Why three Atlantic City casinos are closing

A time few could imagine during the not-too-distant glory days of casino gambling has arrived in Atlantic City, where two casinos will close this weekend and a third will shut down in two weeks.

More than 5,000 workers will lose their jobs in an unprecedented weekend in the seaside gambling resort, leaving many feeling betrayed by a system that once promised stable, well-paying jobs.

The Showboat is closing Sunday, followed by Revel on Monday and Tuesday. Trump Plaza is next, closing Sept. 16. To the thousands who will be left behind, it still seems unreal.

"We never thought this would happen," said Chris Ireland, who has been a bartender at the Showboat since it opened. His wife works there, too, as a cocktail server. Before dinnertime Sunday, neither will have a job.

What makes it even tougher to swallow is that the Showboat — one of four Atlantic City casinos owned by Caesars Entertainment — is still turning a profit. But the company says it is closing Showboat to help reduce the total number of casinos in Atlantic City. Caesars also teamed with Tropicana Entertainment to buy the Atlantic Club last December and close it in January.

"They just want to eliminate competition," Ireland said. "Everyone's in favor of a free market until it doesn't exactly work for them."

Yet many analysts and casino executives say the painful contraction now shrinking Atlantic City's casino market is exactly what the city needs to survive. Since 2006, Atlantic City's casino revenue has fallen from $5.2 billion to $2.86 billion last year, and it will fall further this year. Atlantic City will end the year with eight casinos after beginning the year with 12.

New casinos popping up in an already saturated Northeastern U.S. gambling market aren't expanding the overall pie but are slicing it into ever-smaller pieces. Fewer casinos could mean better financial performance for the survivors.

Resorts Casino Hotel, which was on the verge of closing a few years ago, completed a remarkable turnaround in the second quarter of this year, swinging from a $1.3 million loss last year to a $1.9 million profit this year.

"I truly believe that eight remaining casinos can all do very well when the gambling market is right-sized," said Resorts president Mark Giannantonio.

That may be true, but it is little comfort to workers who are losing their jobs. By the time Trump Plaza shuts down in two weeks, nearly 8,000 jobs — or a quarter of Atlantic City's casino workforce — will be unemployed. A mass unemployment filing due to begin Wednesday is so large it has been booked into the city's convention center.

When casino gambling was approved by New Jersey voters in 1976, it was billed as a way to revitalize Atlantic City and provide stable, lasting jobs. The first casino, Resorts, opened in 1978, kicking off three decades of soaring revenue and employment.

But the Great Recession hit just as new casinos were popping up in neighboring Pennsylvania and New York, cutting deeply into Atlantic City's customer base.

"There was a promise when casinos came in here that these would be good, viable jobs, something you could raise your family on and have a decent life with," said Paul Smith, a cook at the Trump Taj Mahal Casino Resort. "I feel so bad for all these people losing their jobs. It wasn't supposed to be like this."

Mayor Don Guardian says his city is remaking itself as a more multifaceted destination, where gambling is only part of the allure. But he acknowledges the pain this weekend will bring.

"This is going to be a difficult few weeks for many of us in Atlantic City," he said. "People will lose their jobs, and that is never good news. Our hearts go out to our neighbors and friends. We still have difficult waters to navigate."

Fitch Ratings predicted in a recent report that the city's casino revenues will decline to $2.5 billion in 2015 from last year's $2.86 billion. It also said it does not see any more casinos closing in Atlantic City for at least the next two years.

The firm also predicted that a good chunk of the money being won by the Showboat, Revel and Trump Plaza will go to the surviving Atlantic City casinos. Showboat and Revel are closing this weekend; Trump Plaza shuts down Sept. 16. After that, Atlantic City will have eight casinos after starting the year with 12.

Fitch predicted at least 50 percent of Revel's revenue will go to the remaining casinos, judging by increases that the Tropicana Casino and Resort and the Golden Nugget Atlantic City have seen since the Atlantic Club closed down in January.

A day before the report was issued, Joe Lupo, senior vice president of the Borgata Hotel Casino & Spa, Atlantic City's top casino, said the market is already responding positively to reduced capacity.

"After the Atlantic Club closed, places like the Tropicana and the Golden Nugget are doing very well, and we had a great summer," he said. "While Revel has had a very difficult time, you have properties in Atlantic City that will become more profitable."

Fitch also predicted 60 percent of Trump Plaza's revenue and 75 percent of Showboat's revenue will stay in Atlantic City, particularly with Showboat's parent company, Caesars Entertainment, also owning three other casinos that will continue to operate in Atlantic City.

Caesars said Friday that more than 470 Showboat employees have gotten jobs with other casinos the company owns, here or in other states. That figure represents about half the number who had applied for new jobs elsewhere in the company. The Showboat has more than 2,000 workers.

Fitch said the three Marina District casinos — the Borgata, Harrah's and the Golden Nugget — may benefit more than the Boardwalk casinos because the marina properties are "the freshest" after major renovations in the last 10 years and because boardwalk activities are dwindling.

But it also predicted the Taj Mahal, Caesars and Bally's will get more business.

"Most of the closings are at the ends of the Boardwalk, leaving a cluster of remaining casinos (including Taj Mahal, Caesars and Bally's) that should see a sizable lift in business from the closures," the company wrote.

Fitch also noted some positives for Atlantic City, including an 8 percent casino tax and diverse entertainment options.

"Atlantic City remains one of the few places in the populous tri-state area to offer a full suite of eat, play and stay options and has by far the lowest gaming taxes," Fitch wrote. "Lower taxes give these casinos more room in the margin to spend on promotional activity, including free food and hotel stays."

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Wayne Parry can be reached at http://twitter.com/WayneParryAC