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More money being spent on non-gaming events in Atlantic City

September 18, 2012 3:08 AM by Phil Hevener

More money than ever is being spent on nongaming experiences in Atlantic City as the city’s troubled casino industry struggles to survive the pressures of competition from all directions.

That’s good news, but it brings us to an as-yet unanswered question. Can Atlantic City’s image make-over come fast enough to make a difference as surrounding states launch or expand gaming options?

The issue continues getting attention from industry watchers that include companies with a strong presence in the Las Vegas area. Geographic diversity and the cross marketing it makes possible are crucial in today’s business environment. That’s why the success of other locales is of more than academic interest in Las Vegas where marketers are constantly pulling out all stops to keep visitor volumes at a high level.

Yes, it takes a lot of work to keep 100,000-plus hotel rooms and a huge menu of amenities operating profitably.

Many financial analysts pay little attention to anything other than the casino numbers states report in great detail. Analysts need numbers before they can crunch them and many non-gaming amenities have private ownership with no obligation to report to gaming regulators.

That’s why the details of New Jersey’s luxury tax and its impact in Atlantic City make for interesting reading. The tax covers everything from drinks to hotel room rates, cabanas and entertainment and admission charges.

The luxury tax generated $16.9 million during the first half of 2012 compared to $15 million for the same 2011 period. Between 2006, the best year for Atlantic City casinos, and the first six months of the current year, a time when the casino win has seemed to be in free fall, luxury tax revenue increased to $32 million from about $27 million.

Visitors have been doing more than gambling, but the pace of change seems agonizingly slow.

The spring opening of the Revel has yet to show it is growing the market. Competitors at Caesars and Boyd Gaming declare it has not. The evidence, they say, is that it has reshuffled existing business.

But what Atlantic City has done is show slow but steady progress toward an increased ability to attract a different audience – people spending significant sums in places other than a resort’s casino. It’s the target audience Revel CEO Kevin DeSanctis has been aiming at with his marketing plan.

The question is, however, how quickly can the thinking behind such thinking be implemented at the Revel and other Boardwalk and marina properties? The poor financial condition of many casinos has not encouraged spending by existing owners or prospective developers.

Companies such as the Hard Rock, Pinnacle and MGM have backed away from the city, figuring they could get a bigger bang for their bucks elsewhere.

The impact of the luxury tax does not get much attention from most analysts but it does confirm the success of efforts to create nongaming amenities that get the attention of visitors interested in something beyond the chance to gamble.

What does the luxury tax cover? Everything from show tickets to hotel rooms, restaurant meals and other non-casino items.

The arrival of the Revel, a significant facelift at Tilman Fertitta’s Golden Nugget (formerly the Trump Marina), additional amenities at Caesars and Boyd Gaming, and the first steps taken to launch a revival of the Resorts property have all contributed to this effort.

The city saw what may become another step in this direction last week as the Connecticut-based Mohegan Sun was approved to manage the Resorts hotel and casino on the Boardwalk. The Casino Control Commission’s approval of this deal gives the tribal entity a 10 percent stake in the casino’s ownership. There are options that could see that expanded.

Phil Hevener has been writing about the Nevada gaming business for more than 30 years. He can be reached at PhilHevener@GamingToday.com.

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