The Atlantic City economy has bore the brunt of of the financial crisis which 2020 has brought about as the hotel and leisure industry has faced mass losses in revenue. For context, MGM alone have posted operating losses of $1 billion in Q2 this year. That is quite something compared with a $371m operating income they posted at the same time in 2019.
There is some bright news on the horizon for AC residents and business owners however as Caesars Entertainment Inc. have announced plans to invest $400 million into the Atlantic City economy across the next 36 months.
This news of course comes at an important time for the city which is reeling following the forced closure of multiple hotels, casinos, restaurants and smaller businesses. This investment plan is tied to the $17.3 billion acquisition which we reported on last week, by Eldorado Resorts Inc, which merged with Caesars Entertainment Corp. on June 26. Caesars is a brilliant acquisition for Eldorado, and it boasts many physical casinos as well as their online casino which we reviewed here.
The New Jersey state of regulators have made what appears to be a masterstroke with the regulations involved with this acquisition. We wrote last month about the deal getting FDC approval, with these regulations being key to that.
The group have agreed to invest the money in its 3 properties which should breathe new life into the Atlantic City economy and its struggling Boardwalk. This capital expenditure proposal will include investment of at least $150 million into Caesars Atlantic City, the Tropicana Atlantic City and improvement made to Harrah’s Resort Atlantic City.
Prior to the approval of the merger regulators from the Division of Gaming Enforcement (DGE) filed a report which went into detail around the severe lack of investment in Caesar’s AC. The report also mentioned the lack of investment Bally’s Casino which is currently pending the completion of a sale to Twin River Worldwide Holdings for $25 million. In both cases the DGE sought to show that both casinos spent less than the city’s two smallest casinos, the Golden Nugget and Resorts Casino Hotel.
Quirk of Fate
On the face of it this may appear to be the state’s way of boosting the struggling Atlantic City. On closer inspection however it is clear that the stars have aligned. Indeed had this deal gone through last December it would likely have featured the same regulations. With this being said it can’t be ignored just how much the Atlantic City economy needs this right now.
There has been a lot of criticism of Caesars in terms of their approach, or lack of, towards Atlantic City. Caesars Entertainment Chief Financial Officer Bret Yunker has spoken about this following the approval of the merger:
“Once they got out of bankruptcy (in 2015), they really were focused on Vegas and a handful of targeted regional markets, but, unfortunately, Atlantic City got the short end of the stick there.”
This will however be rectified and the capital expenditure plan from the DGE includes $160m in renovating hotel rooms, $16m for food and beverage improvements and $63m for projects yet to be named.
Ride The Wave
This investment in these 3 casinos will bring about a hotbed of activity in the area which will breathe new life into the city and the Atlantic City economy. With renovations comes jobs, which brings more people into town, earning money and spending it in local businesses, the local economy will do very well from this. Beyond this there is also the added appeal which this will bring to AC.
Jane Bokunewicz is the coordinator working out of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University. Bokunewicz spoke to the Press of Atlantic City and she had this to say on the investment plans:
“… depending on how creative they get with their investments, it could be something spectacular that would attract people to the market.”
Atlantic City has long wished to rise to the levels of Las Vegas and this mass investment will have come at the perfect time for them to take another step up. The fact that this is a required investment which has been agreed upon by Eldorado, it is highly likely that outside investors will see this as the perfect time to invest in New Jersey and Atlantic City in particular.
Usually promises of investment are met with suspicious minds until money is spent, but this time it is different.