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Howard Stutz

Atlantic City continues to struggle

28 June 2010

ATLANTIC CITY, New Jersey -- In the same breath in which the gaming industry received rare positive news from Wall Street, Atlantic City was given yet another beat-down.

And so continues the Boardwalk's years of discontent.

Last week, Moody's Investors Service revised its Industry Sector Outlook for gaming to "stable" from its previous view of "negative."

But in an interview, Moody's Senior Vice President Keith Foley said Atlantic City is far from healthy.

Atlantic City ($3.9 billion) was second only to the Strip ($5.5 billion) in gaming-revenue production in 2009. But the region is in danger of being surpassed by other jurisdictions, if not this year then surely in 2011, unless a recovery plan is found.

"Waiting for recovery is not a strategy," Foley said.

Strip casinos are returning to health, or at least have reversed 2009's monthly double-digit gaming revenue losses to more or less flat results.

The Boardwalk, however, continues to free-fall. Atlantic City gaming revenues are off nearly 8 percent through May following a 13.3 percent drop in 2009. The monthly declines go back to August 2008.

Foley, who is based in New York City, has watched Atlantic City deteriorate.

"They haven't made a correct argument yet," Foley said. "You can't just keep on explaining it away. It needs help."

Last year, the Borgata, Atlantic City's market leader, which is operated by Boyd Gaming Corp., closed hotel rooms in its Water Club expansion during slow periods. Foley said the city's 11 resorts may embrace midweek room closures as a way to cut costs.

Neighboring states such as Pennsylvania and Delaware are expanding their gaming markets. Pennsylvania's slot machine-only casinos will begin adding table games in July. Many of the new dealers are coming from Atlantic City.

Foley said the Northeast could see a gaming- revenue shift from Atlantic City, which could lead to Pennsylvania casinos adding hotel rooms. Las Vegas Sands Corp. resumed construction this month on 300 hotel rooms at its Sands Bethlehem casino.

Atlantic City and New Jersey leaders have proposed solutions, such as allowing smaller casinos and sports wagering, but nothing garners consensus.

"We're getting hammered from every which way right now, and nobody is standing up for Atlantic City's survival," New Jersey state Sen. Raymond Lesniak, D-Union, told The Wall Street Journal last week.

New Jersey Casino Control Commission Chairwoman Linda Kassekert was also pessimistic.

"We've face challenges before, but what we're going through right now is much more intense," she said.