The New Jersey Casino Control Commission issued a license on Monday for the Revel Casino, which is set to open as Atlantic City’s 12th casino on April 2nd. The road to opening has been a long one for Revel, with construction beginning nearly five years ago in 2007.
The economic downturn and budget overruns almost killed the project. Financial firm Morgan Stanley was the original financial backer, but in 2010 they walked away from the project booking a $1.2 billion loss on their investment. Before construction could resume, replacement financing had to be found for the project. The eventual funds would include a substantial grant from the New Jersey Economic Development Authority.
With considerable competitive pressures, the future for the resort may not be smooth sailing, a fact alluded to in the comments of CCC chairwoman Linda M. Kassekert in the news release (PDF). Kassekert says “GIVEN THE INTENSITY OF REGIONAL COMPETITION, REVEL’S RELATIVELY LOW ROOM INVENTORY, AND ITS NEED TO ESTABLISH A CUSTOMER DATABASE, REVEL’S ONGOING REVENUE FORECASTS ARE EXTREMELY AMBITIOUS.”
The timing for the Revel project could not have been worse. The competitive landscape for Atlantic City has changed immensely in the five years since this project was on the drawing boards. Vastly expanded casino gaming in neighboring states put considerable pressure on the existing casinos. Atlantic City casino revenues had increased every year from the initial openings in 1978 through 2006, growing to a peak of $5.2 billion that year. In 2007, for the first time ever, revenues went down 5.7% to $4.9 billion. Every year since has seen another decline, down to $3.3 billion in 2011. Casino revenues for Atlantic City have dropped a total of more than 36% in the 5 year period.
Revel hopes to buck the trend by raising the bar in AC, much like the Borgata casino did when it opened in 2003. Revel’s designers embraced the seashore, opening vast windows onto the ocean front, in a sharp departure from the casino wisdom of insulating patrons from the outside world. I believe that success for Revel will require rethinking more aspects of the casino business, but I also think the stark reality of that need will be a strong motivation for thinking outside the box. Will they succeed? Only time will tell for sure but I’m going to predict that they will not only succeed, but that they will singlehandedly turn around the city’s declining revenues.