Trump Taj Mahal will become the fifth Atlantic City casino to close in 2014 if the company follows through on its threat to close on December 1st or soon thereafter if state and local officials don’t offer the casino assistance, per a Press of Atlantic City article.
Thus far there has been little appetite by lawmakers to give into the company’s demands.
The sting of contraction
For several years analysts have been saying that the Atlantic City market can support six to maybe eight casinos. Contraction has been called for in the Atlantic City market as necessary evil to insure the survival of the industry. However, even the most pragmatic analysts have likely been caught off guard with the rapid rate of contraction in Atlantic City during 2014.
Long term, the contraction in Atlantic City will be a positive, but the short term adversities the region will be facing are reaching a fevered pitch, as the city tries to cope with the culling of some 10,000 jobs following the closures of The Atlantic Club, Showboat, Trump Plaza, Revel, and the scheduled closing of Trump Taj Mahal in December.
In what was already an economically ravaged region dating back even before the Great Recession of 2008, 10,000 jobs is a number Atlantic City simply cannot afford.
According to the U.S. Bureau of Labor Statistics, Atlantic City had an unemployment rate of nearly 10% in January of 2007, more than double the rate of New Jersey. By November 2008 the unemployment rate reached double digits (where it has remained ever since) reaching a peak of over 22% in November of 2012. Following the closure of the Atlantic Club in January the unemployment rate jumped to 17.8% and we have yet to see the statistics from the three closures in September listed below:
|Atlantic Club||Closed Jan||1,600|
|Trump Plaza||Closed Sept||1,200|
|Trump Taj Mahal||Scheduled to close in Dec||3,000|
* Caesars announced that roughly 400 Showboat employees were retained and transferred to one of the company’s other AC properties.
**As it stands, the Revel is the only closed property that has announced it will be reopening in the future as a casino. How many of these employees will be brought back is unclear.
Remaining casinos will benefit
These closures have left Atlantic City with just seven operational casinos after beginning 2014 with 12 land-based casinos.
There is one short term positive to the sudden contraction in AC. The remaining casinos have, and should continue to see a significant increase in revenue following the market’s consolidation, as consumers visiting Atlantic City have fewer options to choose from, and even some of the total revenue is lost, a significant amount of it should be spread amongst the remaining casinos.
Even though three casinos closed in September (so the impact has not fully been realized) five of the remaining seven casinos posted significant gains year-over-year, with the other two posting no change and a slight loss respectively.
|Casino||September 2013||September 2014||Change|
|Borgata||$51.7 million||$58.5 million||+13%|
|Harrah’s AC||$29.5 million||$31.3 million||+6%|
|Caesars AC||$23.8 million||$26.1 million||+10%|
|Tropicana||$20.2 million||$23.4 million||+16%|
|Bally’s AC||$20 million||19.6 million||-2%|
|Golden Nugget||$10.7 million||$16.3 million||+52%|
|Resorts||$11.6 million||$11.6 million||No Change|
Divvy up a significant portion of Trump Taj Mahal’s September revenue of $17.5 million (not listed) and it’s clear that you should bullish on the remaining casinos in the market.