by Steve Norton
CEO, Norton Management

Is Atlantic City dying? Listen to this and you'll find out why the answer is... | A.C. Impact | pressofatlanticcity.com

My comment:

Today's article raises questions about deed restrictions, that were attached to property sales. In the case of the Showboat sale to Stockton, Caesars obviously accepted a lower price for the property, because with the deed restriction, they effectively closed a casino, that was taking a share of the total AC casino play, including 3 other resort casinos owned by Caesars. The Taj Mahal casino restriction, placed on the property by Carl Icahn, is probably negotiable, if a subsequent operator offers the right price.

The Casino Commission's unwillingness to allow a casino at the 10, without Mr. Straub being licensed, is totally consistent with the Casino Control Act. Over the years, there have been some modifications on softening license restrictions for financial institutions, providing debt to casino operators; but never to a property owner.

Considering, that with the opening of slots and later table games in Pennsylvania, and also slots at Aqueduct and Yonkers; AC has effectively seen more convenient gaming options to 98 percent of the 28 million persons that once found Atlantic City their most convenient casino destination. And that doesn't include customers from Maryland that now also have their own gaming. Fortunately for AC, we have a seaside location, and with a lengthy monopoly, have developed a substantial tourism/gaming infrastructure, that attracts a substantial number of visitors on weekends, holidays, and during July and August; but we are at a tremendous disadvantage 200 mid-week nights a year in the Fall, Winter and Spring. Prior to the new competition, we attracted over 14 million line run bus customers, annually, and primarily during mid week days and nights. Those bus visitors have now declined by more than 90 percent, and many can now be found at competitor casinos, like Sands Bethlehem.

Atlantic City's future success is in following the example of the Strip resorts in Las Vegas, by attraction conventions and trade shows, that primarily hold their events from Monday to Thursdays, and pay regular rates for their accommodations, rent exhibit and meeting space and hold profitable functions. In fact the larger Strip resort casinos generate less than 35% of their revenues from the casino, and earn 73 percent of their departmental earnings from the hotel, restaurant and convention operations. Atlantic City comps over 50 percent of their room, food and beverage revenues; and offers 80% to 90% room rate discounts, mid-week, during off-season nights, plus lots of free play.

AC has a major advantage over our Eastern competition, in that they have tremendous mid-week demand from business travelers, that compete with the convention trades for the available accommodations; creating a situation, where, unlike Atlantic City, weekend rates are lower than mid-week for rooms. In fact, on Manhattan, better hotels charge rates of $500 a night or more, mid-week, offering substantial discounts to weekend

visitors.

AC's biggest problem attracting conventions and trade shows, is that we lack air service from major hub airports. Since the attendees to meetings are not paying for their own transportation, rooms or meals; their preferred method of transportation is by air. Another advantage of decent air, is that we might attract customers from markets that were always beyond the reach of our line run bus programs; like Atlanta, with a population of 6 million, and no casino gaming nearby.

Now that we have the Strip's largest operator, MGM, now owning the Borgata, it is obvious they know the value of the convention trades, and what they can do to boost mid-week occupancies and room rates, while creating profitable functions business, and replacing comps with paying customers in the gourmet restaurants.

If Atlantic City can fill some of the 200 mid-week nights, outside the Summer months, thy will also bring a higher income individual to their casinos, but the real benefit will be in reducing the percentage of comps and discounting now offered, while greatly increasing the profitability of the non casino departments.

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My comment:

Mr. Paul Mushline gives New Jersey a failing grade on the State's introduction of casino gaming. The writer gives us credit for being the second state to introduce casinos, and in the next sentence blames us for being the first to screw it up. And here is where I disagree. We followed the free enterprise system, like Nevada; but required that owners and operators be honorable businessmen and rum their businesses in a well regulated industry; and we achieved that in Spades. In hindsight, we might have been smart to consider that other states, whose citizens we served; might some day learn that the many benefits provided, far exceeded the negatives. And these negatives, are often misunderstood and intentionally misrepresented; which actually contributed to our Eastern gaming monopoly, of nearly 30 years. We created over 60,000 jobs, $10 billion in contributions to New Jersey senior and disabled programs, and an even larger amount spent in New Jersey construction. The original good news for NJ, was that our primary customer base, and the revenues to support our resort, came from other states. Eventually realizing their missed opportunity, they opened their own style of gaming establishments, and severely cut into the business of our casino resorts.

Most states who subsequently introduced casino gaming, followed AC's Casino Control Act and our established gaming rules and regulations. Where they primarily differed, was in allowing casinos in multiple locations around their states, and most placed specific limits on the number of establishments and some of the size of their casinos. Atlantic City is still a viable casino destination, second only to Las Vegas, in North America; but we have been forced to downsize casino and hotel operations; although the hotel part can be revitalized, if we follow the Las Vegas Strip model, and concentrate on conventions and trade shows, on those mid-week days and nights in the Fall, Winter and Spring.