Atlantic City Mayor Tries to Stay Upbeat Amidst Casino Closings
On Wednesday the Mayor of Atlantic City, Don Guardian, threw a bit of red meat to the press when he said, “… I know that behind closed doors there are a half-dozen companies looking at the opportunity to purchase Revel.”
Guardian also stated that there are potential buyers for the Showboat Casino as well, but the casino has been on the market for several years and never found a buyer, which has led to its announced closure. Even the Atlantic Club, which was sold just weeks ago, has suitors according to Guardian.
“I think we have a lot of good offers out there now. I would be very surprised if you don’t see an offer that’s acceptable in the next couple of months for all three,” Guardian said at the location of a planned Bass Pro Shop in the city.
Are these “serious” offers?
To me this all has the feel of posturing. Guardian is doing his job and perhaps trying to make all of the financially troubled properties in Atlantic City more appealing to potential buyers. But in the end it has the look and feel of the car dealership that says you have to buy it now because another buyer is coming in later for the same car.
I’m sure there are companies inquiring about the Revel, but I’ve also inquired to the Minnesota Timberwolves about picking up Kevin Love for my summer league team; this doesn’t make it a serious request or one that the Timberwolves should be announcing to make Love appear more sought after than he really is.
Mayor Guardian’s proclamation doesn’t mean much of anything to me; it’s what he simply has to say considering the dire circumstances Atlantic City is finding itself in –with thousands of jobs about to disappear from the closings of Showboat and Trump Plaza and perhaps the Revel– and with Moody’s cutting the city’s credit rating to “junk” status according to Bloomberg.
Atlantic City relies on gaming (half of the city’s jobs are in that sector) and right now confidence in Atlantic City’s gaming industry is waning among the populace, as several thousand jobs are already on the chopping block due to the announced closures of Trump Plaza and the Showboat (over 3,000 jobs combined) and the Revel holds the fate of another 3,000 jobs in its hands.
The Revel’s problems are larger than the purchase price
It’s hard to believe these inquiries are serious suitors considering the Revel’s many problems, some of which seem almost unsolvable. Overreach and poor planning are the best ways to describe the monstrosity that is the Revel.
It’s not that the Revel isn’t a beautiful property, it’s far and away the swankiest and nicest in Atlantic City, it’s that the Revel simply doesn’t have a customer base in Atlantic City. The Revel belongs in Macau or Las Vegas.
Additionally, the reduced price tag is not going to be enough. Even if the Revel was simply handed to a company for free it may not be able to turn a profit. The monthly expenses for the property are through the roof and as was pointed out by others, the layout is extremely flawed and will require the new owner to pony up quite a bit of capitol for a massive renovation to turn it into what is considered a proper casino –a renovation project that doesn’t guarantee success either.
Among the previous rumored suitors for the Revel were Caesars Entertainment and the Hard Rock, but these rumors died almost as fast they began, which leads me to believe that even with a sweetheart deal, they may have found the property impossible to turn around.
Don’t throw good money after bad
In a perfect world the Revel (a $2.4 billion project) would find a buyer for a few hundred million dollars that was capable of turning it around. But supposing it did; what would be the fallout for the rest of Atlantic City’s casinos if the Revel suddenly siphoned off a number of their biggest players?
If the Revel somehow succeeds it likely means the failing of several other properties, as the market is saturated and one casino’s turnaround means an about face for one of its competitors –right now, it’s a zero-sum game in Atlantic City.
The future of Atlantic City might not include the Revel
In December of 2013 Atlantic City had 12 operational casinos; by December of 2014 that number will likely be eight or nine, and this is still too many. Atlantic City needs to take a long term approach to the problems it is facing and more importantly realize that the “glory days” of the mid-2000’s are not coming back.
The law of diminishing returns was never considered in Atlantic City as more and more casinos were built, and the Revel is the culmination of this idea of just making everything bigger and on a grander scale.
A new model and plan is needed, and when it comes to the Revel it may very well be time for the city to observe the sunk cost bias and cut its losses.
Photo Credit: USA Today Sports Images
