Friday, May 27, 2011

Gaming industry survey data imply urgent need for NJ casinos outside Atlantic City

Typically, I like to post about my suspect handicapping skill and inability to take down a handicapping contest, but in my real line of work as a financial editor this week, I came across an interesting survey that obviously NJ's Governor Christie has not read but hints at a continued downward spiral for Atlantic City and that just maybe it is time for the Garden State to embrace casino gaming outside the misnomered "Vegas of the East."

The American Gaming Association's 2011 State of the States survey of casino entertainment revealed some startling, albeit unsurprising data that, in my opinion, hints that Mr. Christie and the Legislature might want to reconsider kowtowing to Atlantic City lobbyists and doing what is best for the state's tax coffers, creating jobs and stemming the outflow of cash to neighboring casino states New York, Pennsylvania and Delaware. To be sure, competition will only intensify in the Empire State, with Resorts World New York, the casino at Aqueduct, slated to open this summer, while plans evidently are underway for a "racino" at Belmont Park and a new arena for the NHL's Islanders.

In my view, Mr. Christie's incessant hammering of NJ's racing industry and his need to cut off the annual "subsidies" from casinos that propped up the racing business (and kept them quiet about slot gaming at the tracks) was ill-conceived and only obscured what is the chronic defection of wagerers from Atlantic City and a faulty business model that cannot match Las Vegas.  Separate from the AGA survey, I obtained figures showing that, between 2007 and year-end 2010, revenue generated by AC casinos declined by a compound annual average of 7.4%, with 2009 and 2010 reflecting double-digit declines amid the recession and slow recovery.  The notion that diverting tax dollars to "revive" AC and help complete another mega-casino (Revel) in an overly saturated AC market is utterly foolhardy and akin to Alec Baldwin's character Shelly Kaplow in the 2003 film The Cooler, who was stuck in the mentality of the old-world Las Vegas.
"Let me tell you something, Harvard,
come upstairs with me in my office, watch
and learn how to protect your investments
the old-school way."

Meanwhile, the AGA survey makes clear where this revenue is likely going, with Philadelphia quickly the No. 1 U.S. Racetrack Casino market in the U.S.  Yonkers is No. 2, while Dover, DE is No. 6 and three Pennsylvania markets (Grantville, Meadow Lands and Wilkes-Barre) ranked 8th, 9th and 10th.

Interesting, too, is that AGA reports that New Jersey saw the nation's biggest decline in consumer spending on gaming in 2010 (down 9.4%) and commercial casino tax revenue skidded 12.1%, the highest in the nation (by nearly five percentage points to No. 2 West Virginia).  At the same time, Atlantic City's 11-casino workforce fell by 6%, but remained the clear No. 2 behind Nevada. Furthermore, consider that Nevada has 25x the number of casinos (259, according to the AGA survey) than the Garden State but only 175,000 "commercial casino jobs" (as classified in the survey), or one-fifth the number per casino (675 for Nevada, 3,100 for AC).

Although I certainly understand the effort to sustain employment and make Atlantic City vibrant, the Governor is clearly missing the point that gaming at the Meadowlands, and perhaps Monmouth Park, must at least be considered, if not embraced, to stem the defection of casino and horseplayers to neighboring states.

Anyway, the AGA Survey is a worthwhile read, and as always I welcome your feedback.  I simply think that horseplayers should remain abreast of this kind of industry data.

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