BUSINESS & ECONOMY

Storm and Holiday Season Slow Economic Recovery for AC’s Casinos

While the actual buildings withstood the force of Sandy, the business side of Atlantic City’s casinos and resorts did not fare so well. The casino town had shut down prior to Sandy making landfall on the Jersey shore and weeks after devastating parts of New Jersey, the storm triggered some layoffs and cutbacks in the state’s casino industry. Despite the setback, David Rebuck, Director of New Jersey’s Division of Gaming Enforcement, remains optimistic. He tells NJ Today Managing Editor Mike Schneider that Atlantic City is well-positioned to assist in the state’s economic recovery.

The city’s casinos took a direct hit to their bottom line when Sandy struck the Garden State. Casinos were shut down for several days and some have already begun trimming costs to offset the downturn. The Atlantic Club laid off workers and two Trump casinos are making salaried workers take a week off without pay and are barring hourly workers from using vacation days to cover time off during the storm.

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According to Rebuck, seasonal layoffs in the gaming industry are the norm around the holidays but has come around sooner than later this year as a result of Sandy. But he points out that the city does not need to be rebuilt because, unlike other parts of the state, it did not suffer physically. He’s looking to corporate America to bring business and jobs to the city.

“They try to do their best to bring special events .. in bringing conferences, conventions to assist in the recovery, in the economic rebirth in the region that has been so terribly devastated and Atlantic City is positioned to do that,” said Rebuck.

Last week, Moody’s Investors Service predicted that Atlantic City casino revenue could be down 25 percent for the next six months and earnings down as much as 50 percent over the same period due to the storm.

Rebuck doesn’t think the situation will be as bad as Moody’s predicts and counters that the storm’s impact is more short-term rather than long-term. There are two reasons for this upbeat assessment, he says. First, he says economic indicators prior to the storm showed Atlantic City was moving in a positive direction in terms of gaming and non-gaming activities. Secondly, he cites a number of major construction projects that are soon to commence or underway like Margaritaville.

“Tomorrow we [have] final approval for a $150 million convention center at Harrah’s in the marina district. Bass Pro is cutting ground for a 70,000 square foot resort destination for retail sales. So there’s going to be a lot of construction in Atlantic City and a lot of potential to have more jobs come in and therefore have this driving force for better development.”

Rebuck dismissed rumors that three casinos will fold without a state bailout if current revenue trends continue. He says he heard the same chatter 18 months ago when he took over as director.

“We haven’t closed any since I’ve been there. It’s my goal that none would close and I don’t see it as a state bailout but what I could tell you is there is significant interest from outside investors where we’re working with people who are interested in investing money in Atlantic City, not only for casinos and gambling entities, but non-gaming functions down there.”

He’s looking to next summer as an important benchmark for the casino industry in getting past this latest hurdle.

“There’s a couple casinos that are struggling more than others but my expectation is they work this through, they will all stay open until we get to the summer. We get to the summer, then we’re back into a strong season of performance. So we have our work cut out for us in the next few months in this, what I mentioned earlier, down season.”

Last month, the state announced that it would start issuing licenses to casinos and racetracks for sports betting on Jan. 9, 2013. Rebuck says the state is sticking to the date but none have applied because of potential legal conflicts.”

“Most of them are looking at their business operations, trying to determine for themselves what’s the best timing to move forward on this given the litigation,” said Rebuck. “So the question that would have to be answered is best posed to those CEOs because it’s really a business decision on their part as it ties to the litigation. We’re prepared here.”

The four major sports leagues have already filed a federal lawsuit in August to prevent New Jersey from implementing the sports wagering law. The NCAA further acted by pulling a half-dozen regional championship tournaments out of New Jersey.

Rebuck says the state will respond in kind with its own litigation team led by Attorney General Jeff Chiesa.

“I believe that this is going to be an interesting time for New Jersey as we lead the way again in something like this,” said Rebuck.