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Hard Rock International had planned a boutique casino in Atlantic City. Above, the iconic sign in front of Hard Rock Hotel & Casino in Biloxi, Miss.

Hard Rock has scrapped plans for a new casino hotel in Atlantic City, dropping out the day the development group faced a deadline for a $1 million payment to the state for the project.

“Hard Rock International has decided not to move forward with an application for a potential hotel-casino development in Atlantic City, due to current market conditions,” the company said in a statement Wednesday. “We have been evaluating Atlantic City as a prospective location for a hotel-casino development and have not eliminated this location for a future endeavor.”

Wednesday was the deadline for Hard Rock’s developers to pay a $1 million state application fee and submit construction timetables for a project that had already been delayed for months. The New Jersey Casino Control Commission had been awaiting word from the AC Gateway LLC development group, a partnership between Hard Rock International and the New York-based financial firm Och-Ziff Capital Management.

The commission’s chairman, Matthew Levinson, expressed hope that Hard Rock would reconsider its decision and return to Atlantic City when market conditions improve.

“As we move forward in remaking Atlantic City into a full-scale destination, the market will rebound here and that will rekindle interest in developing innovative new resort properties here,” Levinson said in a statement.

Levinson told The Press of Atlantic City that another possibility is that other developers may now step in to replace Hard Rock.

“It gives people who may want to invest in Atlantic City another opportunity to come in,” he said. “We’ll work with anyone who is interested. We’ll also work with AC Gateway if they’re still interested. Hard Rock still sees us as a potential investment opportunity. Hopefully, we’ll see a Hard Rock sooner or later.”

In March, the commission gave Hard Rock’s developers a six-month extension — until Wednesday — to make the $1 million payment, as well as submit a schedule for starting and completing the project.

The application fee would have been refundable if Hard Rock met the construction timetable. The most recent plans called for Hard Rock to start construction by Jan. 11, 2013, and complete the first phase of the project by Jan. 15, 2015, commission officials said.

Earlier this year, Hard Rock officials explained they were encountering delays in securing a New Jersey environmental permit for construction of the beachfront project and needed more time.

Hard Rock had proposed building the first of two smaller-scale casinos approved for the Boardwalk under a pilot program supervised by the Casino Control Commission. Gov. Chris Christie signed legislation in 2011 allowing those projects to have as few as 200 hotel rooms, compared with Atlantic City’s previous minimum of 500 rooms for casino construction.

Mayor Lorenzo Langford said he wasn’t surprised by Hard Rock’s decision, given the poor economy. Neither was state Sen. Jim Whelan , who was the author of the legislation that allowed for smaller casino projects.

“It’s just disappointing, but not surprising, given the market conditions here in Atlantic City and the overall national economy,” said Whelan, D-Atlantic. “It says the market isn’t there right now to support the development of any new casinos, whether it’s a small casino or a larger casino.”

Instead, Whelan said what is happening in Atlantic City has more to do with potential casino sales and development of new partnerships with existing properties. For instance, the Margaritaville brand owned by singer-songwriter Jimmy Buffett is partnering with Resorts Casino Hotel for a new $35 million beachfront restaurant and bar.

Hard Rock was seen as the best hope for the next new casino in the slumping Atlantic City market. Gambling revenue has been on the decline since peaking at $5.2 billion in 2006, driven down by the sluggish economy and competition from casinos in surrounding states. Revenue from slot machines and table games fell to $3.3 billion in 2011 and is down an additional 5 percent so far this year.

Smaller casinos are seen as a way to help revive the market by quickly bringing new jobs and construction to the city, while making it easier and cheaper for developers to build.

No other developers have stepped forward yet to build the second smaller-scale project as part of the “boutique casino” pilot program. Levinson denied that Hard Rock’s decision represented a serious setback for Atlantic City.

“While AC Gateway and Hard Rock are not prepared to proceed at this time, the commission will entertain any future requests from AC Gateway, Hard Rock or any other interested parties seeking participation in the pilot program,” he said. “We are committed to taking the steps necessary — whether it is through boutique casinos or any other efforts — to build a stronger and more vibrant Atlantic City.”

Hard Rock’s developers had said they would start with 200 hotel rooms, but would add a second phase consisting of an extra 650 rooms. The project was proposed at the foot of the Route 40 entryway, on the southern end of the Boardwalk. Hard Rock had estimated the cost of the first phase at $465 million, but never divulged the price tag for the entire project.

Hard Rock, one of the top brands in the casino and entertainment industry, had intended to make use of its rock-and-roll theme in the Atlantic City project. The casino hotel would have included a museum stocked with memorabilia from Hard Rock’s extensive rock-and-roll collection.

Hard Rock also had emphasized the beach in the project’s design. It was supposed to have included a Hard Rock Cafe overlooking the ocean, as well as an outdoor pool on the beach. Fire pits, a barbecue and live entertainment would have added to the beach-flavored party scene.

Staff Writer Derek Harper contributed to this report.

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