Atlantic City Down and Out as Gamblers Dwindle

After an amazing 28 years of growth, Atlantic City has succumbed to the recent down turn in the economy seeing its gambling proceeds tumble for the second time in a row.  In the first 11 months of 2008, casino revenue from games fell 6.7 percent.  Last year’s decline of 5.7 percent was the first ever as the number of visitors also fell from 34.5 million to 33.3 million.  Casino employment has also taken a direct hit, dropping from 42,000 as recently as August to 39,137 in November. 

James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University has said, “It’s possible Atlantic City is past its peak. It could never go back to its past glory. It’s a much tougher game now.”  He also predicted the situation may worsen over the next year.

Construction projects are now being shelved.  A $2.5 billion Pinnacle Entertainment, Inc. casino project was put on hold earlier this year.  Also in the works was a $5 billion Atlantic City resort by MGM Mirage which was canceled in October.  Even Atlantic City’s most profitable hotel casino, the Borgata, hasn’t been immune to the economic woes.  MGM’s co-owned darling has seen casino winnings there drop 2.9 percent in the last month alone.

Trump Entertainment Resorts Inc., who owns three Atlantic City casinos, has watched its bonds trade at as little as 12.25 cents on the dollar due to concerns the company cant make interest payments.  A grace period for Trump to make a late coupon payment or reach agreement with bondholders to restructure is looming ever closer.

Atlantic City was an aging resort area until in 1976, New Jersey legalized casino gambling limited to the one location.  The first casino opened in 1978 but by 1988, 12 casinos were in operation and the number of annual visitors was on the rise at 33 million.

According to Michael Paladino, a Fitch Ratings analyst in New York, "The U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010.”