Atlantic City may be underselling itself as a tourist destination by slashing its hotel rates and giving away too many promotional freebies to attract customers, the new chief executive officer of Resorts Casino Hotel said Thursday.
Gary Van Hettinga argued that higher room rates are key to driving profits in the ultra-competitive casino industry. As more and more gambling revenue is lost to rival casinos in surrounding states, Atlantic City must capitalize on its hotel rooms and other nongambling attractions for business, he added.
“We have to find other ways to bring business to the city,” he said in remarks to the Atlantic City Hotel & Lodging Association. “If we’re all fighting over the same customers, we’re just feeding on ourselves.”
In his first public remarks as Resorts’ new president and CEO, Van Hettinga told the hotel association that the casino industry’s practice of deeply discounting room rates over the slow winter months may actually be doing more harm than good.
“Are we charging enough?” he said. “Maybe we have to start thinking a little differently. Maybe we have to start thinking like hotel properties.”
During his speech, Van Hettinga flashed hotel rates up on a display screen to underscore his point. Published rates for eight of Atlantic City’s 12 casinos for midweek stays in early January range from only $49 to $69 per night. That compares to an average room rate of $183 per night for 30 of 72 hotels in Baltimore’s Inner Harbor for the same period.
“It begs the question: Should we be at $49-$69 right out of the gate?” Van Hettinga asked the audience.
In mailings this week to player-card holders from at least two Atlantic City casinos the word ‘free’ appears as the rate for hotel rooms for early-week or midweek stays.
Higher rates, Van Hettinga maintained, would reflect Atlantic City’s evolution into a more upscale tourist destination as it fights for business with casinos in neighboring states.
“The successful casinos are going to have to figure out how to make profits beyond the casino floor,” he said. “I just think we have so much to offer here compared to the other markets.”
Members of the audience agreed with Van Hettinga’s remarks, but one political leader stressed that casinos must continue to upgrade their hotel rooms if they want to charge their guests more.
“If you want higher rates, then you must have a better product,” said Atlantic County Freeholder Chairman Frank Formica, whose family owns an Atlantic City bakery.
Gov. Chris Christie’s creation of a state-run Tourism District and a casino-funded $20 million advertising campaign are key parts of the city’s efforts to polish its image. Formica said those initiatives are starting to pay off, but more work needs to be done.
“We still need to get the message out that we are cleaner and we are safer,” he said.
Howard Bacharach, executive director of the Atlantic City Hotel & Lodging Association, said higher room rates would demonstrate an even greater effort to draw well-heeled visitors.
“He definitely has a point. Higher rates bring a higher-level customer to Atlantic City. I believe it’s time to possibly begin looking at that,” Bacharach said of Van Hettinga’s call for price increases.
For the past few years, casinos have been slashing room rates during the slower midweek period simply to get heads in beds during the winter doldrums. Last winter, it was easy to find rooms as low as the $30s or $40s per night. Prices usually go up during the weekends, traditionally the busiest time for casinos.
Van Hettinga also questioned the casino industry’s liberal giveaway programs, noting that promotional spending has steadily been going up as a percentage of gambling revenue. The result, he lamented, is that casinos are generally seeing smaller profits.
“How far does this have to go?” he said.
Casinos often shower their customers with free hotel rooms, meals, show tickets and other “comps” to reward them for their business and loyalty. As casino competition grows in surrounding states, Atlantic City is relying more on comps to draw customers.
Van Hettinga said Resorts has been cutting back on its promotional spending to boost profits. He also said that Resorts plans to begin raising its hotel rates in a new business strategy.
Van Hettinga’s appointment as CEO of Resorts is part of a new management deal that has placed the Connecticut-based Mohegan Sun in charge of day-to-day operations of Atlantic City’s oldest casino. Van Hettinga will also continue in his role as president of Mohegan Gaming Advisors, the management subsidiary of Mohegan Sun.
The alliance between Resorts and the Indian-owned Mohegan Sun combines some of the best-known casino brands in the Northeast. A new cross-marketing program will allow customers at Resorts and Mohegan Sun’s two casinos in Connecticut and Pennsylvania to use their rewards points at all three properties for hotel stays, dining and entertainment.
Resorts will be freshening up its exterior and interior in coming months, including a previously announced $35 million Margaritaville restaurant and bar complex. Van Hettinga said Resorts is also planning to make improvements to the casino floor, parking garage, retail attractions and VIP lounges.
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