Vol. 4 No. 12, December 2007
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The Year In Review
2007: Politics, Personalities & Possibilities
For the first time in almost 30 years, the Atlantic City casino industry will undoubtedly produce less revenue than it did the previous year. Gaming’s longest winning streak will come to an end because of a perfect storm of challenges to the city’s casinos: increased competition from Pennsylvania, Delaware and New York; a partial smoking ban that has affected customer loyalty; the beginnings of a possible recession; a weak real estate market, and more. At Casino Connection, we have decided to document the events of 2007 because, as you will see, all was not doom and gloom. There are many reasons to be optimistic, not only for 2008, but also for the future of Atlantic City. So sit back and reminisce on the year that was.
JANUARY
Private Buyout
Harrah’s Entertainment is bought by two private equity firms for $17.1 billion. Questions about how the firms would be licensed will not be answered until October when the Casino Control Commission approves the deal. Most of the management remains in place, led by Chairman and CEO Gary Loveman, but longtime Atlantic City veteran Tim Wilmott resigns soon after the buy is announced.
Pier Pressure
Revel Entertainment, which plans to develop a $2 billion casino resort east of Showboat, says it’s interested in also acquiring the Garden Pier. CEO Kevin DeSanctis is careful to not make it a demand. “The contents of Garden Pier are great,” he says. “Integrating them into a new design would be an option.”
Trop Turnover
Columbia Sussex completes the purchase of Aztar Corporation, giving it control over the Tropicana in Atlantic City. The company begins a review of the operations at the Trop and begins a series of cost-cutting moves that eventually eliminates hundreds of jobs.
Gormley Gone
State Senator William Gormley announces he will not seek re-election in the November 2007 elections. He leaves behind a legacy of improvements in Atlantic City unmatched by any state legislator since Frank J. “Hap” Farley held the same position in the 1940s and ’50s.
Smoke-Free
After hearing dire predictions from the gaming industry and health concerns from casino workers, the City Council of Atlantic City decides to override the state loophole for casinos built into the statewide smoking ban. The council directs casinos to go smoke-free on 75 percent of their casino floors by April 15. Plans to erect barriers to separate the 25 percent of the casino floor where smoking is permitted are due by September.
Quote Unquote
“The foundation of every successful company is its employees. We certainly recognize the value and hard work that each employee at the Tropicana has provided over the years and continues to provide.” —Fred Buro, then-president of the Tropic ana
FEBRUARY
Schiffs Submit
For years, the operators of Bally’s Atlantic City have winced when viewing the pizza parlor, the $1 store and the other tacky shops blocking their Dennis tower. Harrah’s Entertainment, Bally’s owner, finally makes a deal with the Schiff brothers, who have owned the shops for decades, paying them more than $38 million for the property. (At year’s end, the stores still remain.)
Harrah’s Grows
The first phase of a massive expansion of Harrah’s Atlantic City opens, with six retails stores and a new Waterfront Buffet, just part of a $550 million project.
Philly-Area Slots Debut
The slot arcade at Philadelphia Park in Bensalem, Pennsylvania, is joined by a brand-new facility, Harrah’s Chester Casino & Racetrack, giving Atlantic City casinos the first Philadelphia-area competition. The tracks are just the first of the competition, to be joined in later years by casinos operated by Foxwoods and a group known as SugarHouse on the riverfront in Philadelphia. By the end of the month, Atlantic City slot revenues have begun a decline that is not reversed all year.
Mohawk Momentum
New York Governor Elliot Spitzer approves a casino owned by the St. Regis Mohawk tribe at the Monticello racetrack, 90 miles north of New York City. Federal government approval is necessary, and in November, the tribe sues the Interior Secretary for dragging his feet.
Quote Unquote
“If there's a compromise that represents some balance between the public health issues and the economic development issues, then I’m inclined to give that an opportunity to work.” —New Jersey state Assemblyman James Whelan on the Atlantic City council’s compromise bill to ban smoking on all but 25 percent of casino floors after some colleagues reiterated a call for a total smoking ban
MARCH
Reaching New Heights
Revel Entertainment gets approval from the Atlantic City Planning Board to build a tower up to 800 feet high. The height restrictions have been raised from the previous standard of 485 feet because of the closure of the city’s municipal airport, Bader Field.
DGE Departure
Tom Auriemma, the longtime head of the state’s Division of Gaming Enforcement, retires to take a job with Penn National Gaming. The well-respected Auriemma led improvements in the state’s slot lab, which now gets new slot machines on the floor much more quickly than in the past.
Coskey’s Back
Dave Coskey, an Atlantic City casino executive during the town’s heyday in the 1980s, returns as vice president of marketing at the Borgata. Coskey’s journeys took him to Philadelphia, where he rose to the presidency of the NBA ’76ers.
Quote Unquote
“This is a town that had been on cruise control for 25 years… The biggest challenge now facing Atlantic City is itself.” —Larry Mullin, president and chief operating officer of the Borgata in Atlantic City, commenting that Atlantic City casinos must continue to add destination amenities to their properties to meet the new competition from Pennsylvania
APRIL
Hilton High
Keeping up with the expansion and planned new construction along the Boardwalk, the Atlantic City Hilton announces a $1.2 billion project that would add a 1,000-room hotel tower and double the space of its casino floor. The plans are put on hold later in the year as the impact of Pennsylvania competition and the smoking ban are assessed.
Smoking Divisions
The 75-25 rule goes into effect on April 15 as all 11 Atlantic City casinos designate areas where smoking is permitted (25 percent of the casino floor) and where it is banned (75 percent). Smoking customers are upset, while the non-smokers revel in the cleaner air. The impact is immediate as slot revenue plummets.
Union Label
Dealers at Wynn Las Vegas join the dealers at Caesars Atlantic City and Trump Plaza in votes that allow them to be represented by unions. The Wynn dealers are upset that owner Steve Wynn distributed some of their tips to supervisors, while their Atlantic City counterparts feel unappreciated.
Quote Unquote
“The prevailing wisdom is that Pennsylvania and New York casinos are a threat to Atlantic City. It’s not necessarily so. All that competition is anticipated. Atlantic City is a haven for investment. There is no shortage of companies interested.” —Michael Pollock, CEO of Spectrum Gaming Group, commenting on a Chamber of Commerce of Southern New Jersey meeting in which local officials said Atlantic City’s strength as a destination will offset new competition from other states
MAY
Terrific Ten
The Atlantic City Convention Center turns 10 years old this month. The 500,000-square-foot facility proved skeptics wrong by generating almost $2 billion in revenues and boosting Atlantic City’s convention business 77 percent over that period.
Bethlehem Breaking
Las Vegas Sands breaks ground for eastern Pennsylvania’s first non-racetrack casino. The $600 million Sands Bethworks casino will include 5,000 slot machines, a 300-room hotel and 200,000 square feet of retail space. “With construction under way and our long-term commitment firmly established, we look forward to providing new opportunities for so many in the area,” says Sands Bethworks President Robert DeSalvio, a former Atlantic City casino executive.
Profit Hit
First-quarter profits for Atlantic City show a definite impact from the two racinos that opened during the period in eastern Pennsylvania. Net revenues were down 5.7 percent compared to the same period in 2006.
The Pool Makes Splash
The Pool at Harrah’s debuts on Memorial Day weekend, creating another of Atlantic City’s “must-see” attractions. The domed pool features a tropical landscape, and is used by Harrah’s as a special events center and four-acre entertainment complex as well. The adjacent Elizabeth Arden Golden Door Spa also opens.
Quote Unquote
“What is our project? Why the hell should I tell you?” —Daniel Lee, CEO of Pinnacle Gaming, opening his remarks at the East Coast Gaming Congress by noting that with all his competitors in the audience, he wasn’t about to divulge details on what the operator has planned for the Sands site in Atlantic City
JUNE
Trump Sale, Shakeup
The long-rumored sale of the Trump properties in Atlantic City seemed imminent as a group led by former Trump Taj Mahal and Tropicana President Dennis Gomes was named “preferred” bidder. Since the company board did not take the advice of Trump President Jim Perry, he resigned, followed soon afterwards by several other key executives, including CIO Virginia McDowell. The Gomes bid was later rejected and Mark Juliano was named president of Trump Entertainment. McDowell later surfaces as president and COO of Isle of Capri Casinos, with Perry joining the company’s board of directors.
No Shutdown
A budget was passed late in June, averting a crisis that led to the shutdown of the Atlantic City casinos in 2006. But because of the reason for the shutdown—CCC and DGE personnel are still considered “non-essential” employees—the threat will loom over the industry at this time each year until it is resolved.
Be a Sport
The Delaware House considers a bill to permit sports betting at the state’s racinos. The bill dies in committee, but only because Governor Ruth Ann Minner has pledged to veto any bill that would expand gaming. Racino executives count the months (19) until she leaves office.
Echelon Excellence
Bob Boughner, who led the development of the Borgata, returns to Nevada to announce Echelon, a massive $4.5 billion project on the site of the former Stardust on the Las Vegas Strip. Boyd Gaming’s biggest gamble yet, Echelon will compete with MGM Mirage’s CityCenter project, Wynn Resorts’ Encore and the Venetian’s Pallazzo.
Quote Unquote
“Atlantic City is unique, and there is a propensity to compete by giving things away. We need to stop that and be a little smarter in our marketing.” —Paul Rubeli, former chairman of Aztar Corp. when it owned the Tropicana in Atlantic City, on one thing that still needs to be fixed for the city to become a true destination resort
JULY
Chair Stands
Linda Kassekert is re-nominated as chairwoman of the Casino Control Commission for a second four-year term. Kassekert skillfully maneuvered the commission through the casino shutdown in 2006 and looks forward to hearings on the Harrah’s Entertainment purchase and an MGM Mirage joint venture, each with special circumstances.
Miami Slots
The county commission of Miami-Dade in Florida votes to hold a referendum on January 29, 2008 to get approval for slots at the county’s parimutuel facilities. County voters turned down a similar measure in 2002 when Broward County OK’d the facilities.
AC Indians?
Leaders of Connecticut’s Mohegan Tribe, owner of Mohegan Sun, visit Atlantic City to consider building a multibillion-dollar hotel casino. The tribe already operates the Mohegan Sun at Pocono Downs in Pennsylvania and sees an Atlantic City property as the southern end of a northeast triangle in which it could dominate the market.
Electronic Tables
The Casino Control Commission OKs a test for electronic table games. The devices are popular in Pennsylvania, where there are no live games, and Atlantic City operators want to offer them to customers who learn to play there.
Quote Unquote
“When we first began in this market, Atlantic City was viewed as a one-dimensional, gaming-only destination. Today Atlantic City is viewed widely as an entertainment destination with a wider variety than ever in its history.” —Boyd Gaming Chairman Bill Boyd, at the topping-off ceremony for Borgata’s new Atlantic City hotel, the Water Club
AUGUST
Betting on Bader
As soon as Bader Field, Atlantic City’s municipal airport, closed in late 2006, speculation began on the future of the 146-acre parcel. Steve Wynn enters the debate this month when it is revealed he’s discussing plans for the plot with former Senator Bill Gormley and Governor Jon Corzine. No one, however, is talking to the city, which owns the land.
Trop Turnover
Add Fred Buro to the long list of Trop employees fired. Buro joined the Trop when Columbia Sussex took over in January but fails to last a year. Buro is succeeded by longtime Trop executive Mark Giannantonio
Harrah’s HOB
The sometimes-strained relationship between the House of Blues and Showboat comes to an end with the announcement that the casino’s management team will take over operations there. The facility is now owned and operated by Showboat under a licensing agreement with HOB owner Live Nation, the first of its kind.
Quote Unquote
“Whether you are a dealer, a security guard, a slot mechanic or a cocktail server, you have a responsibility to make sure your patrons are old enough to be gambling legally. A word of warning: If you don’t take that responsibility seriously, you will find that the Casino Control Commission and the New Jersey Division of Gaming Enforcement do.” —Linda Kassekert, chairwoman of the New Jersey Casino Control Commission, in remarks at the launch of Responsible Gaming Education Week at Caesars Atlantic City
SEPTEMBER
Smoke-Free in AC
Seven of Atlantic City’s 11 casinos announce they will go completely smoke-free. Facing a deadline to explain how they will comply with the tenets of the 75-25 regulations, some will build separate smoking areas on the casino floor, while others will totally ban smoking and set up separate smoking lounges. The four that will accommodate smokers—Trump Taj Mahal, Trump Marina, Resorts Atlantic City and the Atlantic City Hilton—will build barriers to seal off the portion of the casino where smoking will be permitted.
In and Out
Pinnacle Entertainment announces that Kim Townsend has been appointed CEO of the company’s still un-named Atlantic City property on the site of the Sands. Townsend has much Atlantic City experience with the Golden Nugget and the Sands. Meanwhile, Ken Condon, the president of Bally’s Atlantic City, resigns effective at the end of the year. Condon has played a major role in bringing entertainment and sports to the Boardwalk Hall. He will be replaced by longtime Atlantic City executive Joe Domenico.
Revel-ation
Revel Entertainment breaks its silence about its development north of Showboat. The $2 billion project—backed by Morgan Stanley—will contain two 48-story towers standing 700 feet high, with 2,000 rooms and suites in each. The unnamed property’s casino floor will stretch nearly 170,000 square feet, one of the largest in the city.
Flames on Water
A Sunday morning fire in late September was over soon enough, but it caused enough damage to push back the opening date of the Water Club at the Borgata. Once scheduled to open late in 2007, the tower, complete with its four pools, will now debut in early summer 2008.
Quote Unquote
“Our turnaround strategy has always been to identify our better customers and market to them. It’s to try to get the company away from depending on the day-trip gambler as opposed to someone who wants to come for a two- or three-day entertainment experience.” —Trump Entertainment CEO Mark Juliano, on the company’s approach to turn the fortunes of its three Atlantic City casinos
OCTOBER
Sands Falls
In the first casino implosion in the history of Atlantic City, the Sands crumbles in a spectacular show in late October. With thousands of pounds of TNT (and an equally impressive fireworks display), the implosion attracts thousands of spectators up and down the Boardwalk. The property will now host the new Pinnacle Entertainment property, tentatively set for a 2011 debut.
Levy Leaves
Atlantic City’s long municipal nightmare is over when Mayor Bob Levy disappears for 10 days and then returns to resign. Exactly a year from when he was disgraced for lying about his military record, Levy later accepts a plea bargain in which he admits to defrauding the government for undeserved veteran benefits. City Council President William “Speedy” Marsh takes over until disagreements within the city’s Democratic Party can be sorted out.
Not a Mirage
MGM Mirage announces a huge $5 billion mega-project on the company’s property in the Marina District. Called MGM Grand Atlantic City, the facility will include the city’s largest casino (280,000 square feet), more than 3,000 rooms and suites, and the state’s tallest building, a 57-story skyscraper. The property will also include a large retail component, meeting and convention space and a possible arena. Groundbreaking could take place in late 2008.
Private Trust
The Casino Control Commission gives its approval to a $17 billion purchase of Harrah’s Entertainment by two private equity groups, Apollo Management and Texas Pacific. Harrah’s says its management will remain in place and all expansion plans will be completed.
Quote Unquote
“The projected economic benefits to the city are greater than any other economic development activity in the last 50 years. As much as we may object to losing the right to select the location of gaming sites, we cannot jeopardize the opportunity the city does have to affect the nature of development along the city's riverfront by stonewalling the process.” —Philadelphia Mayor John Street, in a letter to City Council urging passage of ordinances to facilitate construction of two riverfront slot casinos
NOVEMBER
Trump Dumps Suitor
Negotiations between Baltimore’s Cordish Company and Trump Entertainment collapse early in November. Reportedly, Donald Trump was personally negotiating with David Cordish, but could not reach agreement. Trump has an ongoing suit against Cordish over the development of the Seminole Hard Rock Casino in Florida, in which he accuses Cordish of stealing his ideas.
Bader Blockade
Revel Entertainment reaches a development agreement with the city that will allow the company to proceed with its $2 billion casino resort at the north end of the Boardwalk. The deal includes a stipulation that the city does not approve development at Bader Field until all state and federal approvals are obtained and unspecified roadway improvements are made. Revel now will seek state and other city approvals for the development. Construction has already begun and an earlier opening date is announced of 2010.
More from MGM
Chairman and CEO Terry Lanni surprises some observers by saying that the company would be interested in bidding on Bader Field. Despite the fact that MGM recently announced a $5 billion MGM Grand Atlantic City in the city’s Marina District, Lanni said that the company is “bullish on Atlantic City and bullish on the Marina.”
And the Winner Is…
Assemblyman Jim Whelan defeats James “Sonny” McCullough in winning the state Senate seat vacated by William Gormley’s retirement. The closely watched race joins a Democratic sweep of the 1st Legislative District, as Assemblyman Jeff Van Drew handily defeats Republican incumbent Nick Asselta and Democrats Nelson Albano and Matt Milam win Assembly seats in close victories over Republicans Michael Donohue and Norris Clark. Republicans win another close race in the Assembly, with John Amodeo and Vince Polistina defeating Joseph Wilkins and Blondell Spellman.
Mayoral Malaise
The city Democratic Committee selects a slate of three candidates to succeed Bob Levy as mayor, under the municipal vacancy law. The committee selects its own chairman, Scott Evans, along with Business Administrator Domenic Cappella and former City Councilwoman Barbara Hudgins, without accepting further nomination. City committeeman John Devlin and the state Democratic Committee sue, claiming the committee hijacked the process. A judge disagrees, and orders council to immediately select one of the three nominees to succeed Levy, who resigned in October.
Quote Unquote
“We’ll look at it, but Governor (Jon) Corzine is clearly interested in upgrading the Boardwalk and said he will not allow Bader Field to damage it.” —Dan Lee, chairman of Pinnacle Entertainment, when asked if he would consider bidding on the development of Bader Field, in addition to the project on the site of the Sands on the Boardwalk
DECEMBER
Revenue Reversal
Without a stunning turnaround in the final two months of 2007, the year will be the first since the inception of casinos in 1978 in which gross gaming revenue failed to exceed the previous year. Many factors are blamed—recession, smoking ban, competition. Nevertheless, Atlantic City’s future looks bright, if the state can avoid complicating its future with consideration of slots at racetracks or any kind of tax increase.
