Atlantic City Report: Aztar Delays Project

29 October 2001

ATLANTIC CITY, New Jersey –- Citing a variety of reasons that excluded the weak economy and Sept. 11 attack aftermath, Aztar Corp. said it will delay its $225 million Atlantic City expansion project at Tropicana Casino and Resort by about six months.

Chairman and CEO Paul Rubeli said the No. 1 reason for delay is Borgata, the $1 billion casino hotel being built across town by Boyd Gaming and MGM Mirage. It's scheduled to open in mid-summer 2003, shortly before Tropicana's expansion was to have opened.

"A minimum of three to four months separation from the opening of the Borgata is desirable," Rubeli said. "A September or October opening would not give us the separation we wanted and the opening presence we desire. For these reasons, we are proceeding with the goal of opening by March 1, 2004."

Tropicana's expansion consists of a 200,000-square-foot retail village to be called The Quarter, a 502-room hotel tower and a 2,400-space parking garage.

Delaying the project, Rubeli said, will reap several benefits: more publicity, a more favorable spring/summer crowd, better construction bids because Borgata contractors will be available.

Although MGM Mirage is facing a major earnings crunch and uncertainty in the near term, Wall Street gaming-industry analysts believe it's still wise for the company to spend $1.5 billion for proposed wholly owned casino hotel in Atlantic City.

"I think it's probably smarter than it's ever been at this point," Credit Suisse First Boston analyst John Leupp said at the World Gaming Congress & Expo in Las Vegas.

"MGM Grand has about $1.2 billion to $1.3 billion in annual cash flow. Opening a riverboat casino in the central United States that might add $30- to $40-million on an annual basis is really not something that can move the needle for that company, but Atlantic City certainly can."

MGM Mirage has proposed building the unnamed casino hotel next to Borgata, the $1 billion casino hotel under construction in the city's Marina District. MGM and Boyd co-own Borgata. MGM has yet to announce the scope or timing of its wholly owned project. Leupp said MGM might delay the Atlantic City project given its challenges in Las Vegas, but that they should "by all means" eventually build it.

"I think they probably have the best location there," McDonald Investments analyst Dennis Forst said during the panel discussion. "They've certainly proven they can build tremendous projects and get a return on their investment. I don't know how much they'll grow the Atlantic City market, but they will gore somebody else's ox very badly and get a good return on their investment."

Marc Falcone of Bear, Stearns & Co. said MGM could face a labor shortage in Atlantic City, and Jefferies & Co. analyst Larry Klatzkin said the company has to keep an eye on possible new gaming in neighboring Pennsylvania.

Compulsive gamblers who turned to a New Jersey agency for help are wealthier and carry a higher gambling debt than they did the previous year, according to the Council on Compulsive Gambling of New Jersey. Based on 2,953 calls to its 1-800-GAMBLER help line last year, the private agency reported that the average caller had an income of $48,000 and a gambling debt of $37,000, both up more than $2,000 over the previous year.

Callers were predominantly male (82 percent), white (87 percent) and between the ages of 21 and 55 (89 percent). Two-thirds were married. Half of the callers were from someone other than the affected gambler.

The council reported a 23 percent decline in calls, to 20,000, but an undisclosed increase of hits on its Web site (www.800gambler.org).

"People are now changing the method of how they obtain compulsive gambling information," Deputy Director Kevin O'Neill said. "They simply log on, take what they need and log off."

The most visited page, he said, is the 20-question diagnostic quiz.

Atlantic City's closest casino competition, the racetrack slots in neighboring Delaware, reported a 5 percent gain in gross gaming revenue for the September period, according to the Delaware State Lottery, which oversees the slot operations.

The three tracks counted slot revenue of $25.3 million for the five-week reporting period, up 5 percent over the similar four-week reporting period last year, based on daily averages.

< Gaming News