The Fate of Atlantic City Casinos and Online Poker Seems to be Bleak

Atlantic City, once the gambling mecca of the East, is suffering from the rapid closure of its casinos and Internet poker does not appear to be the answer.

Did you know that Jorryt van Hoof has the chip at the World Series of Poker main event? No? Don't worry you're not alone. In the past any poker enthusiast or spectator knew everything about the main event. Results were plastered in the media and most poker enthusiasts actually live streamed the event to see who was doing what. Moreover betting on the event was very high at most offshore sportsbooks. Odds to make it into the money, to make the final table and head to head matchups were common and very well played, but this year most sportsbooks didn't bother to post them at all.

"We had several props and matchups on our site for over a week prior to the main event but in the end we had two $20 bets and one $10 bet, hardly worth our efforts, one offshore bet manager told me. The bet manager admitted he saw a huge drop off in interest starting in 2010 but he was surprised just how little interest there is now. He said that play at the poker network his sportsbook is associated with is pretty much dead too."

"We keep the online poker product going for those who want it, but it's no longer a money maker for us."

But it's not just offshore gambling companies that are seeing a decline in poker interest. The number of poker rooms in Las Vegas and Atlantic City has declined to make room for the more popular and money making slot machines and interest in online poker in Nevada, New Jersey and Delaware is poor to say the least. In fact Governor Christie admitted recently that his expectations with regards to the Amaya Gamingamount of revenue online gambling (and particularly poker) would bring to state revenues were extremely overstated. So an insinuation at GIGSE by George Rover from the New Jersey Division of Gaming Enforcement that Amaya Gaming would likely be allowed to obtain a New Jersey license using the PokerStars name is bittersweet. To be clear, Mr. Rover never stated for certain that Amaya would get a license but he did indicate that bad actors are people and not companies or assets so the DGE's concern about Isiah Scheinberg, the PokerStars founder who is under indictment, wouldn't apply to Amaya. Obviously Amaya will be pleased at the news and undoubtedly will start looking into Atlantic City properties again so they can begin offering online poker under the PokerStars name in New Jersey (a physical location in Atlantic City is a requirement for receiving an online license), but any suggestions that the name alone will help them make a fortune in the state is just wishful thinking. After all, the WSOP name is extremely popular worldwide yet, while performing better than other sites, is hardly turning the state on its axis. Without question for Amaya the three states that will propel it to the next level are California, New York and Florida but the latter two are still in the discussion phase on how to proceed while the majority of California Tribes seem intent on ensuring that the PokerStars and Full Tilt brands are stopped from receiving a license when online poker is legalized there. And comments made by some tribal leaders seem to indicate that unlike George Rover they don't agree that the bad actor clause applies to a person and not a company.

As for which Atlantic City property Amaya will purchase to receive the online poker license, it seems that they are in the driver's seat. In 2011 the Rational Group had an agreement in principal to purchase the aging Atlantic Club casino but it was quashed after other casinos and trade groups like the AGA insisted that the casino not to sell to the Rational Group because of their past dealings in the United States and in the end the Atlantic Club casino was sold to Caesars. The Rational Group then signed an agreement in principal with Resorts Casino but had to back out of the deal after the DGE said that PokerStars could not apply for a license because of the indictment against Isiah Scheinberg. It appears it was at that point The Rational Group realized their future was dim in the U.S. and sought a buyer for the company. But whether the Resorts casino is still the best option for Amaya is under question. The Resorts casino is the oldest property in Atlantic City, but it is also very large with almost 1,000 hotel rooms and 100,000 square feet of gaming space. And it is almost certain that Amaya has no real interest in running a hotel and for that matter doesn't have a huge amount of interest in land based gaming in the city. Their main purpose for any interest in a property in Atlantic City is to get an online gaming license so they can offer PokerStars and Full Tilt to New Jersey residents. Most likely if Amaya could get away with it they'd buy an Atlantic City hot dog stand, put up one slot machine and all their servers. But of course Amaya has to either own a real property or set up a partnership and right now there are a slew of properties available.

Aside from the Resorts, Caesars announced it was going to close the Showboat casino and most recently Trump announced it would be closing and laying off staff at Trump Plaza. Unfortunately a partnership agreement with either of those hotels is unfeasible since Caesars and Trump already have partnership agreements in place with online gambling companies and it's unlikely either would want to sell their property to a competitor. The one property that is up for sale and could be appealing is the Revel. A newer property with a lot of potential the Revel would be a major purchase for Amaya but with almost 1,400 hotel rooms and 150,000 square feet of gaming space the hotel as a purchase would almost certainly be out of reach for Amaya. Moreover, the Revel closed its poker room in 2013 due to lack of interest. But Atlantic Citysince the Revel isn't teamed up with anyone for online gambling perhaps an arrangement could be reached between Amaya and Revel Entertainment which would allow the casino to stay open and benefit from the PokerStars and/or Full Tilt brand. There are some suggestions that Caesars may have agreed to close the Showboat because it plans on buying the Revel but if Amaya makes a better offer there is nothing set in stone. Another option for Amaya could be to just wait it out. One New Jersey analyst I spoke to told me that in his view there will be at least another half dozen operations closing soon.

So Amaya seems to be in the driver's seat whether they want to buy a casino or set up a partnership in Atlantic City, but the question that must be addressed at this point is why Atlantic City casinos are closing at such a rapid pace and whether the city really has a future. I spoke to many industry analysts on the issue and they point to 4 main reasons for the decline in interest:

First and foremost, they point to the fact that Atlantic City is no longer alone in offering casinos in the North-East. Atlantic City's early success was due to the fact that only Nevada had legal land based casinos so for people in states like New York, Pennsylvania, Connecticut etc. Atlantic City provided an opportunity to get a gambling fix without having to fly 3 to 4 hours to Nevada. And junkets and red eye flights from Canada, Michigan, Illinois etc. were the norm. In less than an hour someone could be on the ground in the city, have a very short drive to the airport, gamble all day and be back at the home airport in time to go back to work. Now, however, legal land based casinos are everywhere. In Philadelphia, the city has three casino options and there is talk of a fourth casino and Connecticut has the very popular Foxwood Resort and Mohegan Sun casino. Michigan has three casinos in or close to Detroit and in Canada there are four casinos and numerous slots casinos not far from Montreal or Toronto. In fact almost every northern state has a casino close by. So the appeal of Atlantic City in that regard has diminished considerably.

Second, Atlantic City is still very expensive. One of the appeals of Las Vegas has always been the cheap hotel rooms and meals and while prices have crept up, the average price of a Las Vegas hotel room is still nearly 1/3 that of a hotel room in Atlantic City. And for those who are really frugal one can often get a hotel room at a place like LVS or Circus Circus in Atlantic City for less than $30 a night.

Third, Atlantic City as a tourist destination still leaves a lot to be desired. Around the strip in Las Vegas, the city has done a good job cleaning up many of the run down areas and of course the Hoover Dam and Grand Canyon aren't too distant to travel but in Atlantic City aside from the boardwalk there is really nothing there. For all the money the state has made from gambling since the 1970s, they failed to invest much into the city itself. As a result one still takes their life into their hands if they venture away from the boardwalk and there is nothing for families, unlike Las Vegas.

Lastly, sports betting is still illegal in New Jersey despite attempts to receive an exemption to PASPA by Governor Christie and legislators in the state, and while interest in sports betting has declined somewhat in Las Vegas, sports bettors have no reason whatsoever to go to Atlantic City and instead will head to Delaware if they want some legal method of betting on games.

As a result it seems clear that Atlantic City will never return to its glory days and casino values will continue to decline and thus the future of the city is bleak. There is also a motion on the table to allow for casinos in upper state New Jersey to help it compete with closer casinos and if that happens it will spell an even surer doom for the city, especially if the law is changed to allow online gambling licenses to be available to companies with a physical location in one of those casinos.

So that said it has to be questioned whether Amaya would be wise into rushing into obtaining a property in Atlantic City whether by purchase or a partnership agreement. They need to look at the risks and rewards and determine whether they will ever get the money back from a property that is declining rapidly and a product (online poker) which has failed to live up close to its expectations in the state.

By the way there are 5 Americans, 3 Europeans and 1 South American at the final table at the WSOP. You still don't care? Once again you're not alone.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!

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