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Summer of Our Discontent

Atlantic City we'll see next summer will be markedly different than the one that's operating today.

Summer of Our Discontent

It’s been a painful summer in Atlantic City. Just two months ago, I wrote in this space about my connection to Atlantic City and how it would always remain part of me. Well, the Atlantic City we’ll see next summer will be markedly different than the one that’s operating today.

I feel very bad for the employees of the casinos that have closed or are slated to close. I have friends of long standing in most of them. There’s not much hope for them career-wise if they want to stay in Atlantic City. There will be no gaming job growth there for a long time. The closings, if they all come to pass, will eliminate a quarter of the casino workforce, driving the region into something like a depression.

But if you think for a minute that this situation is specific to Atlantic City, think again.

Atlantic City is the canary in the coal mine. We’re seeing other markets come down with similar diseases: Tunica, Mississippi, has the full-blown illness. Biloxi, Illinois and Indiana have symptoms, and Pennsylvania is feeling down. Various Indian and commercial stand-alone casinos are also feeling the pressure.

Atlantic City was the focus of a triple whammy in 2007. The economy tanked, regional competition was growing, and anti-smoking regulations were being implemented. Individually, these factors would have been difficult, but together they were devastating.

But the city’s malaise began back in the 1990s, when regulations were tight, competition among AC casinos was fierce, and politicians with foresight were few and far between.

Penn National Gaming CEO Tim Wilmott, who lived through those years as a Harrah’s executive, says what’s happening now in Atlantic City—diversification into non-gaming attractions—is just playing “catch-up.”

“This should have happened 25 years ago,” he told CNBC.

It’s true. While the regulatory system in New Jersey is today one of the best in the nation, it also was late to the table. If politicians had been more in tune to what can happen with rapid expansion, the regulators would have followed.

So casino operators in other jurisdictions have to take note of what’s happening today in Atlantic City, because this is what’s going to happen in other regions around the country—and probably the world.

It’s pretty clear that the market for pure gambling is limited. Gambling is entertainment, for sure, but not for everyone. If you want to know my dirty little secret, I find no pleasure or entertainment in gambling. Doesn’t do a thing for me, sorry.

And I suspect I’m not alone, so any casino operator who wants to count me as a customer had better offer great shows, interesting restaurants, nice rooms, maybe a little shopping for my wife (that would be a lot of shopping, actually), and some outdoor activities like boating, hiking or biking. Then I might plunk a couple of bucks into a video poker machine or onto a crap game.

Saturation is a real concern. Now that there are almost 30 casinos in the northeastern part of the U.S., Atlantic City has to offer lots more than just gambling for customers who at one time only had one choice.

Politicians and regulators need to understand that they must be alert to the future. Yes, casino gaming is a great revenue generator and job producer, but it’s not the golden goose that will go on forever and ever. If you want to protect that revenue and those jobs, allow your casinos to operate like any other business. Don’t tax them to death. Don’t regulate them senselessly. And pay attention to the competitive landscape.

It’s hard to blame casino executives for the Atlantic City situation, because their bosses are only interested in the latest quarterly figures. The pressure on them to produce those quarterly figures is intense. So their ability to think a year, five years, 25 years out is almost impossible. Nevertheless, they owe it to the people who work for them and the communities where they are located to be aware of looming problems over the horizon.

At the same time, there needs to be community involvement at every level. The local chambers of commerce, mayors, state representatives and regulators all need to understand the particular needs of their communities and work together with the casinos to ensure long-term success and long-term stability.

Let’s learn a lesson from the painful process that Atlantic City is going through so we don’t have to repeat it in other regions. Prepare for the worst and you’ll be protected if and when it comes.

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