Atlantic City Casinos Face Financial Crisis

Since gambling was first legalized in New Jersey in 1978, the casinos of Atlantic City have faced more than their fair share of obstacles. They have endured hurricanes, blizzards, and the collapse of a parking garage. Last year the casinos were even closed due to a State budget crisis, and more recently the city has been plagued by a serial killer targeting prostitutes. Despite all of this, gaming revenues at the casinos have always skyrocketed, increasing each year, until now.

Annual revenues for Atlantic City's casinos is projected to decline in 2007, for the first time ever. A number of factors play into this expected decline in revenues. Atlantic City currently faces increased competition from slot parlors in neighboring states, such as Delaware and Pennsylvania, as well as the closing of one of the city's casinos. It is also uncertain how much the new smoking ban will impact gaming revenues in Atlantic City.

Revenue figures released for the month of January are already down from 2006, triggering concerns that this could be the start of a trend that would carry forward through the rest of the year. If revenues do face a long-term decline, it would have negative consequences for both Atlantic City casinos and the State of New Jersey, which depends on taxes from casino revenues to support State budgets.

Carlos Tolosa, the Eastern Division President for Harrahs Entertainment said, "There will be an impact, no doubt. The Pennsylvania slots parlors will certainly cause competition. In the past, people just came to Atlantic City. That's the part that always scares you. Atlantic City relies on high frequency customers."

The new slot parlors in Pennsylvania have already begun to cut into Atlantic City's casino revenues. Atlantic City went head-to-head against two new Philadelphia area slot parlors in January. Financial figures for this period showed Atlantic City's overall revenues declining 2.9 percent from a year ago, with slot machine revenues specifically facing an even bigger 7.2 percent drop.