Inside Asian Gaming

INSIDE ASIAN GAMING | August 2008 36 and Spa, the property viewed by many as the embodiment of the kind of expansive, full-service resort the market must move toward if it’s to flourish. “The best way to compete,” he said, “is with product, especially differentiating product.” Perkins, D’Ambrosio and others who study Atlantic City for a living are confident this will happen. With the scheduled opening later this summer of the Chelsea, a boutique non-gaming hotel on the Boardwalk, and a second massive hotel tower at Trump Taj Mahal the city will offer more than 16,000 hotel rooms. Harrah’s added more than 900 rooms earlier this year with its new Waterfront tower. Borgata’s highly touted Water Club, a non-gaming hotel, with 800 additional rooms, opened in June. The market needs 20,000 rooms, says Jefferies & Co. Managing Director Lawrence Klatzkin. Which obviously is going to take time, probably longer than anticipated a year or two ago, when bank credit was flowing like champagne. “It’s not going to change any time in the near future,”he said.“And the smoking ban is going to have to be absorbed. And Yonkers, a new racino at Aqueduct, Pennsylvania, that all has to be absorbed. But the market is not unhealthy. No one’s closing. New must-see properties, a little freshness to the city, it can make a difference.” He sees gaming revenues picking up in the second half and finishing the year down only about 2.3 percent, rebounding in similar fashion in 2009 to an increase of 1.6 percent. One clear advantage for the short term is the low tax rate, 9.25 percent on the gaming gross, third-lowest in the U.S. casino industry, which translates into money for marketing and complimentaries that Pennsylvania can never hope to match with an effective tax rate of 55 percent. However, the tough first quarter saw Atlantic City’s casinos shave more than 5 percent from spending on complimentaries. It will be interesting to see how this plays out if the pressure on profits continues. By James Rutherford, editor of International Gaming and Wagering Business (IGWB) magazine. Reprinted with permission from IGWB. Feature