Last December, Israel Joffe at Fox News argued that Atlantic City may go the way of Detroit, closing casinos and shaking the city's infrastructure, which has long been built on the industry. State Senate President Stephen Sweeney in New Jersey and Chris Christie, meanwhile, cautioned that they would not let Atlantic City "become Detroit." Now, just six months later, Atlantic City is facing a wave of casino closings. The city opened the year with 12 casinos. By Labor Day, it may have just nine.
Economists have long known about the "casino saturation" in northeastern America, but it's now becoming a reality for Atlantic City. Revel, which has been open only two years, has said they are closing if they are unable to find a buyer. Caesars Entertainment was more direct, saying there are too many casinos in New Jersey. They have decided to close one of their four casinos there, the Showboat, on August 31st.
Atlantic City Mayor Don Guardian is looking at the silver lining, hoping that as casinos close shop, Atlantic City can create new and different vacation destinations. "Although it is sad today, it's part of the transition that Atlantic City needs to have," he said, "There is pain as we go through this transition, but it's critical for Atlantic City to realize we are no longer the monopoly of gaming on the East Coast. ... We're just going through a very difficult time."
The closings are not too surprising given recent trends. In 2006, Atlantic City's casino revenue was $5.2 billion. Last year, it was just $2.86 billion. The saturation has hit the city not only from neighboring Jersey casinos, but also from locations in Pennsylvania, New York, and Maryland. Pennsylvania has actually become the second largest casino destination in the country after Nevada.
While the mayor is sad, workers are furious. Bob McDevitt, president of Local 54 of the Unite-HERE casino workers' union, told the Associated Press that Caesars' decision was "a criminal act," as the casino was still profitable. Caesars will help their employees find new positions within the company, giving them preference for existing roles at their three other Atlantic City casinos.
The Wire spoke with a front-desk employee at Showboat, who told us Caesars did notify employees they can begin applying for new roles immediately, "We haven't started getting employees situated, but they are aware that they can apply. When it is in-house, they have to give them an interview. So it's a guaranteed foot in the door." For employees, this came as a shock. "Truthfully, with a casino, nothing is permanent. But ... we thought the business was doing okay. We were making money, but it was a little slow. This came from management, from finance. So we were surprised."
This could turn out to be a good move for the casino market as a whole. By removing some of the saturation in Jersey, the market will get smaller, pouring more gambling revenue into remaining locations. Fitch Ratings told their investors, "Caesars will likely recapture most of the Showboat customers at its three other resorts in Atlantic City." Analysts at Goldman Sachs and UBS agreed that a smaller market would be better for the surviving casinos.
However, no one is sure exactly what the the right size is for this smaller market. Guardian said he was unsure how many casinos he believes Atlantic City can and should support, saying, "The market is going to set that. At some point you're going to have the right number of casinos."
This post originally appeared on The Wire. More from our partner site: