Vol. 4, No. 7, July 2007
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Atlantic City At The Next Level
Growth soars thanks to a stable business environment
Atlantic City is in the midst of a significant renaissance with billions of dollars poised to be invested. This current building and planning boom could propel Atlantic City to becoming the overnight destination many envisioned 29 years ago when then Governor Brendan Byrne, Senator Richard Codey, Assemblyman Steven Perskie and other visionaries collaborated before the first dice were thrown at Resorts in 1978.
While billions of dollars had been invested by casino companies since 1978, Atlantic City’s economy was bolstered in 2003 with the opening of the $1.1 billion Borgata, the first new Atlantic City casino in more than a dozen years.
Borgata expanded the market in part by offering an array of non-gaming amenities similar to the newer Las Vegas multi-purpose resorts—upscale, celebrity chef-inspired dining, retail, spas, entertainment, convention space and nightlife. Since then, Borgata has opened a $200 million expansion and is currently constructing its 800-room, $400 million Water Club hotel tower.
Other casinos took note of Borgata’s success, and since then have invested billions more in expansions and upgrades of various attractions, including the addition of much-needed hotel rooms.
The two new destination resorts that seem to be the furthest along the development path are Revel and Pinnacle. Both companies plan to open in 2011 on their respective Boardwalk locations, spending an estimated $2 billon each on new hotels, spacious casinos and all of the non-gaming attractions that will further fuel Atlantic City’s renaissance.
MGM Mirage plans a casino next to Borgata, which it co-owns with Boyd Gaming. MGM Mirage could bring in concepts from its $7.4 billion CityCenter project presently under construction in Las Vegas.
Former Caesars Entertainment CEO Wallace Barr and former CRDA executive director and developer Curtis Bashaw recently purchased eight-plus acres of casino-zoned property on which they plan to develop a casino hotel resort.
Existing casinos are also busy adding attractions and improving their facilities. Harrah’s Atlantic City just opened its Waterfront Buffet and Shops, “The Pool” and its Elizabeth Arden Red Door Spa as part of its $550 million expansion. The final phase of this expansion, including 1,000 rooms and suites, will open next spring. Harrah’s Entertainment previously announced a potential master plan for its center-Boardwalk properties that could translate into billions of additional dollars being invested in this destination resort.
Atlantic City’s smallest casino, the Hilton, also has big plans: a $1 billion expansion of its Boardwalk property to a destination resort of more than double its current size. Tropicana’s new owner, Columbia Sussex, announced plans to construct an additional 1,000 hotel rooms. This would maintain the Tropicana’s status as New Jersey's largest hotel, with more than 3,000 rooms, and it would expand on the success of its retail, dining and entertainment destination, the Quarter.
Trump Taj Mahal is undergoing a $250 million renovation and adding an 800-room hotel tower to open in 2008. Trump Entertainment Resorts is investing approximately $500 million in the renovation and expansion of its three casino hotels.
Non-casino development also is changing the face of Atlantic City:
Bashaw is also leading an investment group that is converting two older Atlantic City hotels into an upscale boutique-type hotel offering. The Walk, located at the once-blighted base of the Atlantic City Expressway and built with the backing of the casino-funded Casino Reinvestment Development Authority, is now home to outlet shops, eateries and the 40/40 Club, owned by hip-hop mogul Jay-Z, and is in the midst of another successful expansion.
CRDA Executive Director Tom Carver estimates that these various projects could result in $10 billion of investment and create as many as 50,000 jobs over the next decade.
The “secret” behind Atlantic City’s growth is no secret.
Nearly 30 years ago, New Jersey laid the foundation for a stable economic and regulatory environment that has attracted investment, created jobs and generated tax revenues that benefit the entire state. This strategy will continue to serve New Jersey well, as it competes with the emerging jurisdictions of Pennsylvania, New York and other states. These jurisdictions have higher tax rates and limited licenses, and thus will not attract the level of investment and attractions to be found in Atlantic City.
Still, on a recent trip to Atlantic City, Pinnacle CEO Dan Lee said that his company is monitoring the market, and that certain developments could make him rethink Pinnacle’s billion-dollar plans for Atlantic City. Lee’s concerns are very real, and very understandable.
New Jersey must recognize and protect the unparalleled asset it has in Atlantic City’s casino industry. That means maintaining that stable, nurturing investment climate. Threats such as the possibility of slot machines at New Jersey racetracks can undermine that climate, and cost the entire state some much-needed capital investment.
