North Jersey casinos may do well, but NYC competition looms
EAST RUTHERFORD, N.J. (AP) — If New Jersey follows through on its plans to allow two new casinos in the New York City suburbs, analysts and gambling industry officials agree they could be among the most successful in the country.
But some also caution that the casinos, intended to recapture gamblers who have been abandoning Atlantic City for neighboring states, could face their own difficulties if — as widely expected — New York allows a casino across the Hudson River in Manhattan. The New Jersey casinos in turn could wreak havoc on older casinos in New York, Pennsylvania and Connecticut, all of which are now drawing gamblers away from New Jersey.
New Jersey is moving forward with plans to ask voters in November to approve two new casinos in northern New Jersey, more than 70 miles from Atlantic City. Although locations have not been specified, the two proposals most often mentioned are at the Meadowlands Racetrack in East Rutherford, where the NFL's New York Jets and Giants play, and one in Jersey City, the state's second-largest city, directly across the river from Manhattan.
Jeff Gural, who runs the Meadowlands and is partnered with Hard Rock International Inc. on the casino proposal, said 14.6 million people live within 50 miles of his track.
"I think we'd do great," he said. "We have the best location for a casino in all of America."
The other casino proposal comes from footwear magnate Paul Fireman, who has declined to discuss his $4 billion to $5 billion Jersey City proposal.
Gural estimates a Meadowlands casino would take in $800 million to $900 million a year from gamblers, ranking it among the most successful in the nation. Some analysts think a Meadowlands casino could exceed $1 billion in annual revenue, at least before it has a nearby competitor in northern New Jersey.
The appeal of new casinos is undeniable to New Jersey officials, who watch with dismay as Atlantic City's casino industry crumbles, whittled away by ever-increasing competition in nearby states. In 2006, when the first casino opened in Pennsylvania, Atlantic City's casino revenue was $5.2 billion. Last year it had fallen to $2.56 billion, and four of the city's 12 casinos shut down in 2014.
Peter Trombetta, an analyst with Moody's Investors Service, thinks the north Jersey casinos would do well — but at someone else's expense. In addition to harming Atlantic City, the new casinos could draw customers away from casinos in eastern Pennsylvania, New York and Connecticut.
"Given where that's located, in terms of access to a substantial population base, we think they actually could do pretty well," said Trombetta. "Any time you cut off access to competing casinos and offer a good product, people will go there instead of where they used to go. If I were Atlantic City, if I were Connecticut, I'd be nervous. All of the surrounding markets would be affected.
"But we look at gaming as a zero-sum game," he added. "If they built that, I don't think it would grow the market."
New Jersey Assemblyman Chris Brown, an Atlantic City-area Republican, makes the same point in opposing casinos elsewhere in the state.
"The market is simply oversaturated," Brown said. "All we're doing by opening a new casino is shuffling the deck and moving people who are already gambling to a new spot."
A major wild card is the possibility of a Manhattan casino, which could be approved as soon as December 2022, according to the New York State Gaming Commission. Allowing two years for construction, a Manhattan casino could open just as the north Jersey casinos would be hitting their stride. New York City already has one of the top-earning casinos in the nation at the Aqueduct Racetrack in Queens, which offers only slot machines but still won $816 million from April 2014 to March 2015.
"You're going to assume the competition is going to go after your market if it's close by," said Moody's analyst Keith Foley. "If New York state sees north Jersey casinos are doing very well and taking visitors from Manhattan, if they put a casino in downtown New York City, that'll cut that traffic off coming into north Jersey."
Steve Norton, a former Atlantic City casino executive who now runs a consulting company, estimates the two north Jersey casinos would do a combined $1.5 billion annually.
If Manhattan opens a casino, "they'll lose share, but still be profitable," he said.
Gural doesn't believe New York will ever locate a casino in Manhattan and is unconcerned with the cautions voiced by Wall Street analysts.
"They are the same people that said it was a great idea to build Revel," he said, referring to Atlantic City's $2.4 billion casino that opened in 2012 and closed in 2014. "Why would you ask them about anything? Where were they five years or even seven or eight years ago raising warning signs about Atlantic City when anyone with even half a brain could have told you what was going to happen?"
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