Where Las Vegas has won, Atlantic City has failed

Las Vegas and Atlantic City are thousands of miles apart, and that’s just where the dissimilarities begin. While the former has come up aces, the other is crapping out. The question remains: Why?

The two cities are set up to thrive on the same thing: gambling revenue. But Las Vegas has been able to fashion itself into a multidimensional dynamo, characterized by high-end entertainment, nightlife, shopping and dining. Vegas also has the good fortune of a good, isolated  location—the perfect way to capture and control customers—something Atlantic City doesn’t enjoy. And it’s showed, as neighboring states, including Pennsylvania, Massachusetts, Delaware and Maryland, siphon off would-be travelers and gamblers. It’s this weakness that many point to as Atlantic City’s undoing.

“Atlantic City has always been looking for a silver bullet—something that will solve all of its problems and it would always be the next developer or casino,” said Joshua Zinder, business leader of Princeton, N.J.-based architecture firm JZA+D, whose work includes a number of hotel/casino developments in Singapore, Las Vegas, Macao and New Jersey. “With the dilution of the Northeast casino world, where you can go to half a dozen different casinos in Pennsylvania, New York or other regional locations, Atlantic City was no longer the casino destination.”

Likewise, Bruce Ford, SVP and director of global business development at Lodging Econometrics, sees two things at play that have abetted Atlantic City’s degradation, while giving rise to Las Vegas. “You have a gaming market that is actually closer to the demand generators of eastern Pennsylvania, and that has squashed some of its gaming potential revenue,” Ford said, adding that the city still suffers from the stigma of Hurricane Sandy, and loses business to the other gambling centers, including Connecticut and Massachusetts.

Vegas Wins, A.C. Busts
Alan Woinski is principal of Gaming Venture Corp. and is a consultant in the field of gaming. Based in New Jersey, he has seen both the evolution and devolution of Atlantic City. “Mistakes have been ongoing,” he said. “There was a lot of casino space, but not as many hotel rooms, so they catered to the day-tripper market. As it went on, they built up rooms, but the problem is there was no midweek business. Then, when Pennsylvania started to build casinos, Atlantic City wasn’t worried. But they underestimated something about gamblers: They don’t care where they go and will go to the closest place. Once Pennsylvania got table games—that was it.”

Meanwhile, Las Vegas succeeds in still attracting the drive-to traffic from California. It’s a very big portion of the city’s demand, and helps sell the town out three nights a week. “It’s the thing that has held them up,” Ford said, especially during the recession. Then there is the chameleon-like way in which Vegas has time and again modified itself to the wants of the traveling public. In no uncertain terms, it’s become popular as much for what it doesn’t offer, gaming-wise. Atlantic City—not so much. “What do you do there if you don’t gamble?” asked Ford.

All of this came to a head with the highly publicized September closing of Revel, the more-than-$2-billion hotel that fell flat on its face only two years after opening (it reportedly posted nearly $300 million in operating losses after it opened). This served as a flashpoint for the dismal state of Atlantic City. As Woinski explained it, Atlantic City wasn’t yet prepared for a hotel of this ilk; it had an odd design (the lobby was not on the first floor, the casino wasn’t prominent), it was the farthest casino hotel on the boardwalk and food and beverage was not cheap. Upon his first visit to the hotel, Woinski hailed a taxi, jumped in and asked the cabbie his thoughts on the hotel. His reply: “Atlantic City is not ready for this place.”

Here’s how Jack Curtis, a principal at New York design firm CetraRuddy, explained Revel: “The conception and design of the casino had a very clear vision. Located at the end of the boardwalk, it was meant to be a gateway to a new phase for Atlantic City, the first of a wave of new developments that would set higher architectural design standards.”

Revel was unique in several respects, he said. “Casinos are typically inward looking: A box with an entrance marquee. Revel was a skyline building with towers decorated to appear as if they were rising up to face the ocean.” Here he points to one possible misstep. “Revel was scaled back before it was even built. The original design had two towers, both hotel. Perhaps if the second tower had been built as residential, it might have added some diversity to the project.”

Shortly after the closing, Ford asked, “Will it remain closed forever?” Answering his own question: “Absolutely not. It will be sold, and for pennies on the dollar.” He was right. A Florida buyer came forward only days after the hotel closed with a $90-million offer, far below the cost to build the hotel, which was accepted by the owners. However, it’s still unclear if the sale goes through what the buyer, Glenn Straub, intends to do with the property. But the future of Atlantic City may be clear: “The days of A.C. resorts thriving like they did before is not reality,” Ford said.

Vegas Build Up
Las Vegas is not without its false starts. Just look at the recent sale of The Cosmopolitan to Blackstone Group for $1.7 billion, well below the almost $4 billion it cost to build the hotel. Then there is this nugget: The Cosmopolitan, which opened in December 2010, has never reported an annual profit.
But The Cosmopolitan is only one of a few cautionary tales. Meanwhile, developers are building and owners are renovating/converting—the latter more and more of a trend, as Ford explained, to boost rates.

“Since 2008, Vegas hasn’t had a new construction cycle for the most part,” Ford said. “There has been a renovation wave. Many hotels are looking to find ways to bring more rate scales to their resorts.” This includes Caesars, which launched the Nobu Hotel and is renovating the former Quad into the Linq Hotel & Casino, MGM Grand with its Skylofts and the redevelopment of what is now The Cromwell.

One of the more recent high-profile openings was SLS Las Vegas, on the former grounds of the Sahara Hotel. The hotel, on the northern end of the Strip, is full of notable brands with big personalities behind it, including architecture firm Gensler, famed designer Philippe Starck and even Lenny Kravitz, who put his funky touch on some of the hotel’s suites. Inside, the hotel boasts such restaurants as Los Angeles import Katsuya, and notable hotspots including Foxtail.

The hotel is one of the first members in Hilton Worldwide’s new soft brand, Curio, A Collection by Hilton, and as Dianna Vaughan, global head of Curio, said, SLS Las Vegas is certainly in line with the new countenance of Sin City, catering to the younger set who undoubtedly want more out of their Vegas experience than just a nice casino and buffet.

“The hotel has done a good job nodding to the past, but connecting also with the new Vegas,” she said, referring to the Sahara’s Rat Pack glory days. “There is so much to do. You see 20-somethings: They spend their money on F&B and entertainment. They might not gamble as much.”

SLS Las Vegas has achieved what other hotels in Las Vegas set out to become: something to everyone. While Atlantic City tried the same with Revel, and to the same extent Borgata, it may have been done in more by what is out of its control. “A.C. is at a disadvantage,” Vaughan said. “There are so many casino options within the A.C. drive area. If you fly into Los Angeles or even Las Vegas, you don’t have as many options. There is more competition for Atlantic City [as a city] that Las Vegas doesn’t have.”

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