Atlantic City: Low prices and high dudgeon

That shriek of dismay you hear from the direction of Atlantic City is the screech of hotelier Curtis Bashaw (left). What is the cause of his umbrage? The discovery that a hotel room in A.C. can be had for as little as — brace yourselves — $19. Get over it, Curtis. Out here, I can book a room at Circus Circus for $22/night, so I find it difficult to be appalled. Besides, isn’t this the free market at work? Would you prefer price controls? Bashaw has chosen to “go dark” midweek, which ought to save him a bundle on wages and especially on benefits. As you’ve probably guessed already, the lowballer in question is good old ACH. In order to get the $19 room, you have to pay in cash. (That’d also be a neat way for owner Colony Capital to squirrel money away from creditors, but I digress.) ACH COO Michael Frawley seems a realist but draws this snort of disapproval from Bashaw: “If we want to be the Walmart of gaming destinations, then maybe this pricing strategy makes sense.  As a whole, the town leaves money on the table by lowering rates to such a pathetic level.” Dude, you’re already “the Walmart of gaming destinations” and the only money left on the table via artificially high ADRs are the dollars that will be played on the green felts of Pennsylvania and in the VLTs of New York City instead.

All this pouting and foot-stomping (and Bashaw has like-minded allies at other non-gaming hotels) is typical of the fractious, do-nothing mentality that has dogged the Boardwalk for the past 15 years or more. Execs like Courtyard by Marriott GM Hugh Chandler are going to be feeling downward pressure on their room rates from both above and below. Borgata is spending $50 million on a hotel upgrade — and it sounds like some of the improvements are well overdue — which should maintain Boyd Gaming‘s competitive edge amongst those who want to spend real money in Atlantic City. Nor do Bashaw, Chandler, etc. seem to be taking into account the supply shock that will occur when Revel opens, even if those $329/nights rates are unlikely to last.

Caesars Entertainment, meanwhile, has derailed the ACES train that shuttled passengers from Gotham to the Boardwalk. Caesars has a bigger stake in A.C. than anybody else but decided this was one “loss leader” it decided it could do without. One could call it a casualty of the company’s financial straits or the first victim claimed by Resorts World New York. But the bottom line is that it was costing New Jersey taxpayers millions in subsidies each year, making it an expendable luxury in hard times. Obviously, you have to spend money in tourism promotion to make money off tourists, but ACES’ cost reiterates the question, “What price Atlantic City?”

Blackjack players threw down a big February loss ($4.5 million) on Tropicana Atlantic City, which put a whammy on overall Boardwalk numbers, down 6% last month. Had the Trop not gotten its clock cleaned (-27%, year over year), the market would have been only 3.5% down. Borgata had a very lucky month (+33%) at the tables, bucking a citywide trend and contributing to a 7% Borgata revenue increase overall — very impressive considering that it had been up 3% the same time last year. Harrah’s Marina (4%, right) and the Golden Nugget (18%) were the only other gainers. Even Resorts Casino Hotel‘s comeback trail hit some rough sledding, down 10%. The value message at ACH can’t be promulgated soon enough, for was down 25% year-to-date and its grosses fell below the $8 million mark in January. Scraping by on $9 million was Trump Plaza, down 22% and doing God only knows what to the bottom line of Marc Lasry‘s two, Trump-branded casinos. If ACH and the Plaza keep going at their current pace, the $19/room problem will take care of itself.