Vegas East
Time Magazine Sunday, Jul. 2, 2006
Vegas East
Jersey’s dowdy seaside gambling mecca is making a play for shops and fine dining. Sound familiar?
By BARBARA KIVIAT/ATLANTIC CITY
Like many before him, Sheldon Gordon came to Atlantic City, N.J., confident that he would win big. Standing on a glass walkway between his new beachfront shopping mall and Caesars casino, he surveys a boardwalk full of people on a humid June afternoon and says, “There’s no mall in America that has this amount of traffic on a Monday.” If he were playing poker, Gordon’s face would be a dead giveaway: he is obviously quite happy with his hand. At the end of the walkway is the Pier, a $210 million green glass complex holding 90 shops, 10 restaurants, two nightclubs, a wedding chapel and a three-story, $8 million water-and-light show. “This is going to dramatically change Atlantic City,” Gordon says.
It’s about time. Real estate developers and casino companies are plowing billions of dollars into low-rent Atlantic City–known for day-tripping seniors, nickel slots and giveaway buffets–in an attempt to reinvent the resort town as a Las Vegas–style destination packed with shows, shops and celebrity chefs. The folks in Jersey see no reason why Vegas should have a lock on garish spectacle and conspicuous spending.
Last week the first stores in the Pier opened, as did a $200 million expansion of the Borgata casino hotel that includes restaurants by star chefs Wolfgang Puck, Bobby Flay and Michael Mina. “People want to do more than gamble,” says Pam Popielarski, president of the Tropicana casino hotel, which opened its complex of stores, restaurants and IMAX movie theater, dubbed the Quarter, in late 2004. “They want entertainment.”
It wasn’t until the 1990s that Las Vegas figured out that people couldn’t gamble 24 hours a day and that despite the house’s best efforts, they still had disposable income to spend outside the gaming halls. Gordon was there when blackjack met Louis Vuitton and Cirque du Soleil. His Forum Shops at Caesars Palace were a catalyst for transforming Sin City into Shop City; today those stores are among the top grossing in the country on a dollars-per-sq.-ft. basis.
Atlantic City toyed with a similar move for years but couldn’t give up its profitable day-tripper business model. Yet the opportunity was evident. Last year tourists made about as many visits to Atlantic City as to Las Vegas (34.9 million, vs. 38.6 million) and spent a comparable amount of money gambling–$5 billion at Atlantic City’s 12 casinos, vs. $6 billion at the 42 casinos on Vegas’ Strip. But the Strip’s casinos brought in an additional $6.9 billion from nongambling sources, while Atlantic City’s drew just $1.3 billion. All in, tourists dropped $36.7 billion in Vegas; Atlantic City’s take was one-fifth of that. Billions, it seemed, were being left on the table.
A mix of tax breaks for nongambling development, the competitive threat of slots in neighboring states and the 2003 opening of the first new casino in 13 years finally kick-started the city. Borgata, with its scantily clad cocktail waitresses and $150 dinners, raised the ante for the industry. “It’s kind of like when Steve Wynn opened the Mirage,” says chef Flay, referring to Vegas’ first megacasino, which opened in 1989. After Wynn made a volcano, everyone built over the top.
The year after Borgata opened, the Cordish Co., a mall developer based in Baltimore, Md., opened the Walk, a string of outlet stores; the Tropicana’s Quarter also got going. House of Blues started bringing in hip acts to the Showboat casino, and Atlantic City’s nightlife began to surge as rap star Jay-Z and others opened clubs. A slew of room expansions was announced, filling a major need in Atlantic City, which with only 18,000 rooms (compared with 133,000 in Las Vegas) can’t accommodate big conventions. At the same time, a real estate boom in once dumpy shore towns from Long Branch to Asbury Park was spreading south. The Atlantic City development angered some homeowners and small businesses whose property stood in the way. But in a town where more than half the city budget comes from property taxes on casinos, things have a way of progressing.
And progress they have. At the Tropicana, nongaming revenue, including from hotel rooms, jumped 55% in the first year after the Quarter opened. At the same time, gambling revenue increased 21%. Not surprisingly, the longer people stayed, the more they played.
Success like that is spurring growth. In March Morgan Stanley said it would buy boardwalk-adjacent property and look for a partner to build a casino. Bally’s and Caesars are about to announce expansion plans. Trump Entertainment Resorts, recently out of bankruptcy, is seeing salvation in building more rooms and converting its pier into a retail-and-entertainment complex. And MGM Mirage, which owns land next door to the Borgata, is advancing its timetable for building a massive complex of rooms, condos and retail. “It’s no longer a question of if,” MGM Mirage CEO Terry Lanni said recently. “It’s a question of when.”
It all sounds very promising, but since gambling arrived in 1978, Atlantic City has been up and down more times than the roller coaster that once occupied the pier where Gordon built his mall. In the late 1990s, five casinos were on the drawing board. Only one got built.
This time around, things are different, says Gordon. “Atlantic City wasn’t ready,” he says as he eats lunch at Evo, a white-linen restaurant at Trump Plaza that, Gordon observes, is a marked improvement over the joints he used to frequent in the mid-’90s. “Right now, Atlantic City is the same as Las Vegas was 15 years ago,” he says. “This is as close as I’ve come to a sure thing. It’s no gamble at all.” Which is why he’s betting the house on it.
