pacomartin
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March 17th, 2010 at 9:28:21 AM permalink
The gaming revenue in the 11 casinos in Atlantic City has dropped over the last four years so that the amount of the drop equals the sum of the revenue of the five smallest casino. Analysts seem to take it for granted that several of the un-healthiest casinos in AC will close.

Of the 38 Las Vegas strip casinos which made over $1 million, the sum of the smallest 20 is equivalent to the drop in gaming revenue over the last 27 months. I wonder why analysts are not predicting any closings on the Las Vegas strip? Even the Casino Royale, Riviera, Terribles and Hooters are trying to hang on. To my surprise the only casino that I have heard that is closing was the one at Lake Las Vegas next to the Ritz Carlton that is shutting down.

Since WWII I have hardly heard of any casinos that closed except for the ones imploded to make room for a new casino. Castaways, Key Largo, Hacienda, Pioneer are the only ones I can think of, and Castaways was meant to be replaced with a new casino.



Owner Rooms Casino Drop Drop
Total 17,107 11 -24.5% -24.5%
HarrahsEntertainment 1,752 BallyAC -30.0% -19.9%
1,141 Caesars -17.1%
2,590 Harrah -4.0%
1,331 Showboat -26.3%
Icahn 2,129 Tropicana -31.7% -31.7%
Trump(Icahnbiddingforcontrol) 2,010 TrumpTajMahal -15.7% -25.4%
906 TrumpPlaza -32.8%
728 TrumpMarina -36.8%
MGM/Boyd 2,769 Borgata -5.9% -5.9%
Colony Capital 809 ACHilton -41.8% -37.4%
942 Resorts -32.2%
AZDuffman
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March 17th, 2010 at 9:39:38 AM permalink
Quote: pacomartin

The gaming revenue in the 11 casinos in Atlantic City has dropped over the last four years so that the amount of the drop equals the sum of the revenue of the five smallest casino. Analysts seem to take it for granted that several of the un-healthiest casinos in AC will close.

Of the 38 Las Vegas strip casinos which made over $1 million, the sum of the smallest 20 is equivalent to the drop in gaming revenue over the last 27 months. I wonder why analysts are not predicting any closings on the Las Vegas strip? Even the Casino Royale, Riviera, Terribles and Hooters are trying to hang on. To my surprise the only casino that I have heard that is closing was the one at Lake Las Vegas next to the Ritz Carlton that is shutting down.

Since WWII I have hardly heard of any casinos that closed except for the ones imploded to make room for a new casino. Castaways, Key Largo, Hacienda, Pioneer are the only ones I can think of, and Castaways was meant to be replaced with a new casino.




Why are no analysts predicting a closure on the strip when they do in AC? I can make some guesses.

First, AC has new competition form neighboring states, mostly PA. As a child my family went to AC (Brigintine) the year they introduced gambling. While we stayed in an old-school motel, not one car in the lot had a non-PA license plate. Not one. Later I read nearly 2/3 of A/C revenue came from PA customers. PA slots have hurt AC. When table games get up and running later this year I expect that to put AC in the intensive care unit. AC never made a more "complete" package like Vegas did. So without PA customers the boardwalk becomes a large bowling alley.

Second, you mention no strip casino has ever closed except for implosion. WHile past performance is no guarantee of future performance; past behavior indicates future behavior. There have been bankruptcies and forced takeovers on the strip, but the new owners seem to make a go of it. The strip will always be seen as the world mecca for gambling no matter how big Macau gets. And there is only so much land between the Sahara and the airoprt.

Finally, and this is very speculative, I think there is more value in a grandfathered Nevada Gaming License than a NJ one.
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Croupier
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March 17th, 2010 at 9:41:23 AM permalink
Maybe it has something to do with the new markets opening up in PA (i think thats the right state abbreviation), giving extra competition on the East coast, where as the West doesnt have that happening as far as I am aware.

EDIT - AZ beat me to it.
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AZDuffman
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March 17th, 2010 at 9:43:24 AM permalink
Quote: Croupier

Maybe it has something to do with the new markets opening up in PA (i think thats the right state abbreviation), giving extra competition on the East coast, where as the WEst doesnt have that happening as far as I am aware.

EDIT - AZ beat me to it.



You gotta be quick on this site. Too many smart people lurking all day :-)
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DJTeddyBear
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March 17th, 2010 at 10:26:52 AM permalink
In addition to competition from PA, AC is gearing up for new local competition.

As I've mentioned in other threads, there's a new casino being built in AC, and it's HUGE. http://www.revelinac.com/. I understand it's a Carl Icahn project. It's scheduled to open sometime in 2011.
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
pacomartin
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March 17th, 2010 at 11:19:38 AM permalink
Quote: Croupier

Maybe it has something to do with the new markets opening up in PA (i think thats the right state abbreviation), giving extra competition on the East coast, where as the West doesnt have that happening as far as I am aware.



Nevada is facing major competition from CA Indian Casinos. I don't expect the Wynn or the Venetian to close, but I am surprised about the inexpensive casinos on the strip.

Some of the casinos in Sparks, Reno and Tahoe are closing. I can think of 5 off the top of my head. They are conceding that the Indian Casinos in Sacramento will simply take the bulk of the business in the future. The Indian casinos are 100 miles closer to the population centers of Sacramento and San Francisco and there is a mountain range that is often covered in snow in those 100 miiles. On the top end in Reno, the casinos have completely renovated.

PA is paying back New Jersey for the last 30 years.
When NJ passed their gaming law in 1976, they specified that all casinos must be in Atlantic City (AC) , which is in a fairly remote portion of the state. PA scattered them everywhere and usually putting them so that someone from a neighboring state could easily drive there (NY, MD, OH, WV, or NJ) Now the bulk of the population in NJ is closer to a PA casino than they are to an AC Casino.

It just amazes me that with all the bankruptcies in Las Vegas that only MonteLago casino in Lake Las Vegas is closing.
Croupier
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March 17th, 2010 at 11:40:38 AM permalink
But I dont think the CA Indian casinos can offer the same kind of amenities as the Vegas resorts, as well as the shows, shopping and such. Atlantic City to my knowledge doesnt have the same kind of general draw as Vegas as a destination.

I think that Vegas as a destination has more to offer, especially for International visitors of which 15% were international visitors (source LVCVA.com)
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AZDuffman
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March 17th, 2010 at 11:41:46 AM permalink
Quote: pacomartin


PA is paying back New Jersey for the last 30 years.
When NJ passed their gaming law in 1976, they specified that all casinos must be in Atlantic City (AC) , which is in a fairly remote portion of the state. PA scattered them everywhere and usually putting them so that someone from a neighboring state could easily drive there (NY, MD, OH, WV, or NJ) Now the bulk of the population in NJ is closer to a PA casino than they are to an AC Casino.



PA isn't doing that to draw outsiders, not mostly anyways. The state of PA's three biggest cities in order are Philadelphia, Pittsburgh, and Erie. All three are at the outer edges of the state. The population centers that run between these cities run north-south from Pittsburgh to Erie, then north from Philly. Between Pittsburgh and Philly is fairly empty in the south and known as "Pennsyl-tucky" in the north half. One county up there didn't even have one traffic light as late as the mid 1990s and probably still does not.
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cclub79
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March 17th, 2010 at 11:43:35 AM permalink
Quote: AZDuffman

PA isn't doing that to draw outsiders, not mostly anyways. The state of PA's three biggest cities in order are Philadelphia, Pittsburgh, and Erie. All three are at the outer edges of the state. The population centers that run between these cities run north-south from Pittsburgh to Erie, then north from Philly. Between Pittsburgh and Philly is fairly empty in the south and known as "Pennsyl-tucky" in the north half. One county up there didn't even have one traffic light as late as the mid 1990s and probably still does not.



Perry County got their first traffic light just before Christmas this year. You would have thought it was the Second Coming. And Perry County's only a stone's throw from Harrisburg.
DJTeddyBear
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March 17th, 2010 at 11:48:45 AM permalink
Quote: pacomartin

When NJ passed their gaming law in 1976, they specified that all casinos must be in Atlantic City.

There's a reason A.C. was picked.

A.C. was a glorious resort community in it's hey day, but it was in desperate need of some type of revitalization.

Plus, they wanted the casinos in one town so it would become the "Vegas of the East."

And that's an important point.

For example, I prefer Mohegan Sun to any single A.C. casino. And I live about equally distant. But I prefer A.C. because of it's multiple casino choices.
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
pacomartin
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March 17th, 2010 at 11:50:15 AM permalink
Quote: AZDuffman

PA isn't doing that to draw outsiders, not mostly anyways. The state of PA's three biggest cities in order are Philadelphia, Pittsburgh, and Erie. All three are at the outer edges of the state. The population centers that run between these cities run north-south from Pittsburgh to Erie, then north from Philly. Between Pittsburgh and Philly is fairly empty in the south and known as "Pennsyl-tucky" in the north half. One county up there didn't even have one traffic light as late as the mid 1990s and probably still does not.



Yes, the unique makeup of PA is what makes it such a battle ground state politically. It's a hodge podge of Mississippi, New York, Wealthy old liners, and Appalachians,

But certain casinos were placed very deliberately. The Poconos attract much of northern NJ for vacation, and Sands Bethlehem is right on the interstate from New York City making it much closer than Atlantic City. That's why Sheldon Adelson chose it for his first local casino. He is running buses from NJ to Bethlehem.
DJTeddyBear
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March 17th, 2010 at 11:53:39 AM permalink
Quote: Croupier

But I dont think the CA Indian casinos can offer the same kind of amenities as the Vegas resorts, as well as the shows, shopping and such. Atlantic City to my knowledge doesnt have the same kind of general draw as Vegas as a destination.

You're right about that.

But if there were no casinos anywhere in the U.S.A. besides Nevada and A.C., and the A.C. airport was closer to the actual city (it's nearly 13 miles away), then A.C. WOULD be much more of a draw than it has become.

As things stand, A.C. will never achieve the "Vegas of the East" status that was originally planned.
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
AZDuffman
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March 17th, 2010 at 11:54:37 AM permalink
Quote: pacomartin

Yes, the unique makeup of PA is what makes it such a battle ground state politically. It's a hodge podge of Mississippi, New York, Wealthy old liners, and Appalachians,

But certain casinos were placed very deliberately. The Poconos attract much of northern NJ for vacation, and Sands Bethlehem is right on the interstate from New York City making it much closer than Atlantic City. That's why Sheldon Adelson chose it for his first local casino. He is running buses from NJ to Bethlehem.



Interesting take on the political aspect. PA has been described as a "T" with the "T" being more rural and conservative areas and the areas outside the "T" more urban and liberal. But while casinos were placed deliberately, I think it was for locals play first. I don't expect the Pittsburgh Casinos (Rivers and Meadows) to draw much if any out-of-state play. Rivers will get spillover from ballgame attendees but that is it.

Erie will kill the WNY Indian Casinos.
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Croupier
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March 17th, 2010 at 12:06:32 PM permalink
Quote: DJTeddyBear

You're right about that.

But if there were no casinos anywhere in the U.S.A. besides Nevada and A.C., and the A.C. airport was closer to the actual city (it's nearly 13 miles away), then A.C. WOULD be much more of a draw than it has become.

As things stand, A.C. will never achieve the "Vegas of the East" status that was originally planned.



I agree completely. The increasin commonality of other casinos has and will prevent AC from achieving Vegas status. I just dont think it will ahppen in the same way to Vegas.
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AZDuffman
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March 17th, 2010 at 12:27:13 PM permalink
Quote: DJTeddyBear

You're right about that.

But if there were no casinos anywhere in the U.S.A. besides Nevada and A.C., and the A.C. airport was closer to the actual city (it's nearly 13 miles away), then A.C. WOULD be much more of a draw than it has become.

As things stand, A.C. will never achieve the "Vegas of the East" status that was originally planned.



Vegas still had things going for it that AC could never copy. As part of Nevada there was a whole different "attitude" about the city. If you lived in the northeast AC was a days drive but Vegas was "out west." When you went there you went somewhere. AC was in comparrison a weekend trip.

With the old-time quickie divorces; legalized prostitution; and a reputation of a new-start-for-anyone city; Vegas was and always will be different. It can be seen as some sort of "Imperial Free City" sort of seperate in its own way.

AC is just a slum.
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boymimbo
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March 17th, 2010 at 12:43:25 PM permalink
Agree that AC is just a slum. And it's too bad too. I am not an urban planner, but the whole city could have been planned so much better.

Las Vegas kind of started out as a gambling town in the 30s and always remained that way. AC legalized gambling in the mid 70s but the town was already quite impoverished by then because it never reinvented itself. It was just another east coast resort town but due to the advent of the car, cheap air travel and air conditioning, it lost its luster.

When the casinos opened all it did was magnify the urban problems in that the only real safe choice you have in Atlantic City is to stay in one of the casino resorts. This makes the town unfriendly to families which drives people away from the Boardwalk.

In my opinion, what AC should have done is limited the number of casinos to perhaps five or six, raised property taxes in the areas near them in order to move the impoverished away from the casino and create a tourist zone east of Atlantic Avenue. You could than also open other resorts along the coast that would cater to families.

There is some success in AC such as the Borgata. But everything outside of the casinos including the boardwalk, is unfortunately, a slum.
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DJTeddyBear
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March 17th, 2010 at 1:18:40 PM permalink
Quote: boymimbo

...But everything outside of the casinos including the boardwalk, is unfortunately, a slum.

Everything? Including the boardwalk?

I gotta protest such a broad generalization.

While I agree that the ammenities for children are limited to the Steel Pier (a small amusement park with several cool rides and midway attractions), arcades, the obligatory hotel pool, and the ocean, there's also some cool things such as Ripley's Museum.

The boardwalk has lots of little shops and restaurants. OK. A lot of the shops are cheapo souveniers, and a lot of restaurants are walk-up pizza and the like.

The beach is fairly clean. Several casinos open beach bars in the summer.

In addition to the Steel Pier, there is 'Ocean One', a pier designed to look like a beached ocean liner. Inside it's an upscale shopping mall. That's near Caesar's. On the inland side of Caesar's is 'The Walk'. It's a two-block wide strech that goes all the way to the new convention center, lined with nice restaurants and upscale outlet stores.

Bottom line: The rest of the city might not be all that great. And a lot of the biggest improvements occured in the last 10 years. But I wouldn't write it off as a slum.
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
DJTeddyBear
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March 17th, 2010 at 1:20:53 PM permalink
By the way, get a little too far away from the strip or Freemont, and Vegas ain't that great either.
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
AZDuffman
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March 17th, 2010 at 1:32:32 PM permalink
Quote: DJTeddyBear

Everything? Including the boardwalk?

I gotta protest such a broad generalization.



I wouldn't call the boardwalk itself a slum, but one block out is.

How bad is AC? This is some time back, but in 1996 I was there on a company meeting. I had to drive, my old region flew in (I had just been promoted.) My old boss comandeered me and my car to go to the liquor store a block away as to walk it was too scary a thought.

A few years before that my brother and I landed on the (then) airport on the island and took a cab six blocks because it looked too scary.

No reason to believe it changed much.
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cclub79
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March 17th, 2010 at 1:40:16 PM permalink
Quote: DJTeddyBear



In addition to the Steel Pier, there is 'Ocean One', a pier designed to look like a beached ocean liner. Inside it's an upscale shopping mall. That's near Caesar's.



It's actually been known as "The Pier Shops at Caesars" for about 5 years now, and they don't have the old Ocean One cruise ship motif or appearance anymore. It seems linked to Harrah's (more than just physically; you can use your Comps there on a 2 for 1 basis) but I believe the ownership is still separate, though I think there were some financial problems. I remember always going to the McDonald's at Ocean One when I wanted cheap food that didn't have the Casino markup, before I was playing enough to get comps.
boymimbo
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March 17th, 2010 at 1:44:44 PM permalink
I made a few trips to AC when I was living in North New Jersey a couple of years back. I did not feel safe on the Boardwalk at night. Too many shops close early and though you are literally steps from casino entrances, there were dark areas, boarded up areas, and places where I just didn't feel safe. This was around 9pm at night. There were police on bicycles roaming the boardwalk that we noticed.

The problem is that when you are walking the boardwalk, you can see the apartments one block up that are all boarded up and you wonder who lives there?

Vegas did a great job of making the strip seem like something out of this world.

The boardwalk and the beach was great in the daytime. Guess I should be gambling at night!!!

I apologize for the broad generalization.
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DJTeddyBear
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March 17th, 2010 at 3:56:12 PM permalink
Quote: boymimbo

I apologize for the broad generalization.

Nah, don't sweat it. A few years ago, I would have agreed with you.

Funny story:

About 10 years ago, I was driving around and got lost and, being a man, refused to ask for directions.

I started following some guy who, as I said to my wife, "He looks like he knows where he's going...." Of course, the wife gives me a crazy look. Turns out, following him was not a good idea.

When I tell that story, I say, "He drove us right into the slums of Atlantic City."

People are quick to respond with "How can you tell?"
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
pacomartin
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March 17th, 2010 at 4:18:18 PM permalink
Sometimes I think the entire north strip of Vegas is going to collapse in on itself, a victim of high real estate prices, low room rates,and not enough people gambling. That is 10K rooms

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calwatch
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March 17th, 2010 at 10:35:55 PM permalink
There is starting to be a critical mass of casinos in the San Diego area that are drawing folks from Southern California. The "San Diego Strip" (Pechanga south to Valley View) has several casinos catering to differing price ranges that offer each other competition. Regularly I hear ads on the radio for Pechanga and Morongo, and until recently San Manuel was really advertising on billboards until about 9 months ago (replaced by those ubiquitous 1-800-GET-SLIM weight loss surgery ads). San Manuel, Morongo, and Pechanga continue to advertise on sports TV, and San Manuel recently hired Magic Johnson to be a spokesman (at least he's reading from a script, so it doesn't feel awkward). Business is still brisk at the card clubs despite the decline of poker, and Commerce and Bicycle Club have been hyping their version of EZ Baccarat (commission-free bacarrat with a "drop fee" that makes it worth driving out to the desert).

Still, Vegas is surviving, primarily for all of the non-gaming activities. World class shops, a greater density (and accessibility) of clubs than the Sunset Strip, strip attractions like the Bellagio fountains and the themed casinos (vs. the non-themed California Indian casinos),. and variety of games available add up to more people making that drive. I do see long-term erosion of the Vegas market, but for now I tend to see chronic gamblers going to the locals casinos, while the occasional vacationer will still go to Vegas for both gaming and non-gaming activities.
rxwine
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March 18th, 2010 at 2:42:36 AM permalink
Quote: pacomartin

It just amazes me that with all the bankruptcies in Las Vegas that only MonteLago casino in Lake Las Vegas is closing.



I have a theory that in this kind of economy you might get more people here who try to multiply the last of their savings in an effort to stave off the inevitable which would mean the economic situation of the casinos would be the last to crash.

No evidence to present at all though.
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Wizard
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March 18th, 2010 at 6:06:44 AM permalink
Quote: rxwine

I have a theory that in this kind of economy you might get more people here who try to multiply the last of their savings in an effort to stave off the inevitable which would mean the economic situation of the casinos would be the last to crash.

No evidence to present at all though.



I've always wondered why we don't see more of that. For example, somebody has 10K in cash, and 100K in debts. Put the 10K on a 10-1 long-shot in Vegas. If you win, pay off the debts. If you lose, declare bankruptcy, and you're no longer 90K in the hole.
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DJTeddyBear
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March 18th, 2010 at 8:20:59 AM permalink
Quote: Wizard

I've always wondered why we don't see more of that. For example, somebody has 10K in cash, and 100K in debts. Put the 10K on a 10-1 long-shot in Vegas. If you win, pay off the debts. If you lose, declare bankruptcy, and you're no longer 90K in the hole.

Maybe because before someone gets to the point of considering bankruptcy, they owe more than 100K and/or have less (far less) than 10K liquid.

Liquid. Hmmm....

Maybe if enough people watch Pawn Stars, they might find some valuable junk in their attic, bring it to Vegas, and do exactly what you're suggesting. (Yes I know there are pawn shops in every big town, but you get the point.)
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
AZDuffman
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March 18th, 2010 at 8:50:51 AM permalink
Quote: Wizard

I've always wondered why we don't see more of that. For example, somebody has 10K in cash, and 100K in debts. Put the 10K on a 10-1 long-shot in Vegas. If you win, pay off the debts. If you lose, declare bankruptcy, and you're no longer 90K in the hole.



I think that state lotteries work this way. Who plays them? The lower income classes. They figure the $1-10 a week they play is better spent on that chance than trying to do something more long-term. There was a quote about the poor playing numbers in HBO's "Don King, Only in America," but I forget the speciffics.
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pacomartin
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March 19th, 2010 at 8:02:42 AM permalink
Quote: DJTeddyBear

There's a reason A.C. was picked.

A.C. was a glorious resort community in it's hey day, but it was in desperate need of some type of revitalization.

Plus, they wanted the casinos in one town so it would become the "Vegas of the East."

And that's an important point.

For example, I prefer Mohegan Sun to any single A.C. casino. And I live about equally distant. But I prefer A.C. because of it's multiple casino choices.



I see that Vegas and Atlantic City were very close in gaming revenue in 1984 before Vegas began to dominate. But now it seems that convenience gambling will trump the resort model.

Year Atlantic Vegas Ratio
1978 $134,073 $1,236,235 922%
1979 $325,480 $1,423,620 437%
1980 $642,673 $1,617,195 252%
1981 $1,099,781 $1,676,149 152%
1982 $1,493,163 $1,751,421 117%
1983 $1,770,943 $1,887,452 107%
1984 $1,951,768 $2,008,155 103%
1985 $2,138,651 $2,256,763 106%
1986 $2,281,204 $2,431,237 107%
1987 $2,495,674 $2,789,336 112%
1988 $2,734,773 $3,136,901 115%
1989 $2,807,017 $3,430,851 122%


I also see that the TRUMP Taj Mahal opened 18 weeks after the MIRAGE opened on 22 November 1989, so they were under construction at the same time. After that AC only opened THE BORGATA in 2003.
AZDuffman
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March 19th, 2010 at 8:26:37 AM permalink
Quote: pacomartin

I see that Vegas and Atlantic City were very close in gaming revenue in 1984 before Vegas began to dominate. But now it seems that convenience gambling will trump the resort model.


I also see that the TRUMP Taj Mahal opened 18 weeks after the MIRAGE opened on 22 November 1989, so they were under construction at the same time. After that AC only opened THE BORGATA in 2003.



Somehting esle enters here IMHO. In 1978 it was still kind of expensive to fly to Las Vegas. By the mid 1980s a flight to LV was almost as cheap as a drive to AC depending on where you lived in the eastern USA.
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boymimbo
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March 19th, 2010 at 9:10:49 AM permalink
None of the Vegas megaresorts had come to Vegas by 1989 when the Mirage was built.

To support my conservative friend's argument, airline deregulation took place starting in the early 1980s and certainly that had the effect of creating cheap airlines (People's Express) and the hub and spoke system that we see today. This would have increased air traffic to Vegas. Unfortanately the statistics to support this are not handy.
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pacomartin
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March 19th, 2010 at 3:33:26 PM permalink
Southwest Airlines moved into Vegas in 1982 and America West started in Phoenix in 1983 and quickly expanded into Vegas. The major terminal upgrades were completed by 1987 which were critical to Steve Wynn's decision to sell the Golden Nugget in Atlantic City in 1987 and the opening of the Mirage in 1989.

But back to my initial question, I still don't understand why analysts think that Vegas will be spared the widespread closure of the oldest casinos and resorts to match the reduced revenue. Eventually these resorts cannot support endless room remodels and cost cutting. In January of 2009 there was a 67.7% midweek occupancy which meant there were 45.5K rooms sitting empty midweek. Most major cities don't even have 45K rooms. For every room in Nevada there is one slot machine which on average makes more than the hotel room. But with slot revenue plunging this whole excess seems like it must collapse.

At the same time the assumption is almost automatic that Atlantic City will lose at least three of the smallest and worst performing casinos.
boymimbo
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March 19th, 2010 at 6:48:15 PM permalink
I think the demographics of Las Vegas are alot different than AC. Las Vegas is about being a destination. It's one of the few places in the United States with huge convention spaces. When business does pick up, Vegas will be ready. Vegas is the core business. None of the MGM nor Harrahs properties are losing money. Business is way off, to be sure, but the casinos are still surviving and making money. With MGM and Harrahs owning most of the properties on the strip, they can coordinate room rates and convention space. Even if the Circus is losing money, the property is still an important part of MGM's portfolio as when the business does come back, the Circus will be the low cost MGM alternative in Vegas (as the Excalibur is right now).

AC is a drive destination from New York and Philadelphia. Three airlines serve the airport: AirTran from its hub in Atlanta and Orlando, WestJet from Toronto, and Spirit Airways from some Florida destinatins, Myrtle Beach, and one flight to Boston. Otherwise you fly to Philadephia and drive an hour. AC faces more and more competition, first from Connecticut and now from the casinos in Pennsylvania.

Looking at the 11 casinos in AC:

AC has 11 casinos. AC Hilton's YTD revenue this year is off 29.5%. Resorts is off 20%. Trump Marina is off 23.2%. The Taj is off 19%. The Plaza is off 16.5%. The Harrah's properties are fine: Caesars is off only 3.7% and the Marina is off only 2.5% and Ballys is off 10.3%. The Borgara is off 12%. To round out, Showboat is off 5.6% while the Trop is off 10.1%. As a group, revenue is down 12% across the board YoY.

From the Q3 statements readily available online, here is my thoughts about the 11 casinos. All income figures are Operating Income, meaning income before depreciation, interest expenses, and special charges.

Borgata is doing fine with income only down slightly from 2008 at 107 million from 108 million.

Harrah's
Bally's is doing fine with income in the first nine months at 42.6 million.
Caesar's income is 35 million down from 67 million the year before.
Harrah's income is 56 million down from 73 million the year before.
Showboat's income is 22 million down from 30 million the year before.

AC Hilton's Balance Sheet is looking ok, but it lost 19.5 million in the first nine months and 2.7 million in the 3rd quarter. It is bleeding fast.

Resorts is a mess. It lost 18.4 million for the first nine months of 2009 but it also list 5.5 from the year before. They defaulted on their $350 loan back in 2008 and it is now owned by their lenders.

Tropicana was sold to Carl Icahn on March 10th so it is unclear what their future is, but with the debt wiped away through bankruptcy, and revenue only off by 10% YTD, it still lost 18 million in the first three quarters down from breakeven the year before. With Icahn buying the Fountainebleau in Vegas and his attempt to take over Lion's Gate (entertainment) it is clear that he is very interested in Gaming and Entertiainment.

Trump Hotels are also in bankruptcy collection and Icahn bought 1/2 of the bank debt. The Marina is the worst of the three financially. The Taj Mahal earned 28 million vs 49 million the year before. The Plaza was off 5 million in the first 9 months of 2009 vs earning 14.5 million the year before, while the Marina earned 2 million vs 7.5 million the year before.

But the truth of the matter is that despite the huge loss in revenue and money, both MGM and Harrah's are doing OK. Even Circus Circus is helping out cash flow and is making money. EBITDA for all of their Vegas properties is still positive. You can't say the same about Atlantic City. I could see Resorts closing down as well as one of the Trump resorts.
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pacomartin
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March 20th, 2010 at 1:55:30 AM permalink
I guess we'll just have to see. Last year's empty rooms in Vegas midweek in January set a record 46.6K which was only umatched by the new record set in January 2010 of 52.7K empty rooms. One of the things that I would hope a train from Los Angeles would do would be to fill some of the midweek rooms. People could take the day off work, or have a mini-work convention in Vegas to discuss some idea.

If 10K rooms closed in resorts that are more than 35 years old, it might help start the building cycle to return earlier.

Analysts ready to write obits for Atlantic City's weaker casinos
By DONALD WITTKOWSKI Staff Writer

ATLANTIC CITY
Casinos from Connecticut to Nevada saw revenues fall in 2009, but that's small consolation to the hard-hit gambling halls here. A casino-by-casino review of results last year finds several struggling to survive.Gaming analysts are getting ready to write obituaries for Atlantic City's weaker casinos.Their pessimism centers on newly released revenue figures for 2009. Overall, revenue from slot machines and table games sank 13.2 percent to $3.9 billion, the lowest level since 1997.

It was a very difficult year for the industry, said Israel Posner, executive director of the Institute for Gaming Management at The Richard Stockton College of New Jersey.Joel H. Simkins, of Macquarie Securities, claims Atlantic City is permanently disfigured. He warned of multiple casino closings, but declined to name which properties he believes are in peril. The financially shaky Atlantic City Hilton Casino Resort, Trump Plaza Hotel and Casino and Trump Marina Hotel Casino had a particularly bad year. Gaming revenue fell more than 20 percent at each of those properties.Robert A. LaFleur, of Susquehanna Financial Group, predicts Atlantic City's revenue will drop even more this year because of the introduction of table games at the rival Pennsylvania casinos.

The situation will go from bad to worse when Pennsylvania rolls out table games, Lafleur wrote in a note to investors. Atlantic City generated $1.2 billion from table games in 2009, representing about 30 percent of total revenue. Pennsylvania casino operators will fight for that lucrative market when they introduce their games in about six to nine months, once state gaming officials complete the regulations. While table games should give Pennsylvania a short-term boost, analyst Keith Foley of Moody's Investors Service believes the Keystone State casinos will ultimately encounter the same difficulty as their counterparts in Atlantic City; "too much competition".

Beyond the near-term impact of the approval of table games in Pennsylvania, the move is a symptom of the bigger problem plaguing the gaming business, namely that there are more states and more facilities scrapping over an ultimately finite and possibly permanently smaller pie, Foley concluded in a new research report. With the poor economy and extra competition cutting into Atlantic City's casino business, revenue has slipped three years in a row. Compared with the record-high of $5.2 billion in 2006, revenue is down 25 percent industrywide. Simple arithmetic shows that the industry has lost $1.3 billion in revenue over the past three years.
Mosca
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March 20th, 2010 at 6:58:50 AM permalink
Sorry if this is a little disjointed. It is in my head, and I'm just going to let it fly, and try to keep it reasonably organized.

I can't speak comparatively, because I don't go to Vegas. Now, I understand; this is "Wizard of Vegas". And the distinction is not subtle. the games themselves don't know where they are; when we discuss games, it isn't important. Where the real draw is, and should be, is what it is about Vegas that makes it worth going to. After all, for me, and many like me, that is what matters. I have to drive two hours to get to the airport (PHL) that takes me to Vegas; I can either wait in an airport, go through TSA screening with my shoes off, sit in a cramped airplane for four hours, deal with the deplaning experience and luggage-go-round, and travel to the hotel... or I can drive another hour and be in Atlantic City, playing in a casino.

Is Vegas worth it?

Hmmm. How do you answer that question if you've never been there?* Well, the only way it would ever come up would be if AC isn't all it is cracked up to be. And there has been a lot written about it, mostly written about civic corruption that would make even Vegasites drop their jaws, and about waste, and bad decisions, and about safety and everything, and it all boils down to this:

What are you going to do with all the poor people? And why are they still poor?

Even without the casinos; why? Atlantic City is urban area that sits on the beach, and not just any beach; the New Jersey coast is beautiful. the beaches are long and the surf is gentle, the sand is fine, the water is warm. South of Atlantic City: Ocean City, Margate, Wildwood, and Cape May are all reasonably prosperous vacation destinations.

Mostly what AC did to address the question is, they built malls. Malls and hoity toity chain restaurants: Morton's, Gallagher's, Ruth's Chris, etc. So you have The Pier, The Quarter, and the new Outlet Mall, where you can get the exact same goods you can buy at any other outlet mall in America, or buy on line (cheaper). And if you win you can eat a nice steak (as if you can't get a nice steak here in Wilkes-Barre [yes, you can get a GREAT steak here in Wilkes-Barre]). But all that did was move the people away from the poverty, it didn't solve it; you are either isolated from the poverty around you (The Pier, The Quarter), or surrounded by the poverty you don't see (the outlets). The boardwalk? Be prepared to be pestered by cart pushers every 10 yards, to walk by homeless people sitting on benches, to eat at questionably clean food outlets and have your eyes glaze over at store after store of t-shirts, but mostly the homeless, on the benches or moving slowly with the crowds.

Because the poverty is everywhere. Even today, 40 years after the casinos opened, there has been nothing done. It emphatically IS NOT safe to walk anywhere one block inland from the casinos. Unemployment is almost 15% (remember, those who have dropped off the rolls aren't counted). 25% of the housing is vacant. 27% of the (counted) population is below the poverty line. And those above the poverty line aren't much above it; median household FAMILY income is $32k; per capita income is $15.4k.

So why have people still gone there? Simple. Until recently, AC has been successful not because it is the equal of Vegas, or even because it is close; AC has been successful because it has been good enough at isolating the gamers from the the poverty so that it's represented value not over and above Vegas itself, but over and above the hassle of traveling to Vegas.

So Vegas has NEVER been the competition. NO ONE has sat in St Louis and thought, "Hmmm. Vegas, or AC?" AC never had any competition. But now, there IS real competition. And it isn't Las Vegas. It is the PA casinos. They are getting the people who wouldn't fly to Vegas, but still like to game. And when the PA casinos get table games, all those issues that AC failed to address over the last 40 years will eat them alive, from inside. For AC to survive, they need to solve the question, what are they going to do about all the poor people? And that's not a casino question.



*Well, not NEVER. We were there once, in '94. But we had our 3 year old daughter with us (long story). And that means that being in Vegas wasn't BEING IN VEGAS. At least the trip was free, which is another story; I earned a trip to Vegas and couldn't have the Vegas experience!
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boymimbo
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March 20th, 2010 at 8:08:38 AM permalink
Quote: pacomartin

If 10K rooms closed in resorts that are more than 35 years old, it might help start the building cycle to return earlier.



Why does Vegas need to build new casinos? Most of the entire strip has regenerated itself over the past 21 years. The north strip (north of the Fashion Mall) is now "old Vegas". I think they'll have to build Echelon first before they tear down the Cirque du Cirque and the other properties. Vegas just opened the Encore a year ago and the City Center complex this year. Maybe Vegas just needs to have a breath and see where things go.
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boymimbo
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March 20th, 2010 at 8:53:07 AM permalink
Quote: Mosca

Is Vegas worth it?



Well that depends. I live in Niagara Falls and am about a 10 minute drive away from three "full service" casinos. Yet I make an annual pilgrimage to Vegas anyway.

For Atlantic City, I either have to make the hour drive to Toronto and fly via WestJet and pay $246 for the 90 minute flight. I only have a choice of two flights per week. Or I can take AirTran out of Buffalo and connect through Atlanta. I can also make a 9 hour drive to AC direct. When I get to AC, I have a choice of 17,000 rooms over 11 casinos: 4 owned by Harrahs, the Borgata, the Trump properties, the Trop, Resorts, or the Hilton.

For Vegas, I can go to the airport in Buffalo and take Southwest's offerings (three direct flights a day). I can go to the airport in Toronto and fly Air Canada or WestJet (five direct flights a day), or I can choose a myriad of options to get me to Vegas from either airport via all of the major airlines' hub-and-spoke system. I'll pay $400 for a five hour flight. Once I get to Vegas, I'll have a choice of a myriad of properties. There are about 81,000 rooms and 35 places to gamble on the strip itself.

So I've elected already to pay more and fly a longer distance to get there. Why? First, because I can get there with more options and have a far greater choice of things to do (shows). Second, because I feel safer there because I don't feel the poverty around there. Third, because it is much warmer there than it is here.

Quote: Mosca

What are you going to do with all the poor people? And why are they still poor?



Quote: Wikipedia.org

Like many older east coast cities after World War II, Atlantic City became plagued with poverty, crime, and disinvestment by the middle class in the mid to late 20th century. The neighborhood known as the "Inlet" became particularly impoverished. The reasons for the resort's decline were multi-layered. The automobile became available to many Americans after the war. Atlantic City had initially relied upon visitors coming by train and staying for a couple of weeks. The car allowed them to come and go as they pleased, and many people would spend only a few days, rather than weeks. Also, the advent of suburbia played a huge role. With many families moving to their own private houses, luxuries such as home air conditioning and swimming pools diminished their interest in flocking to the beach during the hot summer. Perhaps the biggest factor in the decline in Atlantic City's popularity came from cheap, fast jet service to other premiere resorts. Places such as Miami Beach and Nassau, Bahamas superseded Atlantic City as favored vacation spots.

By the late 1960s, many of the resort's great hotels, which were suffering from embarrassing vacancy rates, were either closed, converted to cheap apartments, or converted to nursing home facilities. Prior to and during the advent of legalized gaming, many of these hotels were demolished.



Today, the issue is that there is not enough reasonable (full-time, high paying) employment to support the metropolitan population of about 300,000. And because the weather is nice enough and the property values low enough, you can afford to live in Atlantic City, close to a nice ocean, and live in squalid, impoverished conditions. The vacancy rate on housing is 26%.

What caused the problem? Gross mismanagement and the inability for the New Jersey government and local governments to work together to create a sustainable future for Atlantic City. Building malls and nice chain restaurants is nice, but the singular industry to support the entire population is pure tourism. The casinos are just large corporations designed to deliver to its shareholders. It wasn't given the responsibility to pay its employees well or to treat their employees well as perhaps as it should have been. Of course, corporate "responsibility" went the wayside decades ago.

To support the population you need a couple of things. First, a decent college to bring in and keep smart people and build some intelligent industries and give the ability to Atlantic City's youth to be able to stay in the city and then work in Atlantic City as management or executives after graduation. Second, you need to bring in some government jobs to support the population, whether it is even some processing centers. Third, bring in some government incentives to attract and keep a secondary industry. Fourth, use the tax revenue generated from casinos to support Atlantic City itself and not be used in the rest of the state.

Finally, zoning could move the residential neighbourhoods where the poverty exists to areas FAR outside of the tourist area. That would make Atlantic City more attractive to visitors. And you have to make the town more family friendly again and not all about gambling. With the boardwalk dominated by casinos and the poverty everywhere, it is not a choice destination for anyone except for those who go explicitly to gamble or go to a second-class convention.
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