Before going too far into this, here are a few key facts people should understand about what the Revel bankruptcy filing means:
Revel opened with the idea that it would be a resort that happened to have a casino. Imagine the Atlantis in the Bahamas without the good weather, dolphins and water park. The idea was that non-gamers from New York would drive 3 hours to eat at good restaurants, go to nightclubs and relax in a nice spa. Reflect on that one for a moment. Why would one leave New York City for restaurants, nightlife or a spa? Perhaps it would be an interesting get away once a year but that is about it. They were able to have some success when they hosted mega events like Beyonce’s comeback concert post the birth of Blue Ivy. The place was packed that weekend. Unfortunately there are not enough events like this to get people from New York to make the drive.
The other issue with this strategy is that it leaves Revel empty during the week. Their answer to this was to build a convention center with the hopes of attracting big conventions (they are the only real convention space in Atlantic City). It is no surprise that event coordinators across the country haven’t been jumping through hoops to book their conventions in Atlantic City.
Revel is beautiful. When one walks through the resort, it is apparent that a lot of money was spent (maybe not $2.4 billion but still a lot of money). The rooms are very nice as well – imagine a W room but more luxurious. There is one issue that absolutely kills Revel and its ability to generate real gaming revenue – the escalators. The escalators kill the casino in a few ways:
Atlantic City economy
Atlantic City is really struggling. Back in the Boardwalk Empire days, it had a monopoly on east coast gambling. Since then, both of the big feeder states have legalized casinos. Pennsylvania has large resorts with slots and table games. New York City has a casino with slot machines and video table games (most New Yorkers don’t know this but there is a casino out by JFK airport). This has put an immense amount of pressure on Atlantic City. Why make the long drive when a casino is a subway ride away? There are just too many casinos and rooms in Atlantic City. Facilities like the Borgata have been able to survive (although performing worse than they used to) but it has gotten more difficult. Hurricane Sandy did not help the situation but the good news is that the city has survived and the casinos are all up and running business as usual.
It is actually fairly simple. They need to revamp their strategy and focus on real gamers. They actually started this process months ago by beginning the blocking and tackling that all good casinos do: marketing, comps, special prize drawings, accessible food options, etc. Making Revel a destination is fine but their core has to be the gamer. They need to take a page from Steve Wynn’s book. He has a core set of gamers that drive his gaming revenue and overall success. His icing and cherry on top are the masses of party kids who come in for his beach club and famous DJs. Revel also needs to get its beach club open on time. This could be a real draw as there is nothing like it on the east coast. New Yorkers will take the ride down to party on the beach with top DJ talent. That being said, bringing in the core gamer is the only way they are going to move from that $8 million a month in gaming revenue to $60 million a month (or even $30 million).
The other key thing that needs to be done but probably won’t happen unless the casino continues to fail – fix the escalator/elevator situation. They can keep the escalator there but need figure out a way to get the elevator to go from the hotel room floors to the casino floor. People have said that the fix is possible. Even if it costs hundreds of millions to fix, it is still worth it given how much money they are hemorrhaging right now. They also should create a smoking room somewhere on the casino floor. Smoking is bad for you but if they want to compete with Borgata and Showboat, they need to accommodate the smokers in some way. By having a separate room for smokers they can do it without harming everyone else.
The Atlantic City economy is not something the folks at Revel can control. The answer to this one is quite clear – several casinos need to close. There is just too much supply. Trump Entertainment just sold the Trump Plaza for a paltry $20 million. The owners of Revel would have been well served to pony up that $20 million and send in the demolition crew. If Atlantic City can get to the right amount of rooms, there is no reason why it can’t be a steady maybe even thriving economic center for Southern New Jersey.