Wednesday, August 20, 2014

Casino Gambling - Will New York Do Any Better Than New Jersey?

Why should anyone think that casinos will work in New York when they aren't working in New Jersey? That's a big question with lots of possible answers.

Location – Way back when the first discussions were opened about legalizing casino gambling in New Jersey, the decision was made to locate them, all of them, in Atlantic City and only Atlantic City. In hindsight that was a bad decision in my opinion but when Resorts International opened in 1978 everyone turned a blind eye to the politician's short-sightedness. It was a place to make a legal bet and it was closer than Vegas, so what if you had to wait on a line to get in!

But, that was over thirty-five years ago and the luster has definitely worn off. With as many as 12 casinos operating at a time, New Jersey still never turned into the mecca of east coast gambling like the New Jersey politicos hoped it would. By the end of 2014 there will probably be only eight casinos left and all of them, except the Borgata, are hurting with overall gambling revenue down about 11% from last year. So while AC looked like a good bet in the last century, it's a dog in this one. 

Honestly, no matter how hard anyone tries to dress the place up, Atlantic City will never be a destination resort like Las Vegas. The hotels made attempts to recreate Monet Carlo type opulence inside their walls and some succeeded but no one has ever been able to clean up the surrounding area. On a sunny summer afternoon the Boardwalk is passable if you can ignore hawkers and pretend that the local kitsch isn't as annoying as it really is. On a cold winter evening the Boardwalk is scary – honest to god scary and anyone who ventures out there is asking for trouble.

A block or two away from the Boardwalk is no better, in fact, things are worse. There, you are in the middle of down-trodden, urban blighted neighborhoods that remain pretty much the same as they were after the downfall of the Atlantic City of the 1920s to 1940s. AC is not a nice place to visit and one of the only reasons that the Borgata is doing better than the rest of AC's casinos is that it lives out on the marina side of town. Although this area is far away from anything else in terms of amenities, it appears, on the surface, safer and one is able to drive in and drive out without experiencing fear.

Spreading casinos around the state would have been a better decision for New Jersey and for everyone else. It's probably too late to remedy that situation.

Audience – From the beginning Atlantic City catered to the senior citizen demographic. Give seniors a free bus ride, a free lunch buffet, and some tokens to play the slots with and they will follow you anywhere. And they did. Caravans of buses left early each morning from every major population center within 200 miles of AC, only to return six hours later loaded with broke but smiling old folks. Some played a table game here and there, some filled their purses and tote bags with buns and donuts for the ride home, but most just sat starry-eyed in front of their favorite slot machine pulling away.

Slot machines are big money makers for the casinos and AC might still be riding high but they, the corporate types, get greedy and therein lies their demise. Believe it or not, old ladies like putting coins into slots and they like pulling handles. They like doing that a lot better than sliding their twenties into an electronic entertainment bandit that has so many bells and whistles that most senior citizens have no idea what combinations win which amounts of credits. Notice I said credits, not coins. They liked the coins too; not so much the credits. Casino actuaries noticed that older folks tended to play lower denomination slot machines probably because their pension check money lasted longer that way. So, some cyber genius figured out a way to get their pennies in large doses unbeknownst to the players who are over mesmerized with the beeps and gongs of the computer in front of them. 

 So, moving from a quarter machine down to a nickel machine is hardly possible anymore since the “penny” machine requires a donation of 200 or so at a time in order to get all the reels and lines to come into play. Essentially, the management is killing or has killed the goose that laid the golden egg.

The Borgata is after a different demographic and seems to be a hit with the younger crowd. Swanky clubs, poker tournaments, and a weekend drinking and dancing atmosphere are saving the only profitable casino in AC. But no New Jersey venue has captured the demographic that a Las Vegas style environment does and that is vacationers who come with their families and stay for a week or more.

Travel – New Jersey is losing out on the vast amounts of gambling revenue they were able to capture in the 80s and 90s because other casinos have cropped up that are closer to major population areas. Casinos in Connecticut and Pennsylvania are closer to the New York Metropolitan area than Atlantic City is. A three hour drive is a lot more onerous than a two hour drive and gamblers are making choices based on mileage. Neither of the two large Indian casinos in Connecticut or any of the newer eastern Pennsylvania locales are hurting for business. 
Both areas can be reached in less time and along less annoying roads than Atlantic City, especially in the warm months. A drive back from the Jersey shore to the NY area can sometimes take 6 – 8 hours in summer time beach traffic. Few people are willing to risk that headache for a day of gambling.

 Competition – Atlantic City was the only show in town for a while but that's not the case any more. People can gamble in Pennsylvania, Connecticut, Delaware, and Maryland. Competition like this has overwhelmed New Jersey. The state's attempt to revive revenues with online poker and casino games has thus far been less than spectacular. Things may improve over time but competition has become a major issue. And soon New York, in addition to the upstate Indian casinos and racinos, will have as many as four new full service casinos in easy reach of New Yorkers. There's no doubt that these new casinos will create further pressure for New Jersey. The big question is will New York be able to survive in such a competitive arena on their own?

Looking at the same four areas – location, audience, travel, and competition – will New York do any better than New Jersey.

Location – Recent NY legislation allows for up to four new full-scale casinos to be built in three designated areas – the Finger Lakes area, the Albany area, and the Lower Hudson region. If all four are built, one area will get 2 and the others one each. Thus far there are 22 proposals from developers among which are stalwarts in the gambling world like Caesars Entertainment and the Genting Group. One of the proposals calls for a casino in Tuxedo, NY which is a mere 40 miles from New York City. Other Lower Hudson proposals could put a casino in the Catskills which is at least as close as the Connecticut and Pennsylvania casinos.

The areas proposed for most of these new casinos are rural and sub-suburban. One proposal calls for a casino near Newburgh, NY but outside the city – an upstate area that has experienced as much poverty and as many urban problems as Atlantic City has. All of the casino proposals include language to re-invent the surrounding areas in terms of jobs and boosting the overall economy. Many of the entities hoping to win these bids have already promised cash and subsidies to local towns and villages as well as local school districts.

Will players want to come to these new venues? That's the big question. It doesn't seem like any of these areas will scare people off and some, especially those in the Catskills, might even have a good deal of recreational draw. Nevertheless, it is hard to imagine anyone from a major metropolitan area, especially the NYC area, traveling to Albany or the Finger Lakes to spend a day gambling. The Lower Hudson Valley will absorb all of the NYC traffic so location will be a boon for some areas and a major obstacle for others.

Audience – Some of these new casinos, especially the one in the Albany area and the one or more that end up in the Hudson Valley, can and will definitely market to senior citizens from the NYC area and they should. A nice bus ride, not too short, not too long, a few freebies, and a decent chance to win a few bucks might be very attractive to older players. Whatever casino is smart enough to market to this demographic without making them feel like they are being robbed, can be a winner here.

Younger audiences are another issue and that has mostly to do with the idea that in order to get to these new casinos you have to drive. Young people drink, sometimes too much especially on weekends. Drinking and driving do not go well together and DWI incidents can become a major issue in communities that are already skeptical about big casinos in the first place. Causing problems like these will far outweigh any benefits that a new casino may offer. Someone needs to be very proactive before situations like this get out of hand.

In my opinion none of these locations is ripe for an upscale, luxury casino. For the most part the areas in question are working class communities. These people will not be attracted by high brow amenities and expensive food. Something a cut above ordinary will do the trick, I think, without alienating those who might become a major audience.

Travel – The New York State Thruway (Interstate 87) is no party as far as traffic goes but it's a far cry from the Garden State Parkway. Nevertheless, these new casinos, especially those along I-87, will have to do some work on their end to minimize the frustration that drivers will inevitably encounter on the way there. Some of the sites in question, especially the one around Woodbury Commons, are already traffic disasters without a casino in the neighborhood. I cannot imagine what those situations will be like after a casino is built!

 Overall, only the Finger Lakes casino will be further away from NYC than those already in NJ, CT, and PA. In that regard, New York wins the travel sweepstakes over New Jersey.

Competition – There is no escaping the fact that once the four new New York casinos are built and open for business, there will be plenty of competition. New York will be surrounded by states that offer as much or even more in the way of casino gambling. These days there is nothing new about gambling. Almost every state has a lottery, some kind of racing (dogs, horses), and plenty of casino opportunities. “If you build it, they will come” does not apply. In order to succeed in New York casinos will have to be closer, safer, more attractive, and better all-around than their neighbors to the south, east, and west. In many ways solid, nearby competition was the beginning of the end for New Jersey. Competition may be the first of many coffin nails for New York casinos unless they can stand out in an already crowded market.

What is the answer to success in the gaming industry? If I knew the answer I wouldn't be spending my time writing blogs! I do know that adaptation has a great deal to do with it.

Take Las Vegas for example. If there ever was a gambling locale used to making itself over time and time again, it's LV. I first visited there and gambling towns to the north (Elko, Winemucca, Reno) in the 1970s. Even then Las Vegas wasn't far from it's heyday in the 50s and 60s. The “rat pack” was gone though; headliners were starting to give way to in-house shows, Cirque d'Soleil was a dream, and the Dunes was the tallest in-spot on the strip. Downtown was still a place to visit and if you wanted to experience the sleaze and buy a 25 cent margarita. Most 21 tables were the $2 variety and you played with solid heavy iron slugs. A $3 blackjack win was something to hoot about. Crap tables were multiplying all over town and it wasn't unheard of to play 25 cent Roulette. Poker tables were hidden in corners and populated with very unsavory characters.

The first re-make I was around for started with Circus Circus on the north end of the strip, across from the Sahara that was waning in popularity and north of the Riviera, soon to follow suit. Circus Circus not only tolerated kids but encouraged them to come see the 24/7 big top performances that took place regularly above the casino floor. In order to get to the catwalk just below the performance area, kids had to cross the casino floor holding their parents' hands. Las Vegas was becoming “family friendly.”

That lasted a while, long enough for MGM to build a theme park out back when they moved south of their old location and for Wet and Wild to build a water park on the strip. Vegas was going to be for everyone.

The next adaptation was engineered by Steve Wynn who brought back luxury in the dust of the demolished Dunes and Sands. The Mirage was first class back then but it also had white tigers and Sigfried and Roy for the little ones right along with Picassos hanging on the walls and a high-stakes poker room.

The opulence continued with the Bellagio, the Venetian, and Mandalay Bay at the extreme south end of the Strip right on top of the old Hacienda where Red Fox used to hold court on a nightly basis. Although you could still walk into any casino wearing shorts and flip flops, now you could also dress to the nines as well and dine at top notch restaurants. Most of the $3.99 all-you-can-eat buffets disappeared. Clubs, for the twenty something crowd, abounded and drinks regularly cost $20 plus.

  And then a series of economic down turns made all that glitz a little too pricey just about the same time poker became a national pass time. Small poker rooms grew. Corporate big shots like Harrahs and then Caesars bought out the World Series of Poker and breathed life back into a town that had record unemployment and huge numbers of foreclosures. But LV is still there, renovating downtown and turning it's massive dance clubs into smaller more intimate lounges for the new generation.

Las Vegas has survived all of this and will continue to survive because it adapts. Las Vegas throws out the old rules when they no longer apply and re-invents itself for new customers.

If New York casinos, and the New Jersey ones for that matter, want to survive they need to take a lesson from LV. So far New Jersey hasn't gotten the message. Whether or not New York will remains to be seen.

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