Atlantic City casino health has ‘deteriorated’ says gaming analyst

In a side note to my column this morning about the state of the Atlantic City gaming market, a New Jersey State Senate committee on tourism met last week to discuss several bills, including a measure that would allow smaller, boutique-style hotel-casinos to be built along the Boardwalk.

Bill Lerner, a principal in Las Vegas-based Union Gaming Group, was asked by the committee’s chairman to testify on the proposal. Lerner said that despite opposition from Atlantic City’s 11 large hotel-casinos, the state should allow smaller properties.

“The health of your casino licensees has materially deteriorated,” Lerner said, providing a laundry list of statistics showing marked declines in cash flows and investments. “Each of these metrics has shrunk in each of the last three years and 2010 is trending similarly. I estimate that Atlantic City gaming revenues will ultimately shrink to $3.5 billion from a 2006 peak of $5.2 billion.”

Lerner said capital markets have changed direction and are not willing to fund the construction of large casino resort projects in older U.S. gaming markets.

“The point in my opinion is that you have an opportunity to help resolve your deepening Atlantic City issue through sensible private investment that could actually stimulate growth in the revenue base,” Lerner said. “This may also encourage new investment from existing casino resort operators. Doing nothing doesn’t appear to be a viable option.”