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Atlantic City: The New Las Vegas?

Jonathan Kandell
From the Print Edition:
Rudy Giuliani, Nov/Dec 01

(continued from page 1)

Harry usually flies here on a plane chartered by the Taj. But most of the nearly 34 million annual visitors to Atlantic City arrive by ground transportation, about a third of them by bus. These visitors are just plain folks like the widows Dotty and Mary Lou from Brooklyn, who twice a month spend a day here (a three-hour bus trip each way and five hours in the casinos). It's a Tuesday morning when their motor coach, packed with aging blue-collar and barely middle-class men and women of every race, crosses the bridge into New Jersey. For the next two hours, there is silence aboard. But then from the wetlands, a flock of white herons explodes into flight above billboards of Johnny Mathis, Barbara Mandrell and other perennials of the gambling circuit. The towering casinos, incongruously large for a city of 39,000 inhabitants, come into view, and a buzz of excitement stirs the bus for the final 30 minutes as gamblers talk about their favorite slot games and their budgets. "We won't lose more than $50 apiece," says Dotty, 76. "If the money's gone, we'll walk the Boardwalk until it's time to go home." She and Mary Lou play only the slots because they are too intimidated by more experienced players at the card, roulette and craps tables. The bus pulls into Bally's. Instead of a "player development exec," a "greeter" climbs aboard and hands out bonus packets of free-meal slips and coins for the slots.

A quarter-century after New Jersey legalized gambling, Atlantic City is itching to morph into a classier gambling mecca that will attract more Harrys and fewer Dottys and Mary Lous. But the simple reality that Atlantic City already has nearly as high gambling revenues as Las Vegas makes everyone a little nervous, and more than a little protective of the status quo.

"When I tell people this -- even smart businessmen -- they look at me like I'm crazy," says Donald Trump. "So we have to be doing something right."

But Las Vegas, as Trump well knows, makes almost half of its total revenues in nongambling operations -- hotels, food and beverage, entertainment and shopping -- while the comparable figure for Atlantic City is only 20 percent. "We have to redesign ourselves like Las Vegas did and become more of a destination resort," says Speros A. Batistatos, president and chief executive officer of the Atlantic City Convention & Visitors Authority. That means many more hotel rooms, activities that can attract nongambling family members, and a lot more flights into Atlantic City's vastly underused airport. It also means overcoming a deep-seated image problem as a second-rate town. "If there were a slogan for Atlantic City," says Jason Ader, a gaming, lodging and leisure industry analyst for Bear, Stearns & Co., "it might be the words of comedian Rodney Dangerfield: ëI don't get no respect.'"

It is in light of Atlantic City's tremendous desire to be taken seriously as an eventual Vegas-style destination resort that the campaign mounted by casino operators and other boosters can best be understood. Decayed housing and similar signs of urban blight have been demolished and replaced with $200 million in new, publicly subsidized residences and green spaces. The entrance to the city has had an $85 million makeover so that visitors are now welcomed by waterfalls and fountains and a 90-foot-tall laser lighthouse. A $268 million convention center, second in size only to New York's Jacob Javits Center in the Northeast, opened four years ago. And this past July a $330 million tunnel was opened, considerably easing traffic flows.

In terms of private investment, the most visible evidence of a new era will be The Borgata, a casino resort jointly owned by Boyd Gaming and MGM Mirage that is scheduled to open in the summer of 2003. The Borgata hopes that it will attract more upscale players than the usual Atlantic City casino resort. "We did a lot of market research and focus groups," says Boughner, The Borgata's boss. "What we heard at all levels was that people wanted to trade up." They wanted more hotel rooms, better meals and shows, even luxury goods stores -- in short, something to do in Atlantic City besides gamble.

The public clamor, apparently, was so great that The Borgata redrew its blueprint, almost doubling its hotel space to 2,010 guest rooms, raising a rose bronze, 40-story tower and fitting in 11 restaurants, a spa, boutiques and three acres of gambling space. Even before ground was broken, The Borgata -- which means "hamlet" in Italian -- had outgrown its name and its original Tuscan village theme. "We now see its design as a juxtaposition of traditional Tuscany and modern Milan," says Boughner, who has hung a framed motto on the corridor wall outside his office that reads: "The chief enemy of creativity is 'good taste.' "

Boughner, a brawny 48-year-old New Yorker who headed to Las Vegas as a teenager and stayed, talks with the MBA vocabulary that casino operators affect nowadays. When he remembers the magic moment that persuaded him to become a casino executive -- the very first time he emptied the slot machines at a Vegas hotel -- he makes it sound like an accounting experience: "I could see the economics of this business was pretty compelling." To explain why Atlantic City casinos must be prepared to invest money in classier boutiques, restaurants and entertainment, even though returns from these luxury businesses will be less than those from gambling, Boughner uses the analogy of a supermarket. "Snack foods provide the highest profit margins and the butcher section the lowest," he says. "But unless you deliver the entire retail experience, you risk losing customers. If you don't offer sirloin, you won't get a chance to sell the Doritos."

Perhaps because he has seen cycles of growth and stagnation in Las Vegas, Boughner views the desert casino capital as something less than an infallible model for Atlantic City. He thinks the image of Vegas as a family destination is overblown. The amusements and nurseries created for young children are gone or going. "Strollers and rollers don't mix very well," he says. Rather than repeat Vegas's mistakes, he believes that Atlantic City should aim for a different family clientele -- baby boomers who will invite their aging parents for a two-day gambling and spa experience at a place like The Borgata.

For a long time, Trump was The Borgata's personal nemesis. For two years, his lawsuits delayed the tunnel project on which The Borgata's construction was predicated. Trump claimed he opposed the spending of municipal and state money on a project that would directly benefit a casino -- an interesting piece of reasoning since his own three casinos along with those of other operators have long benefited from tax breaks and public projects. Probably a stronger motivation for Trump was that his arch rival, Steve Wynn, the Vegas casino king who was planning a Mirage resort called Le Jardin Palais next to The Borgata, would have been the prime beneficiary of the tunnel. Also, Trump's casinos are burdened with so much debt -- $1.7 billion in junk bonds and other high-interest loans -- that after debt service little is left over from gambling revenues to carry out the expansions necessary to compete with amenities offered by The Borgata or the casino resort Wynn had in mind.

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