In what amounted to a $2.4 billion mea culpa, Revel’s new executive team admitted Wednesday that the luxury megaresort misjudged the Atlantic City market in its first year of operation and urgently needs to repair its customer relations.
A new marketing strategy, a diverse entertainment lineup, more affordable restaurant options and the end of Revel’s no-smoking policy are part of sweeping changes on the way to appeal to a broader customer base.
“Everyone deserves a second chance. We’re looking for a second chance,” Jeffrey Hartmann , Revel’s interim CEO, told the New Jersey Casino Control Commission during a hearing on Revel’s bankruptcy restructuring plan.
The commission voted 3-0 to approve the plan, a key step toward allowing Revel to emerge from Chapter 11 bankruptcy protection next week under new ownership. The commissioners seemed convinced that Revel’s reorganization is the best chance for the financially troubled casino to survive.
“Management hopes that these changes, along with an aggressive new marketing campaign, will draw new customers and contribute significantly to turning this property around. We hope they are right,” said Matthew Levinson, the commission’s chairman.
Although the commission approved Revel’s restructuring, it also imposed stringent monitoring requirements on the company’s finances. Those requirements were recommended by the New Jersey Division of Gaming Enforcement out of fear that Revel’s financial projections may be too rosy.
“We will take whatever action is necessary, depending on what happens down the line,” division attorney John E. Adams Jr. said of plans to closely watch Revel’s finances.
The hearing was marked by extraordinarily candid testimony from Hartmann about Revel’s operating and marketing blunders during its crucial start-up months. The $2.4 billion casino hotel opened amid great promise in April 2012 but quickly became a huge flop.
“We are trying to listen to and respond to customers. We probably didn’t do a great job of that last year,” said Hartmann, who took over as chief executive in March in a management shake-up orchestrated by Revel’s lenders.
When Revel first opened under the old management, it touted itself as a high-end resort first and a casino second, a move that Hartmann acknowledged turned off the traditional gambling customers. Hoping to reverse course, Revel has scrapped its old marketing strategy and will reposition itself as a more affordable, “casino-centric” property instead of promoting itself as an exclusive resort, Hartmann said.
“We’re broadening the appeal of the property,” he said. “We are looking for the traditional slots and tables customer.”
A $3 million high-limit slots lounge and VIP club opened last week, the first in a series of new attractions Revel is counting on to draw customers this summer. A new daytime beach club and a low-cost, 24-hour restaurant are among the upcoming amenities.
In another significant move, Revel plans to end its no-smoking policy in the next two or three weeks, Hartmann said. Smoking will be allowed on 25 percent of Revel’s casino floor, the same as other casinos in town. Critics had repeatedly blamed the no-smoking policy for scaring away hardcore gamblers, although anti-tobacco advocates lauded Revel for being the only Atlantic City casino to ban smoking.
Revel also plans to tweak its entertainment lineup, bringing in more diverse acts to appeal to a broader audience, Hartmann said. Country acts and comedians will now be added to the mix. Over the past 12 months, Revel’s hip-hop and pop concerts in its 5,000-seat arena targeted a younger demographic but didn’t necessarily translate into higher revenue in other parts of the property. Hartmann said Revel lost too much money on entertainment but didn’t divulge a figure.
With customers taking their business elsewhere, Revel has languished near the bottom of the pack in monthly gambling revenue among Atlantic City’s 12 casinos. In April, it took in $8 million from its slot machines and table games, placing it next to last in revenue among all casinos.
Revel’s meager gambling revenue contributed to an $111.1 million gross operating loss in 2012. Burning through cash and saddled with more than $1 billion in debt, Revel filed for bankruptcy protection in March.
Lloyd D. Levenson , Revel’s attorney, told the commission that the debt will be reduced from $1.2 billion to $350 million under the bankruptcy restructuring plan. Revel’s lenders will forgive most of that debt in exchange for becoming the new casino owners.
In documents released Wednesday, Revel is predicting that its net revenue will increase from $152 million last year to $256.4 million in 2013. The forecast calls for $322.8 million in net revenue in 2014 and $378.9 million in 2015. Revel is also predicting that it will narrow its operating loss from $111.1 million in 2012 to $42.7 million this year.
Dennis Stogsdill, Revel’s chief restructuring officer, said the property does not expect to start turning a profit until summer 2014. In the meantime, Revel will be helped by $75 million in fresh financing once it emerges from bankruptcy. Stogsdill testified during the commission hearing that Revel will immediately tap $6 million to $10 million of that financing to help pay expenses.
Faced with tough questions from the commissioners, Stogsdill repeatedly expressed confidence in Revel’s financial projections. He also said he believes Revel has enough funding to keep it afloat. But even if Revel falls short of projections, it still has “additional levers to pull” to keep it afloat, he said.
Stogsdill raised the possibility of additional financing from Revel’s new ownership group. He also said Revel plans to implement cost-saving measures in its labor, utility, and food and beverage expenses.
Contact Donald Wittkowski: