Update: Since the first run of this story on July 7, now Atlantic City's Trump Plaza has also announced plans to close gaming operations amid the glut of competition/strained pool of potential revenue.
The struggles of gaming in the Eastern United States continued into this summer as a second bankruptcy in as many years was announced for one of Atlantic City’s newest casinos while one of its mainstays announced plans to shutter operations somewhat surprisingly. Issues for the casino industry don’t appear to be stopping at the East Coast anymore either, with an increasingly wary eye falling on a Las Vegas-based giant with big plans brewing despite big debts.
In early 2013, NACM’s Industries to Watch series suggested a glut of options in US gaming operations, especially in the northern half of the Eastern Seaboard. Sources within the industry noted that at least three to five casinos needed to shutter by 2015, primarily in Atlantic City, NJ, for the existing properties to have realistic chances of success. That appears on the way to becoming a reality as Revel, a glitzy property on the northern end of Atlantic City’s famed Boardwalk open for less than two years, in June filed for bankruptcy protection for the second time. It comes just a couple months on the heels of the closure of the Atlantic Club, a former Hilton-owned gaming operation, located less than one mile away.
Revel’s neighbor, the Showboat, showed far fewer noticeable problems with its business model. But an oversaturation of players in the market, both in the city and throughout other neighboring states and the return of Internet gaming in some areas, inspired its parent company Caesar’s Entertainment Corp. to focus on three other properties it owns in the New Jersey beach destination. Showboat will cease operations at the end of August.
Caesar’s has been a bit of a wildcard of late. It is well known Caesars is carrying a high debt load, so much so that Fitch Ratings downgraded its issuer default rating this spring amid a heightened possibility of a necessary restructuring of debt within two years. Caesar’s, however, seems to still be confident as it will open its Horseshoe Casino property in downtown Baltimore by summer’s end. It would mark the third casino opening in the state of Maryland this decade, with at least one more on tap within the next 12 months. Caesar’s also is full-speed-ahead in pursing new projects in New York state, within an hour of Manhattan, and in South Korea.
With so much competition in newly legal gaming destinations and the Internet, there is as much potential for market saturation as ever within the US gaming industry. Large American appetite for gaming or not, some operators likely will face the reality that there is not enough demand for everyone to thrive or even survive without solvency issues. The spreads for various legal casino operations are going to be different from place to place and need to be monitored like a hawk by credit departments of direct suppliers to them and those upstream alike.
- Brian Shappell, CBA, CICP, NACM staff writer