Before Online Gambling: Atlantic City’s History
By the 1970s Atlantic City became the adult playground for the east coast gambling aficionado. No longer would they have board a jet or train to travel to Vegas. As a result legalized gambling was entertained as a viable way to revitalize Atlantic City, create new jobs, and bring back the tourists. By the election of November 2, 1976 a referendum placed on the ballot, that opened a pathway to legalized gambling in Atlantic City that has become once again a go to place for gamblers, lovers of the seashore and conventions.
Even though many years have lapsed since Atlantic City opened its first legal casino, Las Vegas casinos had been in existence much longer. At one time, long before Atlantic City became the Las Vegas of the East Coast, in fact, long before a single casino even existed there, the town was a popular family-friendly beach resort. Then, over the years, corrupt politicians, rampant crime, and neglected hotels caused people to lose interest, opting instead for the newer resorts in Florida and the Caribbean that affordable and fast jet travel made a viable option.
The First Licensed Casino
On May 26, 1978, the company then called Resorts International (now, after several changes in ownership, simply known as Resorts) became the first licensed Atlantic City to open its doors, marking the official inception of legal gambling in New Jersey. To date, Atlantic City has remained the only place in the State where licensed casinos are allowed to operate. Resorts also became the first legal casino in the United States outside of Nevada.
Over the years, especially up until 1990, one by one, other casinos were added to the mix, most of which are still operating, although several have closed. One long defunct casino which had several reincarnations, none of them successful, was a tri-level casino that started out as the Playboy Casino, then became the Atlantis, and after that, became Trump World’s Fair.
Growth Of The Industry
From 1978 until 1991, Atlantic City casinos were not open 24/7. Weekday hours were 10 a.m. to 4 a.m., and weekend hours from 10 a.m. to 6 a.m. Then, in 1991, the casinos were allowed to remain open for 24 hours during a trial period. In 1992, a new law was passed, permitting all Atlantic City casinos to remain open for business 24 hours a day.
During Atlantic City’s initial years in the casino business, the gambling industry grew rapidly, at the rate of about 55% per year. Then, between 1986 and 2006, growth slowed down considerably to about 4.4% per year. From 2007 to date, Atlantic City gambling has seen a decline due in large part to the number of land based casinos popping up across the United States and especially throughout the east coast.
In addition to the increase in brick and mortar casinos is the online casino and poker site explosion. In 2013 the first New Jersey online casino came on the mainline. When you bring together many disasters both natural and man-made that New Jersey and the rest of the US have struggled with it is no surprise that there have been a few lean years. However, now that things are rebounding investors believe that the downward turn is about to normalize and an increase in revenue is in
Yet another factor leading to Atlantic City loss of footing has been that the cost and ease of access to Las Vegas. That has contributed to Sin City’s continual renewal and evident growth. No longer is Vegas merely a place to gamble, it has become a major destination place year round with no weather barriers like you will find in Atlantic City.
New Growth In Atlantic City Gambling
Atlantic City apparently got the new shot in the arm that it needed with the opening of the Borgata Hotel Casino and Spa in 2003, the first new casino to appear in Atlantic City in 13 years. From day 1, the Borgata, a luxurious mega resort, comparable to places like the Aria and Caesars Palace on the Vegas Strip, became the new “in” place for young affluent gamblers to play. While Borgata’s unparalleled success right out of the starting gate propelled other developers to seriously consider similar kinds of projects in Atlantic City, for one reason or another, they never got off the ground. Then the recession effectively put a halt to any casino expansion in Atlantic City.
Subsequently, one new luxury casino did get built, the Revel, which opened for business in May of 2012. However, the Revel, unlike the Borgata, has not had much success attracting customers. The casino is currently in bankruptcy and faces imminent closure on September 1, 2014 if no suitable buyer is forthcoming before then. The Revel was built at a cost of $2 billion, and during its first year of operation, had to file for bankruptcy protection twice. If sold, it is expected to command a price of no more than a few hundred million dollars.
In 2012, Pennsylvania overtook New Jersey as the second biggest gambling market in the U.S., taking in USD $3.16 billion in comparison to Atlantic City’s USD $3.05 billion. That disturbing statistic, along with the fact that the Atlantic City area was particularly hard hit by Hurricane Sandy in 2012, contributed to Governor Christie’s determination to make reversal of the downward turn in the Atlantic City economy a priority. Online gambling seemed like a perfect solution.
Back on March 3, 2011, the New Jersey State Legislature initially approved a bill for online gambling, but Governor Christie vetoed it. However, after the U.S. Department of Justice issued its revised opinion that online gambling did not violate the wire act after all and left the legalities of online wagering to individual states to decide, a similar bill was proposed. On February 26, 2013, Governor Christie signed it into law.
Atlantic Casino Laws
Because no casino gambling is allowed in New Jersey outside of Atlantic City, all of the servers hosting the websites were required to have an office in Atlantic City and affiliate with one of the Atlantic City casinos. However, unlike in Nevada, New Jersey casinos were permitted to offer online gambling not just on poker but on all casino games. Sports betting is still illegal in New Jersey, either in the casinos or online.
The legal age for betting online in Atlantic City is 21, the same as for betting inside the casinos.
The target launch date of November 26, 2013 was met, preceded by a five day “soft” opening starting November 21, 2013 for selected invited players only. The following five casinos were fully cleared by the New Jersey Division of Gaming Enforcement to begin offering online betting.
- Borgata (the first Atlantic City casino to be licensed) and partner bwin party
- Caesars Entertainment (owner of Caesars, Bally’s Harrah’s, and Showboat casinos) and partners 888 Holdings and Amaya
- Trump Taj Mahal and partner Ultimate Gaming
- Trump Plaza and partner Betfair
- Tropicana and partner Gamesys, Ltd.
The Golden Nugget did not fully pass the initial five day trial period and therefore had to delay opening. Resorts Casino was not allowed to open up for online gambling at all because of legal problems surrounding its proposed partner, PokerStars.
Not only was PokerStars, the world’s largest poker site, denied a New Jersey license; it was also barred from reapplying for one in New Jersey for two years. However, the New Jersey Division of Gaming Enforcement, in a change of stance, is apparently willing to reconsider Pokerstars sooner now that Amaya Gaming Group is acquiring the website. One stipulation of the acquisition is that any PokerStars executives who were involved in accepting bets from U.S. players in connection with the U.S. Department of Justice Case will need to step down.
The two remaining Atlantic City casinos, the Atlantic Club (now closed) and the Revel (likely to close) never even filed applications for online gambling.
Gambling in Atlantic City Today
At the present time, there a total of seven casinos operating in Atlantic City. The casinos are as follows:
- Bally’s Atlantic City
- Borgata Hotel Casino and Spa
- Caesars Atlantic City
- Golden Nugget Hotel Casino
- Harrah’s Resort Atlantic City
- Tropicana Casino and Resort
- Resorts Casino
All in all the New Jersey Casino industry saw a revenue of over $2.5 Billion in 2013 which was a slight increase over the prior year but a substantially lower profit than 2006 when it saw its highest revenue to date. Some of the major factors that impacted the AC-casinos was the recession, hurricanes and the increase in casinos outside of the New Jersey shoreline.
Caesars And Atlantic City Gambling
Caesars has been widely criticized for what many people regard as a trying to create a monopoly in Atlantic City. Objections have been raised not only that Caesars was permitted to own and operate four casinos, but also to apparently making it difficult or impossible for other companies to open and run any additional properties as casinos.
The criticism intensified when Caesars made clear its intentions with the Atlantic Club and again more recently with the announcement that one of its own properties, the Showboat, would also permanently close on August 31, 2014. In 2012, Caesars began using the Claridge extension of its Bally’s property as a hotel only, closing the casino portion, and in October, 2013, announced that the Claridge was being sold to TJM Properties.
The Claridge reopened in May 2014 under the new owners as a hotel only with no casino gambling. Now, Caesars is putting pressure on the Atlantic City Government to allow casinos in other parts of New Jersey because it is actively entertaining the idea of building a casino in the Meadowlands Sports Complex in East Rutherford, NJ close to NYC. Caesars has also announced plans to build a casino in Orange County, New York. Both of these ventures, if they become a reality, would divert significant business away from Atlantic City.
Atlantic City And Gambling Tourists
Atlantic City is a town that is highly dependent on tourists and casino gambling for its livelihood. Atlantic City’s difficulty continuing to attract the desired number of visitors and in turn increased revenue is clearly depicted in the table below, which shows a change in overall revenue from the pinnacle year to the ongoing struggle to maintain predominance among casino - resort areas of the world.
As the above table shows, 2015 marked the seventh year in a row that the number of visitors to Atlantic City decreased from the year before as represented by a loss in revenue.
Another trend, similar to what has been happening lately in Las Vegas, is that Atlantic City visitors, to a greater extent than previously, are spending more money on activities other than gambling, such as restaurants, clubs, and other entertainment and amenities.
As a result, just as the number of visitors has been going down, so have the gaming revenues from Atlantic City’s casinos.
The majority of the visitors to Atlantic City come by car or bus, as opposed to air or rail. However, there has been an 18% drop in bus passenger travel to Atlantic City in recent years. Part of this drop is due to the casinos concentrating their marketing and promotional programs on customers driving to Atlantic City, who are believed to be wealthier and more likely to gamble larger amounts of money. As before stated the ease of access to more localized casinos, special offers to lure new players and to secure loyal players is greater at the casinos that you find situated throughout the United States. Many of them are prone to offering Las Vegas casino packages as opposed to Atlantic City due in part to the ease of travel. Most airlines have affordable travel by air to Las Vegas whereas the proximity of air transport to Atlantic City is difficult and more expensive on average.
Casinos Making A Loss?
The data shows that since 2006, revenue from Atlantic City casinos has fallen by more than 45%. In comparison to Nevada, which has bounced back from the decline during the recession, Atlantic City casino revenues have continued their downward trend.
Atlantic City gambling revenue has continued to plummet since its peak in 2006. While many can attribute this to the natural disasters it doesn’t completely explain why there was evidence of a decline as shown in the figures above. Although Hurricane Sandy caused all of the Atlantic City casinos to be shutdown on October 28 for a full week, which was devastating to the economy revenue continued to fall by a record 28 percent in November in the aftermath of the storm. But the lingering repercussions continued long after that since many homeowners had to exhaust their savings to repair the damage to their homes, leaving little or no money left over for gambling. The reality is that in order for Atlantic City to regain its place as a major gambling resort town, it must begin to bring in travelers from not only the United States, but neighboring Canada and the rest of the world as Vegas has managed to do. It can no longer solely rely upon the New Jersey population and immediate region for maintaining a solid revenue base.
Competition from casinos in nearby states, including Pennsylvania, New York, Delaware, and Maryland continues to be a major factor contributing to the decline.
Online Gambling And Atlantic City
Online gambling in Atlantic City is taxed at a rate of 15% (compared to 8% for Atlantic City’s land-based casinos) and accounts for about 5% of the total revenue as compared to 9% of the total revenue in Nevada. The lower percentage for New Jersey is surprising because New Jersey based gambling websites, in contrast to those in Nevada, offer not only poker but other forms of casino gambling.
Statisticians are loving the newness of online poker by way of New Jersey’s market. Things are looking good for the online poker community. American poker players are hungry to be back in the pocket again. As a result things look good overall.
The data clearly shows that the Borgata, followed by Caesars and the Tropicana, are contributing the lion's share of the revenue generated by online poker in New Jersey, with the other sites lagging far behind. New Jersey online gambling (all sites combined) generated revenue of about USD $1 million in its first week of operation and a total of about USD $8.4 million over the first 5 weeks. But as impressive as those figures were, they were still significantly less than what would have been necessary to meet the projected revenue for the first year. Atlantic City online gambling, though initially projected to bring in $1 billion during its first year of operation, based on the results so far, will probably generate a total closer to only $200 million.
Future Of Atlantic City Gambling
The future of Atlantic City online gambling remains to be seen, but the inception of online gambling looks to be the one thing that will revitalize AC and give it a nice revenue boost for 2017. Recent news shows that there has already been a substantial increase in revenue from both brick and mortar casinos as well as online casinos. Even though there are not as many casinos as there was 15 years ago, the remaining casino - resorts are doing a great job at boosting the economy and revenues. Every indication shows that by year’s end Atlantic City will see at minimum a 4% increase in revenue over prior years.
Problem Gambling in Atlantic City
Problem gambling has been a growing concern in Atlantic City ever since legal casino gambling in the area was first introduced, and now even more so, with the greatly increased numbers of young people getting involved and the recent addition of Internet gambling. Prior to the introduction of online gambling in New Jersey, there were estimated to be about 350,000 problem gamblers in New Jersey. However, Donald Weinbaum, Executive Director of the Council on Compulsive Gambling in New Jersey, expressed concern that the total number could become much higher with the legalization of online gambling, particularly among tech savvy young people. From all indications, that dire prediction has probably come true.
Efforts currently being made to address the problem include giving online players the option to set betting limits on their accounts. In addition, a self-exclusion program, which was already established in 2001 to enable people with a gambling problem to exclude themselves from gambling in any Atlantic City casino, is now being made to online players as well. In order to be placed on the self-exclusion list, an application must be submitted in person to the New Jersey Division of Gaming Enforcement. The request must be made by the individual to whom it would apply; it cannot be made by a family member or anyone else. www.nj.gov
Furthermore, all Atlantic City casinos and their associated websites are required to inform players that if gambling is a problem, they can call the hotline 1-800-GAMBLER. Each Atlantic City casino offering Internet gambling must also pay an annual fee of $250,000 toward a fund for prevention, education, and treatment programs offered by the Council on Compulsive Gambling.
Atlantic City, like Las Vegas, is seeing an alarming number of very young people succumbing to the temptation to gamble. Even though both casino gambling and online gambling in Atlantic City are restricted by law to those age 21 and older, Atlantic City gambling has become increasingly prevalent among many people who are legally underage. A survey of teenagers at Atlantic City High School indicated not only that 64% had gambled in a local casino, but 40% had done so before age 14. Each year Atlantic City casino security officers catch and eject many thousands of teenagers.
However, thousands more slip by undetected due to fake IDs and lax enforcement. Underage drinking in the casinos is also a major problem. In June, 2014, the New Jersey Division of Gambling Enforcement fined one Atlantic City casino $60,000 for multiple incidents over the past two years involving prolonged drinking and gambling by underage individuals who should not have been allowed to do either. In one of those instances, an 18-year-old wound up being taken by ambulance to a hospital when found unconscious after being served eight bottles of beer during the course of nine hours of continuous gambling.
Seniors represent another highly vulnerable group for developing a gambling problem as a result of the opportunities presented by Atlantic City casinos. According to the New Jersey Council on Compulsive Gambling, more than half of Atlantic City’s gambling revenue comes from older adults. Notably, many of these people had not gambled at all previously, or at least did not have a gambling problem until after they retired and casino gambling became a new crutch to fill the void in their lives.
Resorts Casino just opened a new $9.4 million dollar conference center with the hopes of relying heavily on the conference industry as a means to bolster up the overall tourism and enterprise of Atlantic City. This coupled with an economic upward movement across the nation represents a healthy economic upswing for Atlantic City in 2017.