ATLANTIC CITY — The lack of capital improvements at Caesars Atlantic City and Bally’s Atlantic City, a result of bankruptcy issues at parent company Caesars Entertainment Corp., has led to revenue at the properties being well below historic levels, according to a state Division of Gaming Enforcement report.
Since 2008, Caesars and Bally’s have spent a combined $176 million on capital improvements at the two Boardwalk properties, a fraction of what other properties in the resort have invested, according to the report.
During that same period, Harrah’s Resort, which is owned by a separate arm of Caesars, spent more than $215 million and Borgata Hotel Casino & Spa spent more than $207 million on capital improvements.
State regulators are hoping the recently approved Caesars bankruptcy reorganization, which could go into effect in late September, leads to more capital improvements at the properties. In January 2015, Caesars Entertainment Operating Co. filed for Chapter 11. The complex reorganization plan was approved by U.S. Bankruptcy Court on Jan. 17, 2017.
“The relatively low level of capital expenditures is, in the division’s view, one reason that the net revenues from Caesars AC and Bally’s remain well below historical levels,” according the report on the Caesars bankruptcy approval dated June 26. “In the Division opinion, the projected capital expenditures for 2017 and 2018 would not be sufficient to address past deficiencies and provide a much-needed boost to their competitive positions.”
Since 2008, the city’s seven remaining casino properties have spent more than $1 billion on improvements as they look to fend off competition from neighboring states.
“In the first few years, I suspect that there was not any impact,” said Eric Hession, chief financial officer for Caesars Entertainment, during a recent state Casino Control Commission hearing on the issue. “As the years went on, capital was a lot tighter. Bally’s and Caesars likely received less capital during that time.”
But large-scale improvements could be a couple of years away. For 2017, Caesars Atlantic City has budgeted $2 million for improvements, while Bally’s has budgeted $4.4 million, according to the state report. Funding for improvements in 2018 will increase to $5 million for both properties, according to the state report.
Over the past couple of years, the company has made various improvements to both Caesars and Bally’s, Hession said.
“We have done a small amount of rooms at Bally’s and roughly 450 rooms at Caesars, and those are performing well,” Hession said. “We are in the process of putting our capital plan together for the next couple of years. Suites at Caesars are on that list, and we are looking at a block of 100 rooms at Bally’s for 2018/2019.”
Tony Remo, 60, of Staten Island, New York, said he did not have any issues with his room on the 43rd floor of Bally’s.
“We had a nice room. It looked like it was renovated recently,” Remo said Thursday as he smoked a cigar on the Boardwalk. “Is there that much more that they can do? You can invest all you want in the building, but can you get the people down? The building is rundown. Could it use a little a pizzazz? Of course.”
Earlier this month, the Casino Control Commission approved a plan that would allow Caesars Entertainment, which owns Bally’s and Caesars Atlantic City, to lease operations of its properties to a newly formed operating company as part of a Chapter 11 bankruptcy reorganization. The commission approved the reorganization plan, as well as the issuance of casino licenses for the newly formed company.
As part of the approval, Caesars is required to submit a detailed capital-expenditure plan and operational improvement plans for both properties as well as quarterly progress reports.
“It is hard to see how the business can grow in this competitive market with a bare minimum of capital investment,” Matthew B. Levinson, chairman and CEO of the Casino Control Commission, said during the hearing on the matter. “The company has made significant investment in recent years in the Harrah’s Conference Center and other improvements to keep that property attractive and competitive. This is the kind of investment that is needed, and we look forward to tangible evidence of Caesars’ ongoing commitment to the Atlantic City market at all of its properties.”