Revel’s sucker’s bet

June 28, 2013 9:19 am

The Revel casino in Atlantic City opened to great fanfare last year and then promptly filed for U.S. bankruptcy protection.

Now, the $2.4 billion casino appears willing say and do anything to lure in gamblers to help stay afloat. The Revel is advertising a new promotion that claims slots players “Can’t lose.”

During the month of July, the casino says it will ‘refund’ any losses at slot machines. Of course, the ad is misleading. There are no cash refunds. Instead, the Revel will give gamblers credit for any losses at its slot machines. But the credit can only be used to gamble again at the Revel. In other words, the casino will let you lose your money twice.

That’s not a deal, that’s a suckers bet. The goal of casinos is to keep gamblers coming back early and often. Over time, the casino knows it will take your money because the odds are always stacked in its favor. Hence the term, gambler’s fallacy. But the casino industry has a better term that it doesn’t like to discuss. It’s called play to extinction. (See video here and read this excellent piece in the National Review on why casino gambling is a bad racket.)

Getting gambler’s to play to extinction is really what is behind the Revel’s “can’t lose” promotion.

Revel files for bankruptcy

February 20, 2013 9:09 am

The one sure bet in Atlantic City the last 10 months was that the new $2.6. billion Revel casinos was likely to go bankrupt. Well, that bad bet just came true.

There was a reason why Morgan Stanley and other private investors walked away from the half-built casino after the 2008 financial collapse. Given the state of Atlantic City’s faltering casino industry, the Wall Street investors determined it was cheaper to cut their sizable losses and walk away from the Revel.

But Gov. Christie stepped in with $300 million in taxpayer money to get the casino up and running. Can you say bailout? Flush with house money, Revel rolled the dice.

From the start, the casino failed to attract the repeat gamblers needed to keep the slot machines spinning. Atlantic City is a mostly low-rollers market, supported by working class and elderly gamblers who spend hours at the slot machines. (Think Jersey Housewives, Sopranos and lots of senior citizens buses.)

The Revel tried to be an upscale casino that doesn’t allow smoking. But there aren’t enough James Bond types in Atlantic City to support the casino. Not to mention, the increased casino competition from Pennsylvania, Delaware, Maryland and the racino in Queens, N.Y. With gasoline back near $4 a gallon, there is no need to trek to dumpy Atlantic City when there are plenty of dumpy casinos closer to home. In fact, the growing glut of casinos raises questions about the whether the region is oversaturated and can support more casinos.

Other states will likely press on with their casino expansion plans, paving the way for more competition and more casinos going under. In the end, the big losers at the Revel will be the New Jersey taxpayers that Gov. Christie put on the hook for the $300 million in state funding.

Atlantic City losing streak: six years and counting

January 11, 2013 9:11 am

Like many of the gamblers who leave Atlantic City with empty pockets, the casinos here are on a serious losing streak.

Total casino revenue was down 8 percent in 2012 in Atlantic City. It was the sixth year in row of revenue declines. Where have all of the gamblers gone? The casinos are struggling from increased competition mainly from Pennsylvania, which legalized casinos in 2004. Delaware, Maryland and Ohio have opened casinos in recent years. Massachusetts legalized casinos but has yet to open any. 

Overall, revenues are down 41 percent from the high 2006. The casinos raked in $3.05 billion last year compared with $5.2 billion in 2006. the addition of the new Revel casino has done little to reverse the fortunes in Atlantic City. In fact, the Revel has struggled to attract gamblers since opening last spring and is teetering on bankruptcy. Hurricane Sandy also hurt the casino, which were forced to close for several days during the storm.

The financial problems in Atlantic City may get worse if New York Gov. Andrew cuomo gets his way and legalizes casinos. About half of the Atlantic City gamblers come from the New York area. At the same time, some lawmakers in North Jersey are pushing to bring a casino to the Meadowlands.

That will leave the Atlantic City casinos like many of its gambling customers: chasing its losses.

Update: The casinos in Nevada are also struggling as the sluggish economy continues to impact gamblers.

Revel casino on the rocks

November 15, 2012 1:33 pm

Analysts are predicting that Hurricane Sandy will likely deliver a knockout blow to the Revel casino in Atlantic City.

The $2.4 billion casino has struggled mightily since it opened last spring. After just four months, the casino asked lenders for $100 million to pay its bills and some speculated then that it would be headed for bankruptcy. Now analysts don’t expect the casino to recover from Hurricane Sandy.

The hurricane forced the casino to close for several days and many gamblers have not returned to Atlantic City. About 50 percent of Atlantic City’s gamblers come from New York and North Jersey, two areas hardest hit by the storm. They are too busy rebuilding and don’t have the time or money to gamble.

But don’t blame Mother Nature. The problems with the Revel were known and real well before Sandy barrelled through Atlantic City. The hurricane just hastened the casino’s demise. Private investors cut their losses and walked away from the casino when it was still under construction. The market had spoken. But Gov. Chris Christie came along and gave the casino a bailout. Now taxpayers are on the hook for a casino that - just like most gamblers – never had chance to make any money.

Sandy still battering AC casinos

November 8, 2012 11:22 am

More than a week after Hurricane Sandy hit the Jersey Shore, the casinos in Atlantic City are still suffering from the storm’s aftermath.

Gov. Christie ordered the casinos closed before the storm hit. Once the storm passed, the casinos were quick to reopen. But many of the gamblers have yet to return, The Inquirer reports.

A large chunk of Atlantic City’s gamblers come from North Jersey and New York – two areas hardest hit by the storm. As such, the casinos are largely empty. Moody’s issued a bleak report for the Atlantic City casinos in the short-term: “We expect Atlantic City revenues to be down 25 percent both this quarter and next,” Moody’s said. “Earnings could decline 40 percent to 50 percent in both quarters. Gaming operators with just one property in Atlantic City, such as Revel Entertainment Group L.L.C. [owner of Revel] and Marina District Finance Co. [owner of Borgata], are most at risk.”

Revel rolls snake eyes again

June 12, 2012 8:28 am

Big shock: the new $2.4 billion Revel casino in Atlantic City had another sluggish month in business, despite lots of free media coverage and an advertising blitz.

Revel’s revenue was $13.9 million in May, ranking eighth among Atlantic City’s dozen casinos. Revenues in April, its first month in business, were $13.4 million. Overall, Atlantic City’s total gambling revenue was $263 million in May, down 9.5 percent
compared with a year ago. Excluding Revel, revenue declined 14.3 percent.

The arrival of Revel is not going to fix what is ailing Atlantic City. The Jersey Shore resort is getting killed by increased competition from Pennsylvania, Delaware and other states, including Maryland, which just opened a new casino. As a result, many more elderly people who used to bus in to Atlantic City now have a local casino closer to home.

The Revel was aiming for the high-end market. But Atlantic City has always been more about low rollers, seniors playing slots and working class heroes hoping to get lucky. The Revel’s fancy amentities and nonsmoking policy don’t appeal to the blue collar crowd.

That’s why Morgan Stanley walked away from the Revel after the financial collpase. The bankers understood it was better to cut their losses. The free market had spoken. But, surprisingly, Gov. Chris Christie, supposedly a free market Republican,  came through with a $261 million taxpayer-bond bailout to help complete construction of the Revel.

The way the bailout is structured it is unlikely taxpayers will ever get repaid. Rather than bring more gamblers to Atlantic City, investors are betting the Revel will more likely take market share from the other existing casinos in Atlantic City. That will only weaken the remaining casinos, which are already struggling from the outside competition.

Gov. Christie avoids Atlantic City

May 16, 2012 9:21 am

Elected officials are such hypocrites when it comes to gambling. They salivate over the tax revenue that comes from casinos and lotteries, but they distance themselves from the economic and social costs that come from government’s role in enabling more and more gambling.

Take New Jersey Gov. Chris Christie. He was the scheduled keynote speaker at the East Coast Gaming Congress in Atalntic City. But he backed out of the commitment and is sending his luitenent governor in his place. Christie’s spokesman said the change was due to a scheduling conflict.

Critics believe Christie doesn’t want to be seen cozying up to the gambling industry in advance of his presumed national political ambitions. Ironically, the gambling conference is being held at the new Revel Casino, a $2.4 billion resort that was only completed after Christie provided a $260 million taxpayer bailout.

Christie may run from his gambling ties but he can’t hide. The governor has been deeply involved in trying to prop up Atlantic City’s sagging fortunes. The state has scaled back regulations of the casinos, a move that is saving the casinos millions of dollars. Christie has also been a supporter of legalizing sports betting and online gambling.

But a Fairleigh Dickinson University PublicMind poll released on Monday found the majority of Garden State residents oppose online wagering based at Atlantic City casinos. The move would enable a virtual casino in everyone’s home computer and mobile phone. Such easy access to gambling would surely increase the social and economic costs that come from gambling, and make it easier for technology-crazed teens to gamble.

That policy may not go over well with some conservative groups. Maybe that’s why Christie doesn’t want to be seen schmoozing with the casino operators in Atlantic City.

 

Revel casino’s sluggish start

May 10, 2012 1:05 pm

The casino that is supposed to save Atlantic City is off to a poor start.

The $2.4 billion Revel casino had just $13.4 million in revenue in its first month of operation. That is a very sluggish showing for the mega-casino that received so much hype and attention – not to mention a state bailout from Gov. Chris Christie. By comparison, the Borgata Hotel Casino & Spa raked in $54 million in gambling revenue in March. Overall, revenue at the Atlantic City casinos was down 10 percent for the month.

Revel’s ranking is near the bottom for the 12 casinos in Atlantic City. Revel’s manager expects business to pick up in the summer. It better. Elected officials are banking the Revel will bring gamblers back to Atlantic City, which has seen its gambling revenue plummet since Pennsylvania legalized gambling in 2004.

Maybe the old ladies and sweatsuit crowd is intimidated by the Revel’s upscale image.

Revel’s rise almost didn’t happen

April 11, 2012 10:30 am

The new Revel casino in Atlantic City is just opening but it already has an interesting history. The $2.2 billion casino was left for dead after the financial collapse in 2008. Construction resumed after getting a state bailout from Gov. Christie. Now Atlantic City hopes the Revel can revive its sagging gambling fortunes.

The Revel’s revival is detailed here in a piece by the Business Insider. Perhaps the most interesting quote is this one from Revel CEO Kevin DeSanctis before the Revel was built: “As far as I’m concerned the last thing this place needs is another casino,” he said. “If we’re just going to build a casino, let’s not waste our time on this. It’s not going to be productive.”

DeSanctis was explaining why the Revel is trying to broaden the gambling market by going after high-end customers who want dining and entertainment as well as a casino. The Revel is also the first casino to try to capitalize on its location at the Jersey Shore. The casino is open and airy and has windows that look out at the Atlantic Ocean.

By comparison, the other Atlantic City casinos are dark and windowless. They don’t want gamblers wasting time on the beach when they could be wasting time and their money in the casino. But it remains to be seen if the Revel’s design will reshape the faltering Atlantic City gambling market. Competition and convenience is killing AC. The Revel may bring in a few new visitors, but it’s hard to see how an ocean view will be a game-changer.

Revel ropes in usual suspects

April 2, 2012 1:31 pm

Atlantic City’s flashy new Revel casino hopes to lure in trendy new gamblers to its $2.4 billion resort. But this review shows that on the first day of opening, the casino was populated by the usual old folks and hard-core gambling types that populate the other AC casinos. Bring on the coach buses and cheap buffet.

It’s a depressing sight, especially on a Monday morning, to see all the old people literally tethered to the slot machines aimlessly giving their money away. It’s even worse to walk the surrounding streets and see the pawnshops, soup kitchens and dollar stores that surround the casinos. One more casino stripping wealth from those who can least afford it is not going to change AC’s fortunes.

Here’s Inquirer reporter Amy Rosenberg’s take: “Monday mornings are never a glamorous time for a casino, so I’m not going to judge the vibe from today, but let’s just say, New casino, Same people. Not that there’s anything wrong with the familiar Atlantic City mix of old folks, slackers and early birds, but who sent out the memo for everyone to wear sweat pants, sensibly soled shoes and windbreakers on Revel’s big day?”