New Jersey’s casino industry has been the subject of much sensationalistic gloom and doom in some recent media accounts. We believe a longer-range perspective is important to bring balance that appears to be missing.
While it is true that we have experienced revenue declines over the past year and a half, let’s not lose sight of the fact that New Jersey’s casino industry is far larger and more important to our state’s economy than its original advocates projected. We have developed into one of the state’s leading economic engines, generating incredible economic benefits that reverberate across New Jersey, including billions of dollars in capital investment, more than 60,000 jobs created, more than USD 1 billion in tax revenues generated annually and USD 2.5 billion in goods and services purchased annually from New Jersey vendors.
While we are challenged by competition from Pennsylvania and New York, a weakening economy and consumer confidence, rising gas prices and a partial and soon-to-be-full smoking ban, let’s not lose sight of the fact that we re main one of the pillars of New Jersey’s economy.
We should also remember that the reasons our industry is experiencing a rough patch are both beyond our control and not unique, as established casino jurisdictions across the country are experiencing similar revenue declines. These reasons include the credit crunch that has rendered available capital scarce and expensive, delaying previously announced projects that would otherwise be under development and continuing Atlantic City’s transformation from a regional destination to a playground for tourists who live along the entire East Coast.
Our nation’s difficult economic climate may have encouraged the misconception that New Jersey’s casino industry is irreversibly spiraling downward. In fact, it has been „reported“ that things have gotten so bad that our casinos have taken the drastic step of reducing the comps we grant. This is truly proof that the end is in sight, right? Absolutely not!
The comps that the industry issues to some of its customers are similar to promotions or affinity programs that are common marketing tools used by department stores, credit card companies, airlines and even grocery stores to reward their customers‘ patronage. In Atlantic City, while the lessening of comps to some degree reflects lower business volumes, more important it also demonstrates Atlantic City’s evolution from a single-dimension attraction to a multi-dimensional resort that appeals to an increasing number of customers willing to pay for noncasino amenities that previously were almost exclusively comped. This is the model that has been extremely successful in Las Vegas.
In addition, Atlantic City’s recent successes bode well for the future. Since Borgata opened five years ago, approximately USD 5 billion has been invested in Atlantic City, the majority for nongaming amenities and attractions such as celebrity chef-inspired restaurants, top-line entertainment, world-class spas and shopping, and upscale hotel offerings. Just this year, Harrah’s Waterfront Tower, Borgata’s the Water Club, Taj Mahal’s Chairman’s Tower and Chelsea Hotel have opened to rave reviews.
The returns generated by these attractions have spurred significant interest in major casino companies developing additional Las Vegas-style destination resorts in Atlantic City, each with a price tag from USD 2 billion to USD 5 billion. In fact, Revel Entertainment is constructing a world-class USD 2.5 billion destination resort on the Boardwalk.
Where else in New Jersey has there been the level of exclusively private capital investment that has occurred in Atlantic City over the past five years? More important, where else in New Jersey is there the potential for USD 20 billion in private capital investment over the next 10 years and tens of thousands of new jobs?
The predominant reason for this success is the stable investment climate that New Jersey has established and maintained, encouraging huge levels of capital investment unmatched by nearby states. For instance, the Pennsylvania and New York gaming models do not support the economics that permits the billions of dollars in investment required to develop the world-class resorts that have been and will continue to be developed in Atlantic City. This permits New Jersey’s fully integrated destination resorts a competitive advantage over the convenience-driven, nondescript, gaming-centric experience offered in neighboring states, which attracts only local business.
While our industry is enduring a challenging short term, the future is remarkably bright. It is undeniable that the transformation is under way and is poised to continue on an even a grander scale once the economy recovers, which is good for both for our industry and New Jersey’s economy. However, as competition has eliminated the regional monopoly we once en joyed, it is vital to our industry, and for all of those in the state who benefit from our growth, that New Jersey’s policies continue to progress and stay ahead of the curve.