By Steve Norton
CEO, Norton Management

Atlantic City “Not a 9-Casino Market, Golden Nugget Owner Says

My comment:

It is great to hear someone else agree that Atlantic City has too many casinos for its existing market. I have been arguing for changing Atlantic City's market strategy within two years after we opened Resorts International in 1978. At first, it was line run buses that I started in November 1978, mid-week, days only, while we were still a monopoly. Even in the early years, our RICH occupancy was in the 60% range, during the winter season. As chairman of the AC Convention Bureau, I was arguing for major conventions and trade shows that didn't require air service. But few other operators agreed.

I also fought for AC to get a commercial airline company to start daily service. But, as long as no other eastern state introduced gaming, we were solid, even though we were severely discounting room rates in the off season.

Well in 2006 Pennsylvania approved slot machines and our AC win declined from $5.2 billion to the low $2 billion range. Still no successful attempt to get air service from eastern markets where Atlanta has over 90 flights a day to Las Vegas, 6 or 7 nonstop.

Atlantic City still earns over 90% of their departmental profits from the casino where the Strip in Las Vegas earns only 27% of its profit from the casino department, with most coming from the rooms department, with restaurants, beverage and the conventions all positive contributors. But Vegas has air service from everywhere, over 20 million annual arrivals.

AC's successful bus programs, once bringing over 14 million annual visitors, just over 40% of our estimated arrivals, has now diminished to just over 1 million, as these programs have diverted to closer gaming destinations and our total visitor count is now down to 22 or 23 million visitors.

Subsidizing an airline from cities like Atlanta, Dallas or Houston, all with area populations close to 6 million, would give us a boost in attracting citywide conventions and trade shows, and allow AC casino hotels to charge normal room rates rather than the often discounted mid-week rates that can be as low as 10% of that property's weekend rate.

I was fortunate to be hired as President/COO of Las Vegas Sands in 1990, the year that Sheldon Adelson was building the Sands Expo Center, and was awaiting the arrival of Comdex, North Americas largest trade show – a company also owned by Adelson's company.

We had to find housing for 170,000 attendees and exhibitors and Sheldon gave me the task to get the needed rooms. After much negotiation, we came up with a proposal that satisfied every CEO, but Circus Circus’ Bill Bennett. Our deal was that we would triple the going mid-week room rates (to $150), give most of the profitable functions to the larger resorts, rent all of their meeting and convention space (along with the LV Convention Center), in exchange for a 10% commission, for which we would provide free bus service from all participating resorts to the properties providing exhibits, meetings, and functions.
Prior to Comdex, Las Vegas' larger resorts preferred in-house conventions, where their attendees never had to leave the property for meals, entertainment or gaming. That year Las Vegas passed Chicago as the top convention destination in America and has kept it most years since, except for occasionally passing the baton to Orlando.

But Tillman Fertitta is absolutely correct, that Atlantic City should not have 9 casinos, maybe not even 7 or 6, without finding a way to create full rate resort demand on the 160 mid-week nights a year outside of the peak summer months of July and August.