Bruce Springsteen’s 1982 song “Atlantic City” echoed up and down the New Jersey shoreline over 20 years ago. The boss sang about the once iconic town and how desperate people used it as an “all or nothing” shot to get out of a financial rut. However, with a deal nearly reached on the new Revel Casino development in Atlantic City, Springsteen’s song may have a new meaning.
Recently, J.P. Morgan has received commitments for $850 Million for the $1.5 Billion capital structuring. This, along with help from the New Jersey State government, could be the “all or nothing” shot to get Atlantic City, and perhaps even the state, out of the financial rut. With tax rebates of $261Million, over a 20 year period, pledged by Gov. Christie, the eleven – hundred room resort may be able to attract the crowd necessary to revive AC back to its “glory days” level.According to a recent Washington Post article, Atlantic City goers are spending 30% less at the casinos, the gambling market in general is down around 22%, and gross operating profit per hour is down 61%. As the nation’s second largest gambling market, AC followed industry leader Las Vegas by $1.61 Billion in 2009. What is one of the main differences between Vegas and AC? The Branding.
That is the source of the risk, according to some analysts. The new Revel Casino will attempt to rebrand Atlantic City into a place for business meetings and vacations – not just gambling.
Looking at this from a five forces model, could this work? New entrants into Atlantic City have been successful, including the Borgata which is currently the most successful and the newest AC Casino. Substitutes such as online gambling have becoming increasingly popular; thus, taking profits away from casinos. Suppliers are not very relevant or powerful in this industry. However, existing competitors are a threat. With new casinos spouting up in Pennsylvania, existing casinos in New York, and the national focus on Las Vegas as the gambling capital, Atlantic City seems nothing more than a fun weekend. This is especially true to people who can go to local casinos on weekdays or to people who save up for yearly vacations in Las Vegas. However, if its marketing campaign can accurately depict their new unique product, Revel’s competitors are nearly none existent, east of the Mississippi.
The overwhelming question is within the fifth force: buyers. In other words, will people buy in to this new branding? The economy seems to be improving and discretionary spending will soon grow with it. If the economy continues to grow, then Revel can create a new business and vacation destination and Atlantic City, as a whole, can possibly come back to life.
This industry is relatively attractive for Revel. With two forces, threats of entry and suppliers, in their favor as well as the conquerable forces of substitutes and competitors, Revel has a fighting chance to win buyers. I believe that it can become the East Coast Business and Vacation destination as well as a place for gamblers.
Everything dies, that’s a fact. But with new spending and branding, AC can come back.
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Berzon, Alexandra. “Big Casino Project Back From Dead.” Wall Street Journal. 9 February, 2011.http://www.washingtontimes.com/news/2010/dec/7/atlantic-city-casino-profits-plummet/