Skip to main content
From left, the Trump Taj Mahal Atlantic City, the Showboat Atlantic City Hotel and Casino, and the Revel Atlantic City. Kevin P. Coughlin/Bloomberg

For more than 20 years, Rob Mayer manned the front doors of some of Atlantic City’s biggest casino hotels, greeting gamblers, carting bags and getting hefty tips. He loved his job and never imagined working anywhere else.

Mr. Mayer spent most of his career at Bally’s, but when he heard about plans for a $2.4-billion (U.S.) resort called Revel, he jumped at the chance to work there and earn $20 an hour. The new job didn’t last long. Revel shut its doors in September, a little more than two years after it opened. And it’s not the only casino to go down. Three others have also closed this year amid a stunning downturn in the city’s gambling business.

“It was going to be my retirement job,” Mr. Mayer says as he passes time in a union hall. “It was a great opportunity to make a lot of money.”

For decades, Atlantic City was an Eastern beacon for fun and games, a resort town that came to be known for its gleaming boardwalk lined with flashy casinos that rivalled those in Las Vegas. This is where the Miss America Pageant began, where stars like Marilyn Monroe, Frank Sinatra and Bing Crosby came to play and where the board game Monopoly was invented using the city’s street names like Boardwalk and Park Place.

Today, the city is a shadow of that glorious past. Gambling revenue has fallen by nearly half in the past seven years. Just eight casinos are left, and one, the Trump Taj Mahal, is teetering. Nearly 8,000 jobs have vanished with the casino closings and many neighbourhoods are lined with abandoned homes.

Now the city is counting on a Canadian company to help turn things around. A subsidiary of Toronto-based Brookfield Asset Management Inc. is buying Revel for just $110-million, part of a push Brookfield is making into the casino business. It’s a risky bet.

Revel was supposed to help reinvent Atlantic City when it opened. While other establishments made the casino the focal point of their venue, gambling almost seemed like an afterthought at Revel. Instead it tried to offer a new level of luxury and celebrity with a 32,000-square-foot spa and four shows by Beyoncé to kick off the grand opening. Its sleek 47-storey glass structure stood out as a symbol of sophistication amid the bright lights and kitsch along the boardwalk. But now the building sits empty, an imposing derelict of failed dreams.

Just how Brookfield might turn around Revel’s fortunes remains to be seen. Brookfield’s deal for the resort hasn’t closed, and company officials have yet to spell out their plans. That means people like Mr. Mayer can only wait and hope that the Canadians will succeed where so many others have failed. Some of his former colleagues have packed up and headed to Las Vegas. He is staying put.

“I’m waiting for Revel to reopen and once it reopens hopefully I’ll be re-employed there,” he says.

Slot machines from the closed Trump Plaza. Vernon Ogrodnek/Associated Press

What went wrong

Atlantic City had its heyday long ago.

Stretching just 48 city blocks on Absecon Island, Atlantic City started out as a seaport in the 1800s but soon became something of a resort town as hotels and shops sprung up around the docks and boardwalk. By the turn of the century, city officials began looking for ways to attract more visitors who came mainly from nearby Philadelphia. They tried a small beauty pageant that ultimately became the Miss America Pageant. But it wasn’t enough.

Finally in the 1970s, they hit on what they thought would be the jackpot. Residents voted to give casinos the green light, allowing the city to quickly corner the market as the main gambling destination in the eastern United States.

But gambling never became the economic panacea they hoped for. The median local income rose from $25,340 in 1979 to $32,408 in 1989, and then fell to $29,886 by 2012, according to the Urban Land Institute, a Washington-based think tank. Adjusting for inflation, residents have actually seen their purchasing power cut in half since 1989.

For a long time that reality was lost amid the bustle of the casinos. “Gaming revenues increased for 30 straight years in Atlantic City, and there was really no reason to believe that it would turn around,” says Roger Gros, publisher of Global Gaming Business Magazine.

But it did, and quickly, for two reasons: competition and the financial crisis.

A number of nearby states including Pennsylvania and Maryland legalized gambling, putting a dramatic end to Atlantic City’s eastern monopoly. “There are about 17 casinos now that operate within a two-and-a-half-hour drive, and three or four [more] that are getting licensed,” says John Palmieri, executive director of the Casino Reinvestment Development Authority, or CRDA.

The financial crisis, meanwhile, appears to have left a permanent dent in consumers’ appetite for gambling. In June, Moody’s Investors Service cut its outlook for the U.S. gambling industry from stable to negative, citing weaker demand, high fixed expenses and oversupply. It noted that regional gambling revenues, excluding Nevada, remained flat even as the U.S. economy improved and more casinos popped up.

“We believe this is evidence that U.S. consumers will continue to limit their spending to items more essential than gaming, even as the U.S. economy continues to improve,” Moody’s said.

Mr. Gros says that what’s happening in Atlantic City could be a harbinger for other cities. “Seven years ago, Atlantic City’s gross gaming revenues were $5.2-billion, last year it was $2.8-billion and this year it looks like it’s going to be in the $2.5-billion range,” he points out. Meanwhile the city’s population has fallen to 40,000 from its peak in the 1930s of 66,000.

In the midst of this upheaval, politicians are now considering allowing casinos in northern parts of the state. “If they build casinos up there and don’t do anything for Atlantic City, it’s really the end of the city frankly,” Mr. Gros says.

Phil Miller runs a church lunch program. Tara Perkins/The Globe and Mail

The city’s struggles

The fallout from the casino closings is starting to spread across the region.

Atlantic City already has one of the highest unemployment rates in the U.S. and nearly one-third of its population lives below the poverty line. Home foreclosure rates are also among the highest of any major U.S. city. There were 401 foreclosure filings in September, according to real estate website RealtyTrac, up from 264 a year earlier.

“People are starting to walk away from their houses – they’re not paying their taxes,” says Alfred Kare, a waiter in the Trump Taj Mahal, which could close in December if the owners don’t get some financial help from governments. “It’s going to trickle down to everything.”

As casinos shut down, the city’s property tax base is eroding, drying up funding for badly needed services. To make up the revenue shortfall, city council recently raised residential taxes by 29 per cent at a time when fewer people can afford it. Eleanor Murray, who runs a local commercial real estate firm, says the taxes on a triplex she owns went from $12,000 to $18,000 this fall. She’d like to rent it out, but is having a hard time finding anyone. “I can’t rent, the building’s sitting there empty and it’s absolutely beautiful,” she says.

And another major casino could soon close.

The Taj Mahal is in bankruptcy and owner Trump Entertainment Resorts recently received court approval to break its labour contract. Billionaire investor Carl Icahn, a Trump Taj Mahal debt holder, has said he will buy the casino and invest new money in it but only if labour costs are slashed and government aid is secured.

“Some of the waiters in my restaurant haven’t paid their mortgages for two months now because they’re so nervous that we’re going to close,” Mr. Kare says. “The average wage in our union is $12 an hour. I’m a waiter, and we make about $9. One guy I talked to last night that works with us, he has three kids and [health care insurance] is going to cost him $1,400 a month.”

Mr. Kare adds that he shares his feelings with customers who ask about it. “I talk to every one of my tables and I’m dead honest with them because of what these guys are doing,” he says. “They ran it into the ground.”

On a recent weekday, the Taj Mahal appeared barren compared to other casinos in the city. The union says potential customers shy away from places with labour disputes. But some analysts and observers blame the unions for the city’s financial woes.

“It’s a huge part,” Mr. Gros says. “These contracts were negotiated at the height of Atlantic City’s success seven years ago, and there was never any giveback by the unions. Plus there are all kinds of really ridiculous work rules, like a waitress can’t clear a table, it has to be a busboy.”

The Local 54 union, which still has about 10,000 members that make up about one-third of the workers in the majority of the casino hotels, paints itself as being in a battle against Wall Street. “A half dozen years ago or so, casinos stopped being run by casino companies and they started being run by private equity and hedge funds,” says Ben Begleiter, a union spokesman. “It’s a fight between working people in this country and the wolves who occupy Wall Street.”

Mr. Icahn recently told The Associated Press that at this point, he’ll be happy if his deal for the Taj falls through. “Even if we get the concessions from the city and the state, we’re going to lose a lot of money,” he said.

Charles Baker, a relief cook at the Taj Mahal, worked his way up at three different casinos over his career.

“I now make $20 an hour,” he says. “They promised us good jobs, good pay, good benefits that I can raise my family on, which I did. My kids are all grown now. … This is a union town, everyone should have a union job.”

While the finger-pointing ensues, Atlantic City’s social services are feeling stretched.

The number of kids using the residential services at Covenant House is up, says director of programming Brian Nelson. And it’s not traditional homeless people, he adds, but couch surfers. For example, “we had an instance where two brothers who were unemployed were staying with a sister, the sister lost her job and had to kick her brothers out and they came to us.”

Covenant House helps young people find jobs, “and that’s going to be a tough one because they’re competing with 8,000 other people who probably have more experience than they do,” he adds.

Phil (Philly) Miller runs a lunch program at the Victory First Presbyterian Deliverance Church across the street from the Taj Mahal. It usually gets busier as each month wears on and people use up benefit cheques they receive at the start of the month. But by mid-October, there were close to 350 people coming in, about 100 more than usual.

On a recent afternoon, a man sitting in a folded chair on the boardwalk held out a cup and begged for loose change, an American flag neatly placed at his feet. He started gambling in his early 20s and couldn’t stop. He has been in and out of work since the early 1980s. “When I was working, I’d work, but when I wasn’t working, I was living off the casinos for a long time. I’d find credits when people left their stuff in the slot machine,” he said, not giving his name.

He’s been homeless for much of his life and has a trail of trespassing charges from casinos he’s banned at. “As far as the casinos having financial problems, I don’t feel sorry for the casinos,” he says.

One of the 10 pools at the Revel Casino Hotel. Laura Pedrick/NYT

What went wrong for Revel

Revel almost seemed cursed from its inception.

A plane crash in 2008 killed three Revel Entertainment Group executives and three other managers involved in the project. Construction was hit by a crane collapse, a minor fire and a lightning bolt that killed a worker. In 2010, Morgan Stanley, the major owner of Revel Entertainment, eventually threw in the towel, halting construction and walking away from its roughly $1-billion investment, forcing the state and other backers to find new financing for Revel.

When Revel finally opened in 2012, it brought a new buzz to Atlantic City. But it didn’t last long. The resort faced the same competition and economic challenges as the other casinos. And it had some of its own problems, including wildly misjudging the market.

“When they opened, their basic plan was that it was going to be a resort that just happened to have a casino,” says former casino greeter Mr. Mayer. “They were going for a real high-end clientele and they thought they didn’t need gamblers. And it turned out you need somebody to lose money to pay the bills.”

A tour through Atlantic City’s casinos will tell you that the majority of its customers are far from high-rollers. Most are dressed in jeans, T-shirts and running shoes, and come for a little gambling and to have some fun. These are not wealthy travellers looking to head to a beach resort with a spa.

The casino floor at the Borgata, which opened in 2003 and is more modern and upscale than most of its competitors, was reasonably full on a recent weekday night. Casual-looking patrons hit the slot machines and tables amid the lights and buzz in a sprawling building that wouldn’t be out of place in Vegas. At one restaurant table, six retired friends said they tried Revel when it was open, but decided to stick with the Borgata.

“Here they give you free rooms, beautiful rooms, and make it worth it to come down for a couple of days,” says a woman who would identify herself only as Eileen. “The Borgata is benefiting from the closures, it’s actually busier here than we expected,” says her friend Greg Watkins.

When Revel did attract wealthy clients, it didn’t treat them as well as other casinos, failing to offer perks like free food, complimentary accommodation and VIP treatment. “When we first opened I remember we had one lady, she was a million-dollar player, she would come in expecting to go up to her room and they would tell her ‘no, rooms aren’t available until 4 p.m.,’ ” Mr. Mayer recalls.

“Revel never changed their plan; their plan was to make it a resort getaway and gaming would take care of itself,” Mr. Gros says. “Well that wasn’t the case. You really need gamblers in Atlantic City, that’s all you’re going to survive on.”

The plan for Revel

The question now is can Brookfield succeed where so many other casino operators have failed.

Its team has been meeting with officials in Atlantic City to talk about the project for weeks. The company declined to discuss its plans for the facility with The Globe and Mail, but conversations with people that Brookfield consulted and a look at the company’s other casino purchases offer some insight.

Part of Brookfield’s strategy will likely be to place more emphasis on meeting the needs of people who are already travelling to Atlantic City, and less on trying to draw a higher-end crowd. Brookfield is also likely to invest some money to reconfigure the resort, and create new marketing initiatives.

This isn’t the first troubled casino the company has acquired. In 2012, it took control of Atlantis Paradise Island in the Bahamas that was also in financial trouble. It spent millions of dollars on upgrades and convention space. It also planned private gambling rooms, sports events and struck a deal with Marriott to be part of its global booking and rewards system.

Caesar’s Entertainment is trying something similar in Atlantic City with its Harrah’s Resort. The company is in the process of a $125-million expansion of Harrah’s meeting facility. Caesar’s and local politicians hope the new venue will allow Atlantic City to boost its current 1-per-cent share of the $16-billion meetings business in the northeastern U.S., and create a conference industry that draws people in on weekdays and diversifies away from gambling, taking a page from Las Vegas.

“What Brookfield has that Revel didn’t have is a great mailing list,” Mr. Gros says, noting that the company also owns a casino in Las Vegas. “The data that they’ve got from their Bahamas property, it’s largely East Coast people, so they can market to those people.”

Revel (which Brookfield might rename) will be facing competitors who are likewise trying to raise their game. “If Revel opens again under Brookfield, that will add some more capacity to the market and there’s probably got to be one more casualty at some point,” Mr. Gros says.

A slot machine player at the Revel Casino Hotel. Jessica Kourkounis/NYT

The plan for Atlantic City

Experts say Atlantic City as a whole must place less emphasis on gambling than it historically has and broaden its income streams. Revel, however, under Brookfield’s ownership, is expected to pay more attention to gambling than it did under its previous owners. In some ways, they were ahead of their time.

Local officials have ideas beyond conferences and conventions, and are working on a deal to have a state college buy the shuttered Showboat casino resort and turn it into a campus.

New Jersey Governor Chris Christie is planning to hold a second “Atlantic City summit” in November, part of a continuing effort to bring the key groups together and create a solid revitalization plan. In October, he lifted a ban on sports betting in an attempt to create a new source of revenue for Atlantic City’s casinos, but the issue is still before the courts because of a federal ban.

Meanwhile Mr. Palmieri, at the Casino Reinvestment Development Authority, is using his powers for planning and land use to try to make the city more appealing. The authority has been working to move some social services out of the main tourist area and in recent weeks it struck its first deal on that front, which will see a drug rehab centre leave town. One of the CRDA’s main targets for improvement is the land neighbouring Revel. The resort is to be the centrepiece of an area that also has a historic lighthouse, a million-dollar park that’s currently being built, and a lot of land that’s being condemned and cleared for redevelopment.

While Atlantic City’s gambling business will likely never be the same, it still has a solid future, says Caesar’s chief executive officer Gary Loveman. After all, the city receives about 27 million resort visitors every year, according to the Urban Land Institute.

“People who now wish to argue that the Atlantic City experience was a failure based on the period from 2007 to 2014 have a very tough hill to climb,” Mr. Loveman said at a recent press conference.

“Atlantic City is not going to be a $5-billion gaming market. It’s going to be, we hope, a two-and-a-half-billion-dollar gaming market. That still makes it probably the second-largest gaming market in North America … and there’s nothing wrong with that, we just have to go through the exercise of adjusting.”

Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.