There are plans to construct three new casinos for the New York market. According to industry experts, this could lead to a significant market shift, strong enough to impact the performance of brands that have established businesses in the neighboring state. Speaking at a conference that was specifically put together to address the challenges that hinder the growth of the industry, panelists mentioned that the entry of new players in the market of a neighboring state could be a bad thing for existing businesses.
Industry stakeholders fear that the casinos of AC could experience 20% to 30% less revenue. If this situation is left unchecked, a reduction in casino revenue could lead to the inevitable closure of casinos. The approval stage for operating licenses is still at the initial stages so even the industry stakeholders have no idea who their completion will be.
The chairman of Hard Rock casino, Jim Allen, a hospitality and entertainment company, holds the opinion that the market is not ready for new casino operators. A general analysis reveals that at least one casino will be forced to close its doors to business once the market welcomes the three new casinos. Even with such an observation, Allen, through his company, has interests in the market via a new casino operation. His employer has already placed a bid to obtain a license to operate a casino establishment in Atlantic City.
Before it was announced that New York was going to introduce three brand new casinos, gamblers from the state could cross over to New Jersey to place their bets there. Financial data from the Garden State indicate that 20 percent of its revenue was from casinos in upstate New Jersey and over 30 percent was from operations in downstate New York. Having casinos where bettors will now go to instead of travelling to the neighboring state is for sure going to have an impact on the market.
Some of the big casino brands operating in New Jersey like Ocean Casino Resort, BorgataNJ and Hard Rock Casino boast of a high population of players visiting their physical premises. The management of these casinos is positive that the volume of their business will not be affected. Allen argues that the established brands have nothing to worry about particularly owing to the fact that they have multiple income streams; it is the small operators that will be greatly affected.
Analysts from Wall Street have already weighed in on this matter stating that the concerns that have been raised by Allen are valid as per market conditions. If the people of New York who turned for gambling satisfaction from the New Jersey market no longer went there, what they brought with them as revenue would no longer count for that side. Although it is a great move for New York to grow its gambling industry, it appears as though this is happening at the expense of another market.
The Managing Director of Wells Fargo, Duane Bouligny, reports on the good leadership of the AC casino industry and has no pressure that any loss experienced as a result of shifted business would be rapidly recovered. There is no debate to the fact that New Jersey has been rapidly expanding and anyone investing in that market can be sure of great returns. This is however only going to be a reality to the big companies that have mechanisms in place to grow against all odds. The sad truth however is that some companies will be or downright get out of business.
A historian gambling expert, David Schwartz, who is forced to restructure based at the University of Nevada Las Vegas, has also weighed in on the matter. He is cognizant to the fact that some casino operators might find it impossible to remain in business; many more will be shoved out due to unfavorable business conditions. It is however important for casinos to come up with strategies of attracting and retaining customers – many casinos in New Jersey have successfully introduced online gaming to their portfolios.
As it is, there are millions of people that make regular trips every year to gamble in the Las Vegas casino hub. Whether these visitors live a short distance or far away from this location is a matter of personal preference. Most of these gambling tourists are looking for a destination where amenities are diverse and the industry eager to offer superior customer experience. Perhaps these are some of the factors that local casinos preparing to set up shop in New York should capitalize on.
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In search of a solution
Allan points out the fact that the revenues as indicated in the fiscal reports can be misleading. This is because revenue accrued from online gambling and sports betting activities have been summed up in the totals. In the real sense, this money does not belong to the casinos as various partners are involved in cost sharing. As per the reports published for the past year, the revenue from retail casino operations was relatively less compared to past years.
There are obviously plenty of challenges that the AC casino industry endeavors to cushion its customers against. Apart from gambling, casinos have invested in shopping facilities, conference spaces, restaurants and drinking spots as well as entertainment amenities and personal care. Plans are underway for the construction of a brand new water park that will give visitors a lasting experience of the casino sector as a whole.
Final Thoughts
It is still too early to guess who among the many applicants will be given a license to set up and run casino operations in New York. Allan is however certain that the financials will give a true picture of the performance of NJ following the progress in the neighboring state. A loss of about 30% in business will spell doom for the AC gambling landscape.
