What Atlantic City Needs to Learn From Las Vegas

Atlantic City’s casino industry has fallen on hard times.

revel_building_no_creditThe closing this month of three Atlantic City casinos (Revel, Showboat and Trump Plaza) is yet another reminder that nothing should be taken for granted in the gaming business.

New Jersey voted in 1976 to permit casino gaming in Atlantic City on the assumption that it would become like Las Vegas, only better. The ways Jersey lawmakers sought to make good on that promise say a great deal about how elected officials approach life. Given a chance to create an industry from scratch, New Jersey chose to make it more strictly controlled, to prevent even a hint of organized crime influence. This meant not only an unprecedented role for state inspectors in daily operations, but statutory and regulatory mandates that constricted the city’s casinos.

Guidelines on how casinos handle cash are reasonable. Telling them what percentages of floor space can be allocated to slot machines versus table games, or what table limits must be offered, less so. Specifying that casinos must avoid large “Las Vegas-style” neon signage is, most would argue, going a bit overboard. And yet in the early years, Atlantic City casinos were able to overcome a variety of administrative shackles to outshine even Las Vegas. In 1982, four years after its first casino opened, Atlantic City defeated the Las Vegas Strip when it came to gaming revenue. It would continue to do so until 1999.

Atlantic City casinos prospered in those years because they were the only game not just in town, but in the entire eastern half of the country. Within five years of New Jersey voters approving gaming, nine hotel-casinos were in operation, drawing 19 million visitors to the formerly moribund seaside resort, employing 30,000 people, and pulling in more than $1 billion a year.

New development, new jobs and new money: That equals success, by any standard. But even as the happy days returned, Atlantic City’s monopoly had an expiration date. Before the first Jersey casino opened its doors, Florida was considering entering the game. It ended up punting, but by 1990 Iowa, Illinois, South Dakota and Colorado had approved casino gaming, and tribal governments across the country were signing compacts governing the operation of casinos.

The start of tribal gaming in Connecticut in the early 1990s was the first harbinger of eventual ruin. It triggered a modest bout of regulatory reform for New Jersey: casinos were permitted to remain open 24 hours a day, and allowed to offer poker, keno, race simulcasting and other “new” games. But efforts to legalize sports betting prior to the Professional and Amateur Sports Protection Act’s 1992 passage failed, and Atlantic City lost what could have been a monopoly to this day: the right to offer straight-up legal sports wagering outside of Nevada.

Meanwhile, it was clear that states nearby weren’t going to let New Jersey keep its casino bounty to itself. Predictably, the proliferation python circled tighter: Delaware, 1995; New York, 2004; and, the killing blow, Pennsylvania, 2006.

From the start, civic and business leaders had emphasized the importance of expanding “beyond just gambling” to keep Atlantic City viable as a tourist destination. But when billions of dollars were flowing through the city’s slot machines each year, there was usually a more pressing need than costly reinvestments that might not pay off. So, despite investments by some, Atlantic City’s Boardwalk never got the total overhaul it needed.

How has Las Vegas avoided a similar fate? Two reasons: It has aggressively marketed itself, never letting the media or anyone else define its image; and its operators have consistently reinvested. This explains why the explosion of tribal gaming in California has not hurt the Strip: While you can gamble in Riverside County, there are still plenty of things to do in Las Vegas that you can’t do there. Atlantic City’s fate bears out the wisdom of both policies. Tourists and gamblers aren’t sentimental, and they won’t keep coming if there’s nothing new to interest them.

Las Vegas isn’t successful because it hit on that one hidden trick to popular appeal; it’s popular because it’s never stopped reinventing itself, hence the current festivalization, foodie-ization and boutiquing of the Strip. Atlantic City, in its long history, has had many highs and lows. The city can reverse the current ebb tide by trying to renew itself again … and again.

David G. Schwartz is the director of UNLV’s Center for Gaming Research.

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