View Full Version : Atlantic City Expansion and Revitalization

03-07-2007, 08:23 PM
I wanted to create a thread that discussed the expansion and revitalization of Atlantic City. There is so much happening in AC and more is in the planning stages. Although this Star Ledger article is titled "Stunted Growth" - I think Harrahs will continue to expand. As is stated, they really have no choice. Atlantic City is really going through a huge growth spurt, with existing casinos expanding and 3 new casinos going in. There is the expansion of "The Walk" which is the upscale shopping district. I will be going to the governors conference at the end of this month so I hope to have pics and more information on the tremendous growth taking place in AC. It really is transforming Atlantic City.

Stunted growth
Purchase by private equity group puts Harrah’s expansion on hold

If there was one casino in Atlantic City that worked to stay a step ahead of the pack, it was Harrah’s.

While other casinos agonized about whether to invest money on expansions in preparation for the opening of the Borgata in 2003, Harrah’s went ahead and built a new hotel tower. When the paint was barely dry, Harrah’s went a step further, announcing an additional $550 million expansion that included yet another hotel addition plus shops, a bigger buffet and an Elizabeth Arden Red Door Spa.

Set under a 90-foot-high glass dome and surrounded by $1 million worth of plants and flowers, the spa, when it opens this May, will require a full-time horticulturist to tend to all the plants.

Not bad for a place that started out as a Holiday Inn.

Now, many industry observers are questioning whether the aggressive strategy will continue now that the casino’s parent company, Harrah’s Entertainment, has agreed to be bought by two private equity firms, Apollo Management and Texas Pacific Group, for $17.1 billion.

In a recent interview, Harrah’s Eastern Division President Carlos Tolosa said the company’s approach will remain the same. But like a true gambling man, he hedged his bets.

‘‘Our strategy does not change,’’ Tolosa said. ‘‘Our vision does not change. Only the ownership changes.’’

But, he added, ‘‘It is too early for me to tell you nothing will change — this deal has not been consummated.

Carlos Tolosa, Eastern Division vice president of Harrah’s, says despite new ownership, ‘‘Our strategy does not change.’’ But my expectations are that we will continue to grow Atlantic City.’’

The change in ownership comes at a critical juncture for Atlantic City’s casinos. These days, the heat isn’t just coming from Borgata, the newest and hottest of the city’s dozen casinos. It’s also coming from slot parlors in Philadelphia and New York.

The competition already has cut into Atlantic City casino revenue, with analysts predicting 2007 will go down as the first year in A.C. history that casino revenue will decline.

It’s also cut into Harrah’s bottom line: The company last month reported l o wer-than-expected fourth-quarter earnings because of weak results from its four A.C. casinos: Harrah’s, Showboat, Bally’s and Caesars.

‘‘With both external and internal competition ramping up, Harrah’s can’t afford to sit still,’’ said Spectrum Gaming Group Vice President Joe Weinert. ‘‘Any property or company that sits still in this market and in this environment is going to be roadkill.

‘‘Harrah’s is smart enough to recognize that,’’ he said. ‘‘I just think this transaction has thrown a wrench into plans they had for Las Vegas and Atlantic City.’’

A big reason for the skepticism is that under the agreement to buy Harrah’s, the private firms will take on $10 billion in new debt, doubling the company’s current debt of $10.7 billion. The resulting company would have a debt-to-cashflow ratio of about 9, a high number for a casino company.

Analysts have questioned whether the hefty debt levels will leave much room for new investment, although Harrah’s has indicated it might sell some of its casinos to pay down debt, perhaps even one of its A.C. holdings.

Already, the buyout has caused Harrah’s to put off multibillion-dollar plans for Las Vegas, as well as for Bally’s and Caesars in Atlantic City. Bally’s was to undergo a massive renovation.

Tolosa said the redevelopment plans have not gone by the wayside. He said Harrah’s still intends to unveil plans for a new hotel and other expansion at Bally’s in six months, and a hotel addition could be in the cards for Caesars.

Tolosa called the $550 million Harrah’s expansion, which was planned before the buyout agreement was reached, ‘‘our first step to our continued growth in Atlantic City.’’

The first phase of the expansion opened last week. It includes a retail promenade, where Harrah’s patrons can redeem points earned through gambling, and a massive new buffet with seven international culinary stations under 22-foot ceilings and 60 chandeliers. It is the second-largest casino buffet in Atlantic City, after Showboat.

Tolosa said Harrah’s, which studies its patrons like no other company, focused its expansion on amenities for women, leaving Borgata to go after the young, male table games player.

‘‘Our customer is older,’’ Tolosa said ‘‘Our customer is more female. And our customer is more slot-oriented.’’

Besides shopping, what women want is a good buffet, Tolosa said.

‘‘They like to eat, eat fast, move out, and go back to whatever they were doing on the gaming floor,’’ he said.

And of course, what woman doesn’t like to relax at a spa?

The Elizabeth Arden Red Door Spa, now under construction, is set in a four-acre complex that includes a 23,000-square-foot, 86,000-gallon pool with a deck large enough for bands and perhaps a fashion show. Harrah’s envisions ‘‘dive-in’’ movies, beach parties and pool-side spa treatments.

After the spa, a hotel tower is set to open sometime next year. When it is finished, the tower will stand 44 stories, making it the tallest structure in A.C. and No. 2 in New Jersey after the Goldman Sachs Tower in Jersey City.

While Harrah’s is still working on plans for Bally’s, one thing won’t change, Tolosa said — the Bally’s name.

After Harrah’s inherited Bally’s and Caesars in A.C. when it bought Caesars Entertainment in 2005, it initially looked to rename Bally’s. The casino is a sprawling complex that includes three brands in one — Bally’s, Claridge and the Wild Wild West casinos.

In 2005, Harrah’s Chief Executive Gary Loveman said Bally’s reminded most people of a health club and its name would have to go. At the time, he hinted Showboat could become a Rio and Bally’s a Horseshoe, two major brands under the Harrah’s umbrella. Since then, however, Tolosa said Harrah’s has discovered both Bally’s and Showboat are highly recognized brands in the Northeast.

‘‘It really makes no sense for us to change something that has worked in the marketplace,’’ he said.

Bally’s ‘‘is a tired property and we intend to put some money into it,’’ Tolosa said. ‘‘But the brand awareness is just big.’’

Asked if Harrah’s would do away with the Wild Wild West at Bally’s — themes have become passé in recent years — Tolosa said, ‘‘I really wish I could tell you yes, but I don’t know for sure yet.

‘‘We can potentially do something bigger, richer, but I don’t have a defined plan right now.’’

As if to quiet the skeptics and prove that Harrah’s is putting its money where its mouth is, the company recently purchased a 26,600-square-foot parcel in front of Bally’s for $38.5 million. It is a key piece of land for any Bally’s expansion, and one of the most expensive properties ever sold in New Jersey.

‘‘It’s just a couple of dollars for us,’’ Tolosa joked. ‘‘Sometimes you pay for what you visualize into the future.’’

New Jersey Guy
04-10-2007, 01:48 PM
There's a blogger who lives down in that neck of the woods, and I thought he had some very good insights about how Atlantic City's casino business needs to move forward.


The advent of slots in surrounding states means that the easy money is gone, and the traffic from day-trippers will be less. Atlantic City needs to position itself more fully as a destination resort where people come to spend more time. Less day-tripping and more 3-day to 7-day stays.

As part of this, it needs to hark back to some of the non-gambling things that made it an attraction. With the rush to build up and build new and focus so much on gambling exclusively and the crowd that gets bused in (because slots give the house such great odds), some of the historic lures to the area have now been lost and without much of a fight.

Miss America Pageant? Long gone. And probably not enough of a fight was put up to keep it.

As far as the comments about lifting height restrictions to new "highs" I have mixed emotions.

On the one hand, the A.C. skyline is very impressive as you approach the town and acts as a draw.

On the other hand, we're not exactly building into the hard rock that Manhattan skyscrapers enjoy, down here on the barrier islands. When the Borgata first went up, some of their big windows of bronzed glass popped out in very little time. Went crashing straight down to the ground below. Why? Despite all the pilings into the sand that went down deep to support that place, there was some immediate settlement.

Atlantic City High School, built with gazillions of $$$ from casinos generating tax and CRDA revenues, and supposedly engineered in state of the art ways, has also been "sinking" under its own weight. My relatives' kids who go there were reporting on how parts of the school would get marked-off due to water problems.

There have been some surveys of other tall casino structures over the years and a finding that they're slowly sinking as the elevations (feet above sea level) of certain prominent features on the structures are used as points of "sighting" for a survey.

The essential problem with barrier islands is that they are basically giant sand bars and in a natural and constant state of flux. Sand generally wants to move with water action and winds. From North to South along coastal NJ as the currents carry it along and also from East to West during storms and with winds. As sea levels rise, there is a natural process that finds storms providing an "overwash" of sand onto a barrier island, and the island's waterward lines on the ocean side recede but its back side along a bay builds up. The overall island "moves" toward the mainland. In a natural state, there's always a beach but the beach is in a process of moving.

At the same time, due to rising sea levels, the back bays and such will also tend to "grow" so that even the waterward boundary line of the mainland moves back. Sea level is likely to rise 1' to 2' in the coming 100 years. Maybe more if one believes the global warming alarmists.

For the very long haul, building high and building close to the water is a dangerous combination. While there has been a lot of sand pumping to try to build up the beaches with dunes, the fact is that it's a very "engineered" approach of trying to impose man's will against the forces of nature. And sometimes it results in the beaches being lost as seawalls and dunes and a lot of engineered structures get put in place to protect the investment in buildings. But the beach gets lost anyway, and the water comes lapping up against the man-made structures built to protect the buildings.

As with anything of a man vs. nature situation, nature is going to eventually win.

Never ending circle of debate on some of these topics. Somewhere there's probably a good balance where Atlantic City as a "beach and family resort" attraction is able to mesh with A. C. as a "gambling and nightlife and entertainment" attraction.

Town needs to address its need for a year-round population of stable neighborhoods and regular businesses.