If entrepreneurs still dream of owning a casino and succeeding in Atlantic City, the high cost of entering the market and the gaming competition from neighboring states makes that goal increasingly harder to achieve.
“If you have enough money, you can do anything,” said Michael Gaughan.
Gaughan is the owner of South Point Hotel, Casino and Spa in Las Vegas, a previous gambling license holder in New Jersey.
The issue of single-party casino ownership has returned to prominence in Atlantic City during the last couple of years as two different people — Colorado developer Bruce Deifik and Florida-based investor Glenn Straub — have tried to launch, own and operate the former Revel Casino Hotel.
During the 1980’s, it seemed like one person could run the whole show, but even then it was difficult. The late media mogul Merv Griffin and now Donald Trump both pulled it off for periods of time in the resort.
“Obviously, if you are running a business in a rapidly growing market, you are probably going to make a lot more money,” said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas.
As opposed to the 1980s, the annual revenues of Atlantic City casinos have been stagnant during the past couple of years, making it more difficult for individual ownership to succeed, Schwartz said.
In January 2018, Straub sold Revel to AC OCEAN WALK, a group led by Deifik, and it turned into Ocean Resort Casino.
After six months of operation, Deifik is now relinquishing majority ownership in Ocean Resort to an outside company.
Deifik, who has not identified the new company, will retain a noncontrolling ownership interest.
Since Ocean Resort opened, it has struggled to compete. During the months of July and September through December, Ocean Resort’s casino win has been last or next to last in the market.
It has gotten harder to privately own a casino in the Atlantic City market, said former Atlantic City Mayor Don Guardian.
Before becoming mayor, Guardian spent two decades as the executive director of the Special Improvement District, a part of the Casino Reinvestment Development Authority.
The small casino with a single operator, such as Resorts and the former Claridge Hotel and Casino, was once the norm, but the cost of doing business has continued to rise, he said.
“If we were talking pre-Taj Mahal (1990), you were talking $100 million and that would build you and open up a casino,” Guardian said.
The Taj Mahal and the opening of the Borgata Hotel Casino & Spa changed the economics of opening in the Atlantic City market, Guardian said.
“Now, you are talking about $1 billion or in Ocean’s case, $2 billion. That’s definitely a lot of debt to be able to take on,” Guardian said.
The problem with Atlantic City that makes it especially difficult for a private operator now is Pennsylvania approving casino gaming, and New York putting slots at the racetracks, said Steve Norton, an industry consultant who spent more than three decades as a casino executive in Atlantic City and Las Vegas.
“Maryland and Delaware, West Virginia are all cutting into our same market. Our win has gone from (a record) $5.2 billion in 2006 to something about half of that now,” Norton said. “That’s the problem, and Atlantic City still has not found any new markets.”
When people want to be involved in the Atlantic City casino market, the combination that seems to work these days is an alliance between individual owners and a gaming company.
This model is in operation with Morris Bailey, the Resorts owner, who is in a management partnership with Mohegan Gaming & Entertainment, and Joseph Jingoli and Jack Morris, who are in partnership with Hard Rock International Chairman Jim Allen and Hard Rock Atlantic City Property President Joe Lupo.
Another model that is currently successful is Golden Nugget Atlantic City, which is owned by Landry’s, Inc., a privately owned, multi-brand corporation, Schwartz said. Tilman J. Fertitta, whose net worth is estimated at $4.6 billion, is the sole owner of Fertitta Entertainment, which owns Landry’s and the Golden Nugget casinos.
“I think everything is harder now (in Atlantic City),” compared with decades ago, Schwartz said. “Look at Caesars. Why did they shut down the Showboat? I think it’s harder for everybody, not just the privately held.”