Why Atlantic City casinos are really failing

Here’s something we all know: The glory days of Atlantic City are long gone.

The announced closure of Trump Taj Mahal on October 10 solidifies the fate of this once gaming mecca—officially relegating it to a ho-hum regional gaming destination. However, there is hope that this resort town will be reborn with a personality different than the gaming persona it’s worn during the past few decades as the capital of east coast gambling. More on that later.

Bit of History

Let’s get caught up first. There was a time not long ago when Atlantic City was the country’s gambling darling. The first municipality to legalize casinos outside Nevada in 1976 (dice rolled for the first time in 1978), the move was insanely successful. Gaming added billions in money to New Jersey’s tax rolls. Mostly on the backs of day trippers bussing in to plop coins into slot machines and gorge at the buffet before heading home that same evening. 

As a New Yorker, I grew up going to the casinos and looked at these palaces with wide-eyed wonder. But even as a kid I thought it odd the region had turned from a true resort destination whose heyday can be seen on the HBO series "Boardwalk Empire" to a series of non-descript buildings whose sole goal was to keep you locked-up inside and extricate money from guest’s pockets. 

And that was good for a while; it turned out to be a massive mistake. For a couple of decades the boardwalk big shots had nothing to worry about. Then casino gambling started its slow march across the country. First on Indian reservations in Florida and Connecticut, then in places such as Biloxi and Tunica, Miss. For a while it seemed casinos were the definitive magical bullet that could fix any funding gap. Now they’re seemingly everywhere.

All the money made Atlantic City casino operators flush with cash, obfuscating reality: There is only so much gambling money to go around. And that every new casino opening meant splitting that pie into ever smaller shares. 

Yet most operators in Atlantic City did nothing. A couple of notable exceptions are Tropicana, which added many more retail, music and dining options at the end of the 1990s; Borgata, which opened in 2004 as a true Las Vegas destination style casino; and Harrah’s which added an amazing indoor pool mimicking the outdoor Las Vegas mega-pools. In fact, Borgata has been seeing gaming gains since so much of the competition has abandoned the market. But that and Harrah’s have been notable exceptions.

The Big Mistake

The market for Atlantic City peaked in 2006 with $5.2 billion in 2006. But then nearby Pennsylvania legalized gambling and everything changed, siphoning off Atlantic City’s main business driver: Philadelphia.

Since then, Atlantic City gaming revenue has dropped by more than 50 percent while Pennsylvania once again saw record gaming revenue in 2015, topping $3.17 billion, a 3.41-percent increase from 2014. 

The Achilles heel for the market was a continued reliance on day-tripping slot machine players. Players were loyal and true, but only because these gamblers had no other option. Turns out a slot parlor is a slot parlor, and without amazing Las Vegas style amenities, a nearby airport offering flights from major carriers and a vibrant convention business, the second these customers had a better choice, they fled.

Most operators in Atlantic City essentially kept their buildings as glorified slot parlors allowing them to sink into irrelevancy by not keeping up with trends. That was an easy thing to do, and a big mistake. Turns out people putting money into slot machines would rather do that 15 minutes from home than drive or bus more than an hour away.

What’s Next?

The series of casinos closures during the past few years has helped the ones that still stand. But there is a more onerous lesson that must come out of this once colossal market’s decline.

Casino gambling as a means of generating state revenue is way past its heyday. The market for new players is drying up and every time a new one opens up it cannibalizes other existing properties that are not in Las Vegas. This is especially true in the northeast now that New York and Massachusetts are going all in for casinos too. I expect it to be the last gasp of American casino expansion. 

It’s a lesson striking workers must finally realize by now. They foolishly went on strike demanding more money and benefits in a dying market, and what did it do? It put them all out of work. After a decade of market contraction, how union leaders could be filled with such stupidity shows just how out of touch with reality many unions are today.

RELATED: Atlantic City's Showboat reopens as a hotel

Unfortunately, Atlantic City will not be the only place seeing precipitous casino revenue declines. Yet, the city does have a chance to change things with new ideas and concepts that move away from its dependence on casinos.

Revel, the poster child of casino failure, may eventually open with a new name and point of view, as will Showboat. I have been privy to the plans for Showboat, and while I swore an oath of secrecy, I can say it’s a great forward-thinking concept.

As for those states continuing this unhealthy addiction tax income from casinos? Well, they’re going to have to find new ways to fill up their coffers as the casino business ebbs. Cannabis, anyone? 

What's your take on Atlantic City? Email me at [email protected], or on Twitter and Instagram @TravelingGlenn and tell me your story. 

Glenn Haussman is editor-at-large for HOTEL MANAGEMENT. His views expressed are not necessarily those of HOTEL MANAGEMENT, its parent company Questex Media Group, and/or its subsidiaries.