By Abim Thomas and Shauneen Werlinger
Atlantic City’s gaming industry is struggling. Its casinos made 11% less in July than they did a year ago. Revel, a $2.4 billion casino that opened with great fanfare in 2012, will close in September after it failed to find a buyer to save it from bankruptcy. At that point, only 8 of the 12 casinos that existed at the beginning of the year will remain.
These woes have led some to question the viability of casinos in Massachusetts. Before drawing any conclusions, however, it is important to examine the factors that have contributed to Atlantic City’s decline:
- Interstate Competition: Twenty years ago, Atlantic City had a monopoly on East Coast casinos. This changed when an increasing number of mid-Atlantic and New England states opened casinos, including 26 in the past decade. These new casinos have drawn revenue away from Atlantic City, as well as states like Connecticut (which projects casino revenue decreases of 5-20% in the next few years) and Delaware (where gaming revenue is down 29% since 2011) that historically relied on out-of-state visitors.
- Saturated Market: At its peak, Atlantic City had more than a dozen casinos within a short radius. This high degree of saturation has ultimately proven unsustainable. Analysts at Deutsche Bank recently predicted that the city will only be able to sustain 6 casinos by 2017.
- Recession: The overabundance of competition has been exacerbated by a decrease in demand. The economic downturn resulted in gamers having less disposable income to spend at casinos.
- Construction Debt: Many point to Revel as emblematic of the failure of Atlantic City’s casinos. That casino, however, had a host of unique problems, including enormous construction debt that forced it into bankruptcy twice.
These factors do not necessarily translate to Massachusetts. First, the Commonwealth would likely reclaim a portion of the $900 million a year its citizens currently spend at casinos in neighboring states – which have experienced a combined 39% increase in total annual gambling revenue. Indeed, Connecticut and Rhode Island are anticipating significant declines in gaming revenue due to Massachusetts casinos. Second, according to analysts, Massachusetts’ plan to license only three casinos and a slots parlor in distinct regions makes it unlikely that the state will experience Atlantic City levels of casino saturation. Finally, Massachusetts leaders appear to have realistic expectations and a sound development plan. Governor Deval Patrick has recognized the cyclical nature of markets and the Massachusetts Gaming Commission has carefully analyzed the effects of increased competition from other states and a potential tribal casino in the Commonwealth (including the potential for saturation in the Southeastern region).
Atlantic City’s struggles have not concerned supporters of gaming in Massachusetts. Penn National Gaming is so optimistic that it plans to spend more than $100 million constructing its slots parlor prior to the November election, despite the pending gaming law repeal initiative. Thus, with recent polls showing that a plurality of voters support maintaining the casino law, the odds look favorable for gaming in Massachusetts.