Atlantic City’s largest casino operator is acknowledging that it is exploring cost-cutting measures, including the possibility of closing a casino.
Calling Atlantic City the biggest problem Caesars Entertainment Corp. has faced in the last several years, Chief Executive Officer Gary Loveman said all of the casinos in the resort are under tremendous pressure.
“We are looking at all of our options to continue to reduce the cost of doing business here — options to reduce capacity,” Loveman said during a conference call on the company’s earnings. “You’ve seen ... with the closure of the Atlantic Club, some movement in that direction. It’s possible with the continuing trend that you’ll see more of that. I think that’s the normal self-correcting healing that you’d like to see in a market like this.”
Caesars owns four casinos in the resort — Caesars, Bally’s, Showboat and Harrah’s. The company teamed with Tropicana Entertainment last year in a joint bid during a bankruptcy auction for the Atlantic Club Casino Hotel. The joint bid pulled Atlantic Club off the market. Caesars now owns the property, but is not operating it.
Loveman did not elaborate during the conference call on what properties might be considered for closing or how quickly that could happen. Gary Thompson, Caesars’ corporate spokesman, declined to specify which properties may be considered.
Bally’s Atlantic City took the biggest hit of all Caesars’ Atlantic City properties in 2013 with casino revenue falling 17 percent to $244 million. Showboat Casino Hotel followed with a 14 percent drop to $193 million. All four properties saw casino win declines.
“We’re looking at options to continue to reduce the cost of doing business here,” Thompson reiterated. “One option is to reduce capacity, as we did with the closure of Atlantic Club. It’s possible that if the market continue to decline, you’ll see more of that.”
Analysts and officials said Caesars statements aren’t surprising given the state of Atlantic City’s market, but nonetheless they are concerning. The resort’s market brought in $2.86 billion in casino revenue in 2013, the lowest in 25 years.
“When you talk about closing a property, that sounds like an abstraction,” state Sen. Jim Whelan, D-Atlantic, said. “The reality is it’s 1,500 or more people out of work that don’t have the opportunity to walk down the Boardwalk to find another place that’s hiring because they aren’t hiring. I don’t want to see them shed a property.”
Atlantic Club’s closure in January left 1,600 people out of work. Roughly 750 of those workers were members of casino union UNITE-HERE Local 54.
Union President Bob McDevitt said it isn’t surprising that Caesars may be looking to get rid of one of its properties, but noted it would be “foolish” to close a property rather than selling it, in part because of the cost involved in closing.
“To me, the best possible outcome would be to sell to a strong company with the ability to put investment into the property and bring more people into the market,” McDevitt said.
Meanwhile, Assemblyman Chris Brown, R-Atlantic, said Caesars’ comments only speak to the need to transition Atlantic City from a gaming destination to a resort destination. Gov. Chris Christie committed to blocking casino expansion in North Jersey until February 2016 while Atlantic City is given a chance for revitalization.
“It is no secret the regional gaming market is over-saturated. This is precisely why I have advocated on behalf of our district and the state there should not be added casinos in the Meadowlands,” Brown said.
Caesars has been grappling with $23 billion in long-term debt, recently creating spin-off company Caesars Growth Partners to help repair the company’s financial standing. Earlier this week, the company also announced plans for debt restructuring that will include selling 5 percent of its equity to institutional investors with plans to list the shares in the future.
The company will also pursue $1.75 billion in new debt offering with the proceeds used to pay off obligations that will be due in 2015.
In March, Caesars announced plans to close a property in Tunica, Miss. Locally, the company reached a deal last month to sell the Atlantic City Country Club to the Ottinger family for an undisclosed price. Last year, the company sold off the Claridge hotel tower from its Bally’s Atlantic City casino for $12.5 million.
Thompson, the spokesman for Caesars, however, noted that the the company hopes the addition of the new conference center now under construction at Harrah’s Resort will help to drive mid-week visitation and reinvigorate the market.
Loveman pointed to Revel Casino Hotel, the $2.4 billion property that opened in April 2012, for exasperating the market’s problems.
“When the Revel joined the market ... it didn’t do anything to grow it,” Loveman said. “Instead, it just took a portion of the existing level of activity. There’s much too much capacity in Atlantic City currently. ... We’ve experienced that as the largest provider.”
Israel Posner, director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at Richard Stockton College, said that because Caesars’ market share gives the company options that smaller operators don’t have.
“When you’ve got a loyalty program and a database that’s as large as Total Rewards, it certainly gives Caesars options that smaller don’t have when making these kinds of decisions,” Posner said.
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