Atlantic City Will Prosper Despite Increased Regional Competition

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The story of Atlantic City is, and has been, one of near-constant upheaval. From the Prohibition-era speakeasies and mob gambling operations to Donald Trump‘s takeover of the city in the 80’s and 90’s, to the more recent rush of casino closures, the city always seems to be fighting for its life.

And yet, here we are in 2017, close to year end and talking about an online gambling industry with revenues approaching a quarter billion dollars in a single year and major companies investing hundreds of millions to purchase and rebrand shuttered AC properties. In 2016, Atlantic City casino revenues were up from the previous year, something which hadn’t happened since 2006.

New competition lies ahead

Despite Atlantic City’s historic resilience, the city has some real challenges ahead of it, as gambling options are expanded throughout the northeastern US, creating more convenient gambling options for residents of New Jersey’s bordering and nearby states.

On October 30th, Pennsylvania Governor Tom Wolf signed a massive gambling expansion, which includes numerous new B&M facilities called satellite casinos and of course the legalization of online gambling in the Keystone state.

And while there are some real opportunities for New Jersey to get value out of the expansion in its neighbor to the west, there are perils as well.

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PA a thorn in AC’s side, but satellite casinos might not be

Pennsylvania gambling has expanded rapidly in the last decade. Slot machines were introduced in 2006, and in 2010 table games came into play as well.

The effects of this expansion on Atlantic City’s finances have been well-covered, and it often hasn’t been pretty.

A recent report by Moody’s, which is only available to those who pay for it, predicted that the Pennsylvania expansion will cause more problems for Atlantic City.

However, it’s difficult to see the launch of satellite casinos in Pennsylvania having nearly the same impact as the land-based monstrosities, as for one, they’re limited in size to 750 slot terminals and 30 table games — very small by casino standards.

Secondly, satellite casinos cannot be located within 25 miles of a land-based venue (with minor exceptions). Given the geographical nature of PA’s casino industry, that means it’s highly unlikely a satellite casino will land closer to Atlantic City than any of the existing PA casinos. Instead, the satellites are more likely to be saturated toward the middle of the state, hundreds of miles from AC.

Opportunities for synergy online

When it comes to online gambling, the addition of a new state should provide a boost to an industry already on the rise.

Interest in online poker, which has plateaued in NJ, should rise thanks to a recent interstate compact agreement between New Jersey, Nevada and Delaware. Most expect Pennsylvania to join this agreement, which would all of a sudden create legal US poker sites with a population reach north of 25 million.

The popularity of online poker has almost certainly helped bring more, and younger, customers into brick and mortar casinos. Particularly the Borgata, with its hugely popular poker room, could benefit from larger player pools online.

And there are benefits for online casinos as well when offerings can extend beyond state borders. Overall, new state markets should be beneficial to the New Jersey online industry.

AC can grow alongside product offerings

More importantly, though, the wave of casino closures in recent years has forced remaining stakeholders to reckon with the reality that Atlantic City, as a product, has spent years on the decline and needs new life. This isn’t really a new development, but this new mindset is beginning to bear fruit.

Atlantic City is still only eclipsed by Las Vegas among US gambling destinations in terms of both reputation and casino offerings. In fact, it’s hard to argue any other major gambling destinations even really exist in the country. New Jersey, as a state, has continued to show commitment to reviving and maintaining the city’s status as a tourist destination.

And, unlike other places where people go to gamble (I’m looking at you, Tunica), Atlantic City and its casinos can be fun to visit outside of just the gambling. The casinos have legitimate high end restaurants and shows that can bring people in from surrounding areas who want more than just a few hours in front of a slot machine.

Also, particularly during warm weather months, the outdoor options are promising. If the city’s new and existing casino owners can work with local government to make Atlantic City more family friendly, it opens up the possibility of a much broader group of customers.

On the casino side, the city has begun to replace its battered down eyesores with hip new locales, such as Hard Rock Casino, which is slated to open in May 2018. It’s this kind of newness and brand recognizability that may draw new blood to the boardwalk. Currently, the newest casinos (Golden Nugget and Borgata) are located in the Marina area, far off the main swatch of the city.

Perhaps it took hitting rock bottom for stakeholders to start seriously addressing the underlying problems in Atlantic City. People are looking forward, though, and the future looks bright for the city once known as America’s Favorite Playground.

Adam Small has been an entrepreneur in the online gambling space since 2004. He is a cofounder of PocketFives.com and owner of several businesses in the industry.

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