New Jersey Warned Of 30 Percent Revenue Loss From New York City Casinos

April 25, 2023
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Jim Allen, the chief executive of Hard Rock International and Seminole Gaming, believes three possible new integrated resorts in downstate New York could cost the Atlantic City gaming market 20 to 30 percent of its annual revenue.

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Jim Allen, the chief executive of Hard Rock International and Seminole Gaming, believes three possible new integrated resorts in downstate New York could cost the Atlantic City gaming market 20 to 30 percent of its annual revenue.

While not predicting a return to the days of mass casino closures, Allen warned that type of revenue decline could lead to at least one Atlantic City casino closing.

“Hard Rock will survive. Borgata will survive, certainly one of the Caesars (Entertainment's) properties will survive,” Allen said during a keynote speech on Thursday (April 20) at the East Coast Gaming Congress held at Hard Rock Casino in Atlantic City.

“We hope everyone survives but the reality is we have to continue to work as a group,” he said. “We have to separate the political agendas from the reality that we as leaders in this industry are responsible for almost 30,000 jobs.”

Allen told some 400 conference attendees including David Cordish, chairman of The Cordish Companies, and Bill Miller, president and CEO of the American Gaming Association (AGA), that Atlantic City still generates more than 30 percent of its business from upstate New Jersey and downstate New York.

“And when you look at Long Island, it is even scarier,” he said. “So we are always discussing with everyone [that] we have to continue to improve the perception of Atlantic City.”

Allen said a decision on site selections for New York's three available downstate casino-resort licenses was expected within the next 12 to 14 months.

Hard Rock is among the 11 bidders proposed to build an integrated-resort in or around New York City.

“We have a little time, 30 to 42 months, to build the destinations depending on who is selected,” he said.

“I can tell you that if we lose 20 percent to 30 percent of our business, it is not going to be a good day for Atlantic City.”

At the two-day conference on Wednesday (April 19), Jordan Bender, senior equity research analyst with JMP Securities, said putting casinos in downstate New York will inevitably cannibalize the Atlantic City market.

Bender noted that there were a few factors at play, especially for MGM Resorts International, which owns Borgata in Atlantic City but could invest $2bn to $3bn in building out its Empire City video lottery facility in Yonkers, just north of the Big Apple.

He noted MGM also operates iGaming and sports betting in New Jersey and has a property with sports betting in Massachusetts.

“The cannibalization effect in New Jersey will bring down some of the revenue coming to Atlantic City but … it is going to grow other parts of their business,” Bender said. “Typically, we think a new property [in New York] may result in anywhere from 15 percent to 30 percent revenue that goes away.”

Bender added that he believes Atlantic City will fare a little bit better than expectations, because it is also a “destination market just like Las Vegas” attracting visitors from the tri-state area.

“At the end of the day, there will be some impact to the market,” Bender said. “We just don’t know how it is going to play out.”

Duane Bouligny, managing director with Wells Fargo Securities, agreed, saying the process in New York will be fascinating to watch.

In terms of the impact on Atlantic City, Bouligny said he expects to see properties that “continue to invest will continue to survive and fare very well.”

“The properties that don’t have the investment will get shut down or right-sized out of the market,” he added.

The New York State Gaming Commission is expected to approve three casino licenses for sites either in or near the city’s five boroughs.

Genting Group’s Resorts World at Aqueduct Racetrack and Empire City Casino, operated by MGM, are considered heavy favorites to land a license, leaving at least one license available for nine applicants.

Jeff Gural, who runs Meadowlands Racetrack in East Rutherford, New Jersey, said three downstate New York casinos “would help me get a casino at the Meadowlands.”

“I’m just biding my time while the New York casinos are decided,” Gural said.

Gural added that for any referendum on casinos in northern New Jersey to be approved by the voters, it must be located at the Meadowlands.

Even as executives and analysts debate the impact New York City casinos will have on Atlantic City, there has been little to no discussion of seeking a New Jersey ballot referendum on casino expansion later this year.

“This industry is about geo[graphic] location and if you are solely based on the Las Vegas Strip or Atlantic City’s Boardwalk there are going to be some really good times based on economic conditions,” said Allen, who began his career in 1979 as a cook at Bally’s Park Place in Atlantic City.

“We subscribe to the theory that our brand is global,” he added.

Allen, who travelled to Japan on Saturday, also reaffirmed the company’s commitment to operating a Japanese integrated-resort (IR). Hard Rock has been exploring building an IR in Tokyo or Hokkaido for almost a decade.

Hard Rock established its first restaurant in Tokyo in 1983.

He congratulated MGM on having its plan certified by the Japanese government allowing the company and its partner, Orix Corporation, to finalize agreements with the city of Osaka on a $10bn casino-resort project.

“We are really excited about Japan,” Allen said. “If we are successful, it is an amazing opportunity for the company.”

“We are not suggesting we’ve won anything at all but with some of the tension between China and Japan it certainly has enhanced our opportunity because all the Chinese companies that are involved in gaming are no longer participating in the RFAs (request for applications) to the best of my knowledge in Japan.”

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