Moody’s Predicts More Atlantic City Casinos Will Close by 2020
Moody’s Investors Service believes more Atlantic City closings are likely. The financial research firm said the opening of 8 new non-Jersey casinos in the region is likely to have an impact on the New Jersey market.
Four nearby states — New York, Pennsylvania, Massachusetts, and Maryland — plan on opening new casinos in the next three years. Connecticut is also toying around with the idea of adding 1 to 3 satellite casinos, though these are meant to shore up their own gaming industry by retaining Connecticut players. Whatever the number eventually becomes, an already-saturated gaming market is likely to become even more crowded in the near future. Moody’s says that’s certain to put additional strain on Atlantic City casinos.
Atlantic City Casinos Report Growth
At the moment, the 8 Atlantic City casinos are drawing more revenue than they did in previous years. The closing of the Atlantic Club, Revel Casino, The Showboat, and Trump Plaza meant the existing gamblers looked for new places to gamble, strengthening the existing business to one degree or another.
The casino industry of Atlantic City is down 8.5% from 2014, with about $2 billion in revenue. That takes into the account 8 full months of operations for three of the casinos which closed: Revel, Showboat, and Trump Plaza. If you take those casinos’ numbers out of the 2014 revenues, the remaining casinos have shown an increase of 5.3% year-to-year. Those numbers are promising, but Moody’s sees trouble on the horizon.
Increased Competition Spells Trouble
But Moody’s Investors Service analyst Peter Trombetta said, “increased competition will keep the heat on incumbents, and (we expect) that the number of casinos in Atlantic City will likely continue to shrink.”
Trombetta dissected each of the new casino venues to reach his conclusion. He suggested the likely impact of each. For instance, Trombetta said the Live! Hotel and Casino in South Philadelphia, a $400 million development which is still in the proposal phase, would likely impact other casinos in the Philadelphia area, such as Sugarhouse and Sands Bethlehem.
Live! Hotel and Casino Is a Threat
Though Live! Casino would impact the nearest casinos most, it is likely to have an impact on Atlantic City, even more so than it would the $1.2 billion MGM National Harbor in Prince George’s County, Maryland, a gaming establishment planned for an opening in 2016.
Trombetta said that casinos which offer the same attractions are likely to be seen as equal, so the customer is going to visit the casino closest to them in those circumstances. He said, “We talk about location being key if those casinos have similar amenities. It’s very unlikely someone is going to drive past one casino to go to another casino if they have similar offerings.”
Oceanside Casinos Still Draw
That doesn’t mean Atlantic City will not be able to draw customers without adding to their amenities. Having oceanfront property is still a key attraction, which is something Live! Casino could never offer. Trombetta said, “Offsetting that to a degree is Atlantic City is on the beach, so you still have that summer traffic going to the Jersey Shore…you’re not going to lose that customer.”
Of course, casinos are not meant to be seasonal businesses. While they expect a flood of traffic at certain times of the year, their goal is to draw a steady stream of customers, so a summer-only destination is not going to be economically viable, because of the huge number of employees on the payroll year-round.
Problems might be created indirectly. The MGM National Harbor, a Maryland casino situated to draw customers from Washington, D.C., is not likely to cannibalize Atlantic City revenues. The National Harbor might draw customers from Live Casino in Philadelphia. If so, Live! might take measures to find customers elsewhere, competing with promotions which appeal to Atlantic City customers.
30% Increase in Slot Machines
Overall, the number of slot machines in the region is set to increase 30% by 2019. The number of gaming revenues in the region (through population growth and economic growth) are not going to increase 30%, meaning some casinos are going to lose. The casinos themselves might not grow the way their operators want, though the industry as a whole might grow. Without skillful management, some are likely to face bankruptcy.
Because of its location relatively far away from the major population centers, Atlantic City is likely to be one of the locations which faces trouble. That is the thinking of Peter Trombetta of Moody’s Investors Service, at least. While it might seem like one analyst’s opinion, Moody’s has a tremendous influence on credit ratings, so that opinion could affect the interest rates AC casinos and Atlantic City itself receive.
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