table poker room.

Borgata spokesman Michael Facenda said the casino realized soon after it opened that there was more demand for upscale living in Atlantic City than it was providing. So, the expansion started quickly.

Deutsche Bank's Lerner said expanding in Atlantic City makes more sense financially than investing in other jurisdictions, where the gaming taxes are upward of 50 percent of gross revenues.

"It's much more competitive and it's a better return on investment," Lerner said.

He said casinos also need invest in other nongaming amenities, including additional hotel rooms that would help lure midweek convention business.

"Atlantic City is not competing with Las Vegas," Lerner said. "But it's following a Las Vegas model to compete regionally."

The Associated Press contributed to this report.

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