by Steve Norton
CEO, Norton Management

How the Hard Rock could benefit from the South Inlet projects | Breaking News | pressofatlanticcity.com

My comment:

While the Hard Rock, purchasing the Taj Mahal from Carl Icahn, is great news for Atlantic City; it doesn't change the basic facts that caused the AC downturn. Gaming analyst, Alan Woinski, and Senator Jim Whelan, an important fixture in Atlantic City, since gaming's inception 40 years ago; were correct; that this may be good news for AC, but doesn't solve our basic problem from substantial new casino competition.

AC needs to find a new source of business, 200 mid-week nights a year, in the Fall, Winter and Spring. Prior to gaming in Pennsylvania and New York, AC enjoyed over 14 million line run bus customers, most coming during our slow demand periods. We started the program, at Resorts International, in November 1978, while we were still the only casino in AC. I found a specialist, in this type business, in California; promoting trips from San Francisco and other central California cities to Reno and Lake Tahoe. More than 90% of our previous AC bus customers, are now going to casinos closer to their PA, NY, NJ and MD homes.

The Las Vegas solution for the mid-week reduction in demand, has been to promote the convention trades; made up of trade shows, corporate meetings, association events and large conventions. For years, Las Vegas was like Atlantic City, primarily interested in group business that could be handled by an individual property, so the convention attendee never has to leave the host resort. In 1990, Las Vegas passed Chicago as the convention capital of North America. Having just left Atlantic City, when Merv Griffin, the purchaser of Resorts International (my employer of 23 years) declared bankruptcy; I joined Sheldon Adelson, as the LV Sands President/COO, just before we opened the Sands Expo Center. Sheldon's company also owned Comdex, the Trade Show for the Convention Industry; but with 170,000 attendees and exhibitors scheduled to descend on Las Vegas, the major resort casinos were not interested in housing the delegates, expecting that time spent at meetings, exhibits and functions would keep them away from the casino, the major source of resort casino profits. Because I had known most of the casino CEO's, since the start of Atlantic City, Sheldon gave me the added responsibility of obtaining room commitments from operators who didn't want our attendees. Our proposal was to triple the then going $50 room rate, to $150, less a 10% commission for making the reservation and providing free buses to take their guests to the many meeting/exhibit sites; which included the Las Vegas Convention Center, the LV Hilton, Caesars Palace, Bally and the new Sands Expo Center. Also my sales pitch, included providing substantial profitable banquet business to the larger properties, also indicating that their gourmet restaurants would be full of cash, rather than comp customers. Every major property, except Circus Circus, agreed, and the day the show began, I got a call from Bill Bennett, the Circus CEO, asking for free busses to his various properties. It seems our reservation agents forgot to mention Comdex, when reserving rooms at his properties; but considering booking lead times for major conventions, its surprising his management didn't put 2 and 2 together.

What Hard Rock is facing in Atlantic City is daunting. There is no question they will take business from other AC casinos; but the big question is whether they can meaningfully improve the business demand for Atlantic City, especially the Boardwalk.

When comparing the latest annual data available from Las Vegas and Atlantic City (2015); the data tells us a disturbing story. The room occupancy and room rate on the Boardwalk was 77.1% and $92, while at the 23 larger Strip resorts, 92.1% and $163. Plus on the Boardwalk 50.7% of the rooms and 56.9% of the food and beverage were comped, while on the LV Strip, 18.4% of rooms and 25.4% of food and beverage were given to players. But the most important news from the LV Strip data, is that their win is down to 35% of total revenue, compared to AC's 70%; and that 73% of the Strip departmental profits came from non casino operations, 40% just from the rooms department.

To improve AC's desirability as a convention/ trade show destination, we need air service into AC International from several major hub airports, like Atlanta, the World's busiest airport. Hartsfield International has 93 flights daily just to Las Vegas, about 5 million available seats, yet no service to Atlantic City. And Atlanta has no convenient casino gaming nearby, where AC would also benefit from individual casino customers, from a City as large as Philadelphia.

AC has one big advantage over our Eastern convention trade competition, we don't have mid-week business traveler demand, that pushes up mid-week occupancies and room rates; which has a negative impact on group business.

Atlantic City will soon have two new heavyweights to help it find a way to improve visitor and meeting demand for the City; both MGM and Hard Rock, so let's all keep our fingers crossed. As an individual who lived at the Haddon Hall Hotel, and saw what Atlantic City was like before casinos; who prepared the estimated casino impacts, for the successful 1976 referendum; and who worked with Dick Codey's Assembly Committee in drafting the Casino Control Act; I have a strong desire to see AC succeed and prosper.

CEO: Hard Rock still wants casino near NYC after Taj Mahal

My comment:

My support of a North Jersey casino (preferably only one at the Meadowlands); does not impact on my desire to save Atlantic City. I believe the moneys sent to AC, from a North Jersey casino; if used to replace the casino real estate tax; could offset a drop in win of up to a $billion, and still be profit neutral. When I compare Atlantic City with the 23 larger casino resorts on the Las Vegas Strip; I find incredible differences. These occur in occupancy (LV 92.1%, Boardwalk 77.1%, Marina 85.2%) average room rate (LV $163, BW $92, Marina $115), and win per occupied room (LV $214, BW $570, Marina $683).

Since I doubt we have a better quality of customer, it means AC is still relying on same day visitors, and my guess, based on published room rates; is that more than half of all AC dept. revenue is coming on Friday night thru Sunday afternoon.

Back in 1990, I was President/COO of the LV Sands, and we were about to open the Sands Expo Center, with Sheldon's Comdex Trade Show; the kind of customer casino resorts didn't want. But we had 170,000 attendees and exhibitors to house; and since I knew the Execs., it became my job to become the Comdex reservation manager. Well my pitch was, 1) we will triple your current mid week rate to $150; 2) you give us a 10% commission for the booking and we will provide free busing from your property to the various sites (we used all of the space at the LV Convention Center, the LV Hilton. Caesars Palace, Bally's and our new Sands Expo); 3) you will benefit from profitable function and cocktail parties; 4) and you will get top dollar for your meeting and exhibit space. You may have to give some extra days off in the casino, but you specialty restaurants will be full of paying, rather than comp customers.

Every major property went along, except Circus Circus, and Bill Bennett called me the day the show opened, and asked if I could send free busses to his properties.

Another interesting area to look at is the RFB comps (rooms-LV 18.4%, BW 50.7%. Marina 57.2%)

(food and beverage-LV 25.4%, BW 56.9%, Marina 44.2%). And the AC room comps do not include the severe 80% to 90% room discounts mid-week. When I visited the East Cost Gaming Congress in May, my Harrah's room rate would have been $479 if I came in on Saturday, but on Tuesday, I paid $44 a night, including a $20 food credit. I probable could have gotten free play if I signed in at the players club desk.

With the beach and Boardwalk, AC should continue to be a weekend and summer resort; but what about those 200 mid-week nights in the off season. Before 2006, we had line run busses (that I started in Nov. 1978, mid-week days, while Resorts was still a monopoly); that in the 1990's reached over 14 million passengers annually, about 40% of the estimated total visitor count of 35 million. Now the buses are going to the Sands Bethlehem, the Poconos or those casinos Around Philadelphia.

AC has to change its business model and reduce its dependence on the casino, which now produces 70% of its revenues (the strip is now down to 34.7% and the non casino departments produce 73% of the departmental income on the Strip).

I am still a big fan of Atlantic City, and grateful to have been part of the referendum and Legislative process, and for recommending the Chalfonte Haddon Hall hotel to the Resorts Board, as the most suitable for conversion to a casino hotel.

I firmly believe a single casino in North Jersey could actually help AC, if the PA tax rates were adopted; providing $200 million a year to AC. And it would restore $200 million or more to Senior and disabled programs that have lost $1.8 billion since 2006.