Angry MGM Tries to Sell Casino in Poor Atlantic City Market
The Neighbors Muscle In
It's easy to see why. Unfortunately for MGM Mirage, based in Las Vegas, it's trying to sell the Borgata while Atlantic City is trapped in a downward spiral. Neighboring Pennsylvania's slot parlors have been siphoning business from the New Jersey casinos since 2006. This summer Pennsylvania plans to introduce table games like blackjack, making it an even more formidable gambling competitor. Even worse for Atlantic City, Delaware is trying to enact sports betting.
Atlantic City's casino revenue last year dropped 13.2%, to $3.9 billion, according to New Jersey's Casino Control Commission, while Pennsylvania's casino tax revenue rose 21.6%, topping $1 billion.
Still, the Borgata saw a relatively modest revenue drop last year of just 5.9%, and MGM Mirage and partner Boyd Gaming Corp. (BYD), which manages the property, recently invested $600 million in updating the property, which opened in 2003 at a $1.1 billion cost. MGM will likely take a bath on its Borgata investment -- the only question is how scalding.
Atlantic City on the Ropes
Atlantic City has been taking it on the chin for years. Last year, three casinos formerly controlled by Donald Trump filed for bankruptcy protection for the third time. In December, billionaire Carl Icahn agreed to buy the first-lien bank loan of Trump Entertainment Resorts (TRMPQ), which owns three Trump-branded resorts here. (Donald Trump resigned from the company's board and is fighting Icahn's plans, which would give Icahn control over the casino operator). In May, Icahn and a group of lenders bought the bankrupt Tropicana Atlantic City Casino & Resort for $200 million.
And the competition is about to intensify. Pennsylvania plans to open more casinos, and gaming is likely to expand in New York, Maryland, West Virginia and Massachusetts. Casino operators remain bullish on their futures. An American Gaming Association poll found that 60% of consumers are cutting back on casino gaming, in proportions similar to those cutting back on restaurants and weekend trips.
Of course, Atlantic City being Atlantic City, it's not going down without a fight. The Borgata is giving away The Ultimate Rock-N-Roll Wedding, including a Valentine's Day ceremony officiated by Rev. Run, a.k.a. Rev. Joseph Simmons, co-founder of hip-hop group Run-DMC. Resorts International, New Jersey's oldest casino, next month will offer blackjack for $2.25 a hand at selected tables. The Trump Taj Mahal is promoting "low room rates & your choice of gift!" -- a glassware set, a "hobo purse," a Nike Polo shirt, a Bulova clock frame.