Atlantic City skyline day

Atlantic City

Michael Ein

Annual gross casino revenue for the entire state of Pennsylvania surpassed that of Atlantic City for the first time in 2012.

While the metric officially solidifies Pennsylvania’s casino industry as the second largest behind Nevada, it is also not much of a surprise to industry observers. That is because by many measures, casinos in the Keystone state have outperformed those in Atlantic City for quite some time. Their success also has come at the expense of Atlantic City.

“Pennsylvania’s gain has been as a result of New Jersey’s pain,” sad Joe Weinert, senior vice president of Linwood-based Spectrum Gaming Group.

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The first signs came as early as December 2010 when for the first time, casino wins in Pennsylvania surpassed that of Atlantic City for a single month. The gap has since widened, with the latest metric showing 2012 to be the first full calendar year in which Pennsylvania’s nearly $3.2 billion in gross revenue surpassed Atlantic City’s nearly $3.1 billion.

In 2006, when Pennsylvania opened its first casinos, gross revenues were only $32 million. That year, Atlantic City’s gross revenues peaked at more than $5 billion.

The two states have taken different approaches to casino gambling. Pennsylvania’s collection of 11 casinos is spread across the state and situated near population centers, making them attractive to and convenient for gamblers who don’t want to travel far. In New Jersey, the 12 casinos are concentrated in Atlantic City.

“There are a lot of actors at play,” Weinert said. “Pennsylvania smartly put most of its casinos along and near the New Jersey border to take away the many patrons who were already spending the money in Atlantic City.”

Pennsylvania’s casinos also were built with the purpose of raising revenue through gambling, while in New Jersey, the state depends on the industry for revenue as well as for jobs and economic development, Weinert said.

But with more states introducing gambling, Pennsylvania also stands to lose gamblers to those emerging markets, such as in Maryland and Ohio.

“Pennsylvania, like many states in the east, is going to be facing competition,” Weinert said.

For some casino operators, multiple markets within driving distance of each other can provide advantages, such as Caesars Entertainment, which operates Caesars, Harrah’s Resort, Bally’s and Showboat in Atlantic City as well as Harrah’s Philadelphia.

“Total Rewards customers in the region have the convenience of a quick drive to Harrah's Philadelphia as a great gaming option, while also being able to use their loyalty rewards for quick getaway experiences in Atlantic City,” Caesars’ spokeswoman Katie Dougherty said in an email.

Industry observers said they believe Atlantic City must continue to market its nongambling amenities and bolster its image as a destination resort. During the summer last year, that strategy appeared to show some signs of success, particularly in August when monthly casino wins saw a year-over-year increase.

But then in October, Hurricane Sandy shut down the casinos for several days, and while it didn’t cause much lasting damage to the tourism district, the storm has dampened visitation.

“The hurricane really affected October and November here at the shore, and to a point December as well,” said Joe Lupo, senior vice president of operations at Borgata Hotel Casino & Spa.

The weakened economy also has exacerbated the situation, making nearby Pennsylvania casinos much more attractive than Atlantic City to gamblers concerned about spending too much money on traveling. Atlantic City may be able to better compete with Pennsylvania had there not been a recession, Lupo said.

“The convenience factor wouldn’t have been that great of a factor,” he said. “We’re living in a new world today.”

Lupo said he believed in the long run, destination style resorts, such as Atlantic City, have more promise than strictly gambling destinations.

“There are a lot more nongamer enthusiasts looking for resort style destinations,” he said.

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