Atlantic Citys Gamble

Meetings & Conventions - Atlantic City’s Gamble - September 2000

September 2000
Atlantic City’s Gamble image

Atlantic City’s Gamble

This seaside town is betting on high-profile builders to herald a wave of much-needed development. But will it materialize?

By Lisa Grimaldi

The buzz about Atlantic City these past few years was that it was on the brink of a second wave, a renaissance that would tap this New Jersey town’s potential to be a vital, hip, leisure, gaming and convention destination with appeal beyond the Northeast market.

Few people would argue that Atlantic City was, and is, in need of a boost. Although its gaming revenues are nothing to sneeze at the city’s 12 casinos raked in $4.2 billion last year a new gaming property hasn’t opened in town since 1990.

Because these properties would rather fill their 11,400 rooms with high rollers than with attendees, the city still does not have enough housing to host huge conventions. Analysts say the city needs at least 20,000 rooms to grow in any capacity not just for conventions. At the Mid-Atlantic Gaming Congress held in Atlantic City in April, Paul Rubeli, chairman and CEO of Aztar Corp., which owns the Tropicana Casino and Resort, said, “The simple solution to the growth of Atlantic City and expanding our market is hotel rooms.”

Critics also contend Atlantic City doesn’t offer a heck of a lot in the way of nongaming attractions, outside of the May-to-September beach season. There is very little high-end shopping, other than a few casino boutiques that carry apparel and jewelry with more flash than cachet. And once visitors venture off the Boardwalk, main thoroughfares such as Pacific Avenue have a decidedly unprosperous feel, dotted with empty storefronts and pawn shops. But in the late ’90s, it looked as though the city’s long-heralded second wave was a not-so-distant dream. The handsome new convention center, which opened in 1997, is now the first major landmark visitors arriving via the Atlantic City Expressway the main highway entrance see upon entering the city. And it is considered successful by city and tourism officials; in 1999, 300,000 convention and trade show attendees generated spending revenues of $214 million, a 73 percent increase over 1998. The area that lies between the center and the Boardwalk is now mostly undeveloped lots not pretty, but a vast improvement from the depressing low-income housing projects that used to loom there.

“The streets are changing,” says James Whelan, Atlantic City’s mayor since 1990. “In the past several years, millions have been spent on renovation of that area around the center. We’ve eradicated the negative eyesores and problem structures visitors found threatening.”

At press time, the city was in talks with a developer, Baltimore-based Cordish Company, which specializes in urban redevelopment projects, to create a $250 million, 400,000-square-foot attendee-friendly shopping/dining/entertainment corridor between the boardwalk and the convention facility.

The 1929-built Boardwalk Convention Hall, now known as the Boardwalk Hall Arena, is getting a long-needed makeover. The $90 million project will transform the old convention center into a state-of-the-art special events arena (which will serve as home to a minor-league hockey team) with 8,800 seats.

The biggest news of all in the late ’90s was on the property front: Three new casinos, the first in 10 years, were in the works. MGM Grand Inc. had plans to build a gaming property on the 35-acre tract of land it owns on the Boardwalk, next to the Showboat Casino Hotel. Even more exciting: Steve Wynn, the then-chairman of Mirage Resorts Inc., whose Mirage and Bellagio megaresorts had helped breathe new life into Las Vegas, was building a $1 billion property in Atlantic City’s Marina District, a relatively undeveloped tract of land west of the casino-heavy boardwalk. And Mirage agreed to partner with Las Vegas-based Boyd Gaming Corp. on another Marina property, The Borgata. A $330 million tunnel connection with the Atlantic City Expressway and the Marina District, funded jointly by the state and Wynn, is set for completion by the end of this year.

Even visitors to the city as late as this past May were invited to get caught up in Wynn’s dream, with a sign along the Atlantic City Expressway touting the fresh arrival: “We can’t wait to be a part of this scene, so we bought this billboard. Mirage.”

To say that a lot of the hope and hype surrounding Atlantic City’s second wave was riding on Wynn is an understatement. “Atlantic City has historically looked to a singular event or person to be its salvation....At different times, it’s been Donald Trump [who owns the Taj Mahal, Trump Plaza and Trump Marina], then it was the convention center, then it was Steve Wynn,” says Mayor Whelan.

Marshall Murdaugh, who served as executive director of the Atlantic City Convention & Visitors Authority from 1995 until late 1999, agrees. “Everyone was enthusiastic about Wynn coming Le Jardin-Palais [Wynn’s Marina property] was going to raise the standard of the gaming properties, restaurants, service&It was going to be a catalyst, because casinos are like sheep when one does something, the others follow.”

Then in April came the unsettling news: MGM Grand wanted to acquire Mirage Resorts. By June, the $6.4 billion deal was completed and Steve Wynn, whose arrival one insider deemed “the return of Elvis,” was out of the company. Suddenly, two of Atlantic City’s new casinos, and the city’s future, were in jeopardy.

Says Mayor Whelan, “Sure, I was nervous [when the MGM/Mirage deal went through]; it created an air of uncertainty for the future.” He added, “I would be concerned if nothing was happening, but we still have the Borgata coming, which will be the largest hotel in the state.”

Another insider, who spoke off the record, said when he heard about the MGM/Mirage deal, he thought, “There go 5,000 jobs and $2 billion out of Atlantic City.”

In June, John T. Redmond was named co-CEO of MGM Grand and was charged with spearheading the company’s development in Atlantic City. Although Redmond and other MGM officials still are mum about the future of their Boardwalk and the Marina tract where the Le Jardin-Palais property was to be built, they’re standing by the original Mirage-Boyd Gaming deal to jointly develop The Borgata. In July, both Redmond and Bob Boughner, COO of Boyd Gaming Inc. and CEO of The Borgata, presided over the unveiling of the model of the property, which has increased in size from its initial 25 stories and 1,200 rooms to 40 stories and 2,010 rooms. Groundbreaking is expected to take place this month.

Marc Falcone, a gaming analyst with New York City-based investment securities trading and brokerage firm Bear, Stearns Co. Inc., expects MGM to take a wait-and-see approach with The Borgata before it moves ahead with further developments. “I think they’ll end up selling some of the land they own in Atlantic City, opening it up to other Vegas developers,” he says. Among the companies worth watching are Harrah’s Entertainment Inc., which owns the Showboat and Harrah’s Atlantic City.

The same month the Mirage acquisition was announced, Atlantic City was dealt a second potentially bad hand: Gaming was coming to New York’s Catskills region, an hour north of New York City, with the proposed casino to be run by the St. Regis Mohawk Indian tribe in Sullivan County, New York. While some Atlantic City players are concerned the new facility will cut into the lucrative New York City market, Bear, Stearns’ Falcone predicts the impact will be minimal.

“That project still needs approvals from the state [of New York] and some other regulatory agencies; I don’t think they’ll be up and running until 2002 or 2003,” he says. “Even then, it won’t have the entertainment draw of Atlantic City.”

Many insiders agree Atlantic City will beat the odds in the end. “The thing is, we’re like Dracula they can’t kill us. [The naysayers] try to write us off, but this town keeps coming back,” says Mayor Whelan.

The convention factor
Although casino development is the linchpin of Atlantic City’s fortunes, the convention industry is critical to the city’s growth. According to Joe DiGirolamo, vice president of convention development for the ACCVA, groups make up nearly 35 percent of the city’s hotel business. Thirty-five percent of that business is corporate; 27 percent is attributed to citywide conventions.

One dream realized: The Atlantic City Convention Center opened in 1997. At the Atlantic City Convention Center, which has 500,000 square feet of exhibit space and 45 meeting rooms, 36 percent of the business booked in 1999 was trade shows.

While DiGirolamo acknowledges the city has a room-shortage problem, he says there are 8,000 commitable rooms from September through June. While the casino hotels might begrudge giving rooms for conventions, there are ways of working with them: “I have four people on my staff who used to work at the casino hotels, so they know how to approach them.”

DiGirolamo also points out that through the Casino Reinvestment Development Authority, the state agency charged with using casino revenues to redevelop the city, the properties can get CRDA funding for expansions and room increases, but in turn they must commit a set number of rooms annually for citywide conventions.

For now, the ACCVA shies away from wooing large conventions, instead targeting those that need 1,500 rooms or fewer per night. Not that bigger groups aren’t welcome. Among the larger events booked at the center: the National Guard Association of the United States, scheduled to meet this month and requiring 4,000 rooms per night; the National Catholic Education Association, booked for 2002 and also requiring 4,000 rooms per night; and American Society of Heating, Refrigerating and AirConditioning Engineers, set for 2002 with 13,000 rooms per night.

“The ASHRAE show was booked in 1998, when we thought we’d have more rooms on line,” says DiGirolamo. “We had to get rooms in nearby towns like Ocean City, Somers Point, Brigantine and Pleasantville. Some attendees will be 10 miles away, but they’ll all have rooms.”

Judy Marshall, meeting manager for Atlanta-based ASHRAE, isn’t as concerned about the rooming situation as she is about safety.

“I haven’t done the site inspection yet, and this could be based on something I heard 20 years ago, but I am concerned. I need 60 to 75 breakout rooms for our meetings, and the convention center is the only facility large enough to accommodate them. Sometimes the meetings last until 9 p.m., so I will probably arrange transportation so they don’t have to walk through the streets at that hour.”

Planners for the other two groups are confident Atlantic City will be a good fit. Says John Gohaan, a communications specialist for the Washington, D.C.-based National Guard Association, “I was astounded that Atlantic City offers so much. Since we’ll be there in September, our attendees can take advantage of the beach, along with the casinos and entertainment. We think it will be attractive to members.”

Susan Arvo, convention and exposition director for Washington, D.C.-based NCEA, says her show attracts 14,000 attendees most of whom are day-trippers and requires 4,000 rooms on peak night. Her group hasn’t met in Atlantic City since 1975, but the bishop of the Archdiocese of Camden, of which Atlantic City is part, felt that they should “take advantage of the city’s nice new convention center.”

“I’ve done a site inspection of the center myself and the Sheraton (a nongaming property next to the center). It’s good for our group; the Boardwalk hotels aren’t too far away.” Adds Arvo, “Some members questioned why Atlantic City was selected; they were worried about the image of the city and safety, as well as the presence of gambling. But I didn’t feel that way at all. I think the city has really cleaned up.”

BETTING ON THE BORGATA
Bob Boughner COO of Boyd Gaming Group and CEO of The Borgata

While MGM Grand Inc.’s acquisition of Mirage Resorts Inc. has put the brakes on two new Atlantic City casinos, a third The Borgata is a go. The 2,010-room property, which will be built in the city’s Marina District, is a joint venture of Boyd Gaming Group and MGM Grand (prior to the MGM/Mirage merger, Mirage Resorts was Boyd’s partner). M&C interviewed Bob Boughner, COO of Boyd Gaming Group and CEO of The Borgata, about the prospect of being the sole new casino in Atlantic City.

M&C: Why are you opening a property in Atlantic City?
“We wanted to come because there is significant potential for a new hotel/casino. When we open in late 2002 or early 2003, we will be the first new gaming property in more than 13 years. Another reason the market is attractive is that Atlantic City’s 12 gambling licensees take in the same gaming revenues about $4 billion annually as the 71 casinos in Las Vegas do.”

M&C: What do you think of Atlantic City’s convention industry?
“Atlantic City has a lot of potential in the convention market. The Atlantic City Convention Center is terrific. By bus, it’s less than 10 minutes from our front door. We will have more than 45,000 square feet of meeting space; it’s not set up for exhibitions I’m saying this up front but there’s plenty of space at the convention center and we will work with them.”

L.G.

VIEW FROM THE CVB

Last month, Speros A. Batistatos took over helm of the Atlantic City Convention & Visitors Authority as president/CEO, replacing executive director Marshall Murdaugh, who left in November. Batistatos brings 11 years of experience as president/CEO of the Lake County (Ind.) Convention and Visitors Bureau, an area that introduced riverboat gaming in 1995.

M&C: Do you think Atlantic City is poised for its “second wave?”
“Absolutely; this city is ready to explode. I hadn’t been here since ’93, and I couldn’t believe the changes that have already happened.”

M&C: What do you see as your biggest challenge in you new post?
“Working on getting more commitable nights from hotels during the year and trying to get more air service into Atlantic City International Airport. It’ll be easier to get the hotels to give us blocks once we have the airlines coming in.”

M&C: What role do you see the ACCVA playing in the city’s renaissance?
“It is going to take a lot of legwork to take the city through this stretch [of growth]. We have a role to play with many others, including the hospitality community, the Casino Control Commission and the mayor. The state is already making Atlantic City attractive for future investment and expansion. We all need to work together to create the Atlantic City we see in our minds.”

L.G.