Exit Revel, eight days early

Labor Day has taken on a cruel, new meaning in Atlantic City, where it will mark the closure of Revel‘s hotel. (The casino will stay open until dawn on Sept. 2.) This takes away eight days of employment that soon-to-be-jobless Revel workers were counting on. But, with Revel running low on money, perhaps this was to be anticipated. Obstacles to a sale are said to have included a freestanding, $36 million power plant that generates Revel’s heat, electricity, etc. And, as one expert says, “It was a hotel trying to support a casino.”

We’ve heard much about Revel’s bungled design and business plan, but it was also the right property for 15 years ago. As Cumberland Advisors Director of Fixed Income John Mousseau says with perfect
hindsight, “You want the casinos to be an accoutrement, not the main stuff. They’ve got a bad business model in terms of everything being based on the casinos.” Nobody would have said about Las Vegas, circa 1999, nor Atlantic City. People would have looked at you like you’re crazy. Vegas diversified its market appeal while it had the time to do so and Atlantic City frittered the chance away. For all its mass, Revel was too little too late.

As Mayor Don Guardian said, “We hit bottom and now we have to realize that we’re re-growing, and gaming is just going to be one part of our future.” One sign is growth in non-gambling revenues of $160 million in the past two years, bringing it close to an annual $1 billion. Those may not be Vegas-sized numbers but you have to start somewhere. As Guardian says, “If we’d done this 10 years ago, we wouldn’t even be having this conversation.”

* Next door, Dover Downs dodged a bullet by refinancing a $60 million line of credit. “The good news is the proverbial gun is not at our head today. The concerns we had about are we going to have to lay off people to pay [the debt] … we think that’s off the table for the period of the term of the loan,” said CEO Denis L. McGlynn, who says the track has been “stabilized” for the coming year (even if shares are trading at a record low).

The CEO credits a tax abatement from Delaware for the new lease on life. The state bailout gave Dover Downs the firmer financial footing that bankers wanted to see. Of course, the racino is still required to reach certain fiscal benchmarks. The line of credit also declines over time, down to $47.5 million — at which time we’ll be in a better position to judge Dover Downs’ long-term viability.

* Right now, Dover Downs has to worry about the impact of Horseshoe Baltimore, which opens Aug. 26. Smokers will be delighted to know that seven of the nine outdoor terraces have al fresco slot play. Heaters have been installed so that one can puff and play even in the dead of winter. For now, a couple of evenings of demonstration play — with the proceeds going to charity — will precede the opening.

The casino “which features plenty of natural light, views of M&T Stadium, a two-story video wall, a 25-table poker room, three restaurants and a ‘marketplace’ with familiar Baltimore brands. A brick facade and street lamps mimic the city’s look,” writes the Baltimore Sun. It sounds like a winner. It will be exciting to see what happens when it goes head-to-head with category-killing Maryland Live! The latter has Horseshoe beat for sheer volume of gambling capacity but perhaps the more atmospheric design (and urban location) of Horseshoe Baltimore will tip the scales in the latter’s direction.

* Here’s a little something for you tired businessmen out there.