Revel Casino Files for Bankruptcy Again, Begins Search for New Owner
Atlantic City’s Revel Casino Hotel filed its second bankruptcy in a little over a year on Thursday. Now, the troubled casino is searching for a buyer.
The Revel Casino went through Chapter 11 bankruptcy in March 2013, but the move did not stabilize the company’s financial situation. Reuters reported a letter sent out in which management warned employees that staff layoffs would happen by August 18 if not buyer could be found.
Atlantic City Declines Further
Revel Casino’s latest financial downturn is just one in a series of bad signs for Atlantic City, which lost the Atlantic Club is January 2014. Atlantic City has seen declining revenues every year since 2006. In that time, profits have declined by 50%. The decline is blamed on market saturation in the northeast, along with the continuing recession.
Political Support for Cas
In the past couple of years, the leaders on the state level of New Jersey and the city level of Atlantic City have done their best to prop up the city’s struggling resorts.
The casinos appeared from a break on property taxes, which the city waived. The state passed licensed online gambling, hoping the revenues would boost the land-based casinos and add significantly to state revenues. So far, the results have been disappointing.
Meanwhile, Governor Chris Christie challenged a 20 year old law which banned sports gambling everywhere in the US except Nevada, Delaware, Montana, and Oregon. That filing has made its way to the U.S. Supreme Court, but it’s still uncertain whether the court will rule on the case or not. Governor Christie has taken criticism for spending tax dollars on the court case, because a significant number of experts think it is a legal dead end.
Searching for a New Owner
With no meaningful relief in sight, Revel Casino has decided its only answer is a dedicated buyer. In less than six months of operation in 2014, the casino showed a net loss of over $75 million. Such numbers are unsustainable, so it was only a matter of time before this round of bankruptcy filings happened.
In its statement to employees, Revel Casino’s management said they are seeking a buyer which has “the ability to provide the funding and long-term commitment to help Revel reach its full potential“.
Revel Casino Leader Are United
Scott Kreeger, president and COO of Revel Casino, said in the statement, “We will work to reach an agreement with a new owner who…shares our commitment to providing Revel’s guests and players an exceptional experience.”
Bob McDevitt is the President of Unite-HERE, a workers union. Unite-HERE Local 54 voted in June to unionize, but also supports Revel Casino’s search for a new owner. Bob McDevitt said, “We believe a sale of Revel to a buyer who wants to keep the property open and retain the employees is the best thing for the workers.”
The $2.4 billion Revel Casino is becoming a model of failure. Revel Casino opened in April 2012 as part of a move by Governor Chris Christie and his allies to bring Las Vegas style resorts to Atlantic City. It was hoped at the time that big resort casinos would convince east coast tourists to stay near home, when they might otherwise go to Las Vegas.
Instead, the massive cost of building Revel Casino is beginning to look like politicians and developers threw good money after bad. The governor provided a $261 million tax initiative to help build the casino. Before it was finished, Morgan Stanley pulled out of the project, relieved to take a “mere” $932 million loss.
Unrealistic Financial Projections
Despite the sums of money spent, Revel Casino never lived up to the financial projections. The recession continues to hamper growth, though developers hoped the US economy would be primed by now. Market saturation is a perennial problem, one the executive who made projections should have considered. What makes the extravagance of the Revel Casino worse is the fact it was built after the global recession, when more sober estimates should have been the order of the day.
Pennsylvania and New York Build Casinos
As Atlantic City retreats, other states continue to build. Earlier this week, a panel in Philadelphia approved the construction of a new casino, overriding a motion to block new gaming projects. A new casino in the Philadelphia area, just an hour away from Atlantic City, is certain to draw more customers away.
In New York state, a casino license is expected within weeks for a casino in Woodbury, just 50 miles from New York City. Such a development would limit the number of gamblers streaming from the New York City area, too. Such moves continue to restrict the customer base for Atlantic City.