New Jersey bet on the wrong casino with Revel
The $2.4 billion Vegas-style resort's planned bankruptcy means skeptics were right when they said it would never score in the city's already troubled gambling market.
When the swanky $2.4 billion Revel casino opened in Atlantic City last year, New Jersey Governor Chris Christie hailed it as a "game-changer" for the struggling Jersey Shore resort. That's why the state provided it with $300 million worth of aid. He couldn't have been more wrong about the most expensive casino in the city's history.The resort, which brags about its ocean-view rooms with flat-screen TVs and marble-tiled bathrooms, tried to bring Las Vegas glitz to the blue-collar Jersey town and failed to attract customers. According to state officials, Revel generated a paltry $8 million in total casino revenue in January, ranking dead last among the city's 11 casinos. That's why the news earlier this week that Revel plans to file Chapter 11 bankruptcy is hardly a shock.
"Revel had amended its revolving line of credit at least three times since the summer, spending money at a fierce clip while bringing in less than half the $30 million a month that Wall Street analysts said it needed to sustain its massive 6.3 million-square-foot operation," according to the Philadelphia Inquirer.
As part of its aid package, New Jersey gave Revel a Redevelopment and Growth tax incentive award of $261 million, which allowed it to receive a rebate of tax revenues over 20 years. No taxpayer funds were provided up front.
The resort has had a rocky history for years. Morgan Stanley (MS) first began developing the project in 2006 but backed out before construction was complete and wrote down its entire $1.25 billion investment. Chief Executive Kevin Desanctis was brought in 2011, but his status with Revel after the bankruptcy remains unclear, according to The Wall Street Journal.
Many critics of the aid, including state Democrats, have argued that the state's oversight of Revel was lax. Bob McDevitt, head of Atlantic City's largest casino union, which has tried to organize Revel's workers, is quoted in the Press of Atlantic City saying, "We warned them this would be a catastrophe, but no one listened. Now, it's a catastrophe."
Revel has a tough road ahead. Increased competition from neighboring states such as Pennsylvania have eroded Atlantic City's business, causing revenue to fall in each of the last six years. Revel clearly didn't help that trend.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
This goes to show you as well as other states that have it (Ohio) that casinos cannot survive being non smoking. I know a lot of people have never smoked or have stopped but most gamblers smoke like crazy when gambling. Go to any smoking casino in Las Vegas and check out the "non smoking" area. There is no one there. No gambler wants to leave a "hot" machine for a smoke. Most Gamblers want their rooms to smoke in too. This is just the way it is. Allow smoking and you will have a full casino. That is why Ohio casinos are going down the tubes and Indiana and Michigan are raking it in.
I smoke but I always aske my gambling neighbor if smoking bothers them. If so I move or gamble till I have to smoke then move.
West Virginia all the way north to Connecticut is glutted with casinos, no other way to put it. But if I had to pick winners here, I'd go with the states which have live horse racing and casinos in the same facility. What Pennsylvania is doing to New Jersey has been happening to Maryland, courtesy of Delaware, for years. It's only a matter of time before the Preakness moves from Maryland to Delaware or West Virginia because of the race track/casino facilities.
As things stand, the only way shot you have at revitalizing a huge number of struggling casinos is to make all casino winnings 100% tax free and payable in cash on the spot.
ac isn't what it used to be...
i bet tourism is down a lot since casinos have opened in pa, ct, ny and other ne states...
i know i live central pa...about 1 hr from the casino in wb...
i can drive there every day if i want too...
so why would i get on a bus for 4-5 hrs to ac and gamble...
we used to have 4-5 buses from my area going to ac every day.
now it's down to less than that a week!!!!
somebody really needs to have their heads examined of that deal.
Been there a couple of times, it is beautiful but there is no way for them to make 60 million a month ( what I heard) to just break even. Very expensive to drink in the bars and dine. The entire property is also smokefree which eliminates 25 % or more of potential patrons. Tough to make ends meet when you are marketing to less than 75 % of the gambling population. Hopefully, Revel will be able to re-emerge and have isolated smoking areas as do the other casinos and target 100% of the gambling audience.
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