Atlantic City Sunset – The Sinking of New Jersey Casinos

The Washington Post recently did an article about the financial woes of Atlantic City. It was littered with the usual comments about New Jersey’s failed attempts at making the city casino relevant in its own geographical area, the failed attempts of online gambling, and even suggested the state move its concentration of casinos further north to compete with neighboring states. Unfortunately, there are many articles like this in various casino online and print magazines, and that somehow simply finding a way to draw people back to the casinos would solve the problem.

It has been pointed out that the reason casinos exist in Atlantic City at all was to try and reclaim lost tourism more than three decades ago. In other words, it was never intended to be the next Las Vegas. The recent closings of Atlantic City casinos has been treated as a surprise rather than an inevitability. That scenario was set once state operated casinos were allowed and built in the neighboring states of New Jersey, especially Pennsylvania. Pennsylvania now ranks second in the casino industry, bumping New Jersey down a step. Comparing these two states will lead to a much bigger revelation about the reasons for the sinking of Atlantic City.

When you think of Pennsylvania, ask yourself what is the first thing that comes to mind. The answer most people give will relate to one of two cities – Philadelphia and Pittsburgh. And there will be little mention of thinking of it as a gambling venue. Ask the same question of Atlantic City and you will almost always get “casinos” or “gambling” in the answer – if it is positive. Of the 12 Pennsylvania casinos, only 4 are located in the Philadelphia area. So the question to be asked is how did Pennsylvania bump out Atlantic City/New Jersey for second place?

Here’s a bit of logic: The common denominator between the two states is what neither have in common with Las Vegas. Neither are vacation spots. Perhaps with the exception of the city of Philadelphia, this fact is the underlying reason for both the rise of Pennsylvania, the decline of Atlantic City, and the steadiness of Las Vegas, even in tough economic times. As has been pointed out, only 4 of Pennsylvania’s casino are located near Philadelphia, so even if it is argued it is a vacation target because of its historic sites it cannot account for the success of the other 8 locations.

Las Vegas has always been a vacation spot, simply because there is no other reason to go there. When people say they are going to Vegas, one thought comes to mind – vacation. This was true of Atlantic City at one time, but with the growth of state operated casinos, it no longer was an adult, or family, playground, but changed into a place to gamble. No amount of online gaming or state cash infusions will change the fact that it is no longer a destination for vacationers.

The only conclusion that can come from this reality is that unless Atlantic City has more to offer than a row of casinos and scenery, the industry there will slowly die. For the casinos to recover they need more than the weekend crowd of gamblers, because the hotel rooms during the week will still remain empty. Once the hotels begin closing up, and that has yet to happen in any significant number, then the casinos cannot control the loss of traffic. The bigger casinos may be able to have other locations temporarily prop up the Atlantic City losers, but like the state cash infusions, that source will strain their overall profitability and force closings.

Las Vegas will likely never be faced with a scenario like Atlantic City because the state gaming laws encourage casino building without all the nonsense politics attached to most of the state operated casino licenses. If you go to Nevada, expect to find a slot machine in the bathroom stall, gas station, grocery store… etc. In fact, as soon as you land at the airport you are greeted with – slot machines. In fact, the only thing that may close Las Vegas is an outright federal ban on gambling across the country. Based on recent Department of Justice rulings, that possibility is nil for the foreseeable future. As for Atlantic City, that same possibility almost guarantees the end of a profitable run