Inside Asian Gaming

February 2008 | INSIDE ASIAN GAMING Atlantic City’s Coming Transformation Reeling fromcompetition for penny-pinching slot players,Atlantic City is on the cusp of a Las Vegas-style transformation,reports the Las Vegas Sun . Last year, Atlantic City reported its first annual decline in gaming revenue since its first casino opened in 1978, but its fortunes could change with the development of several major new luxury resorts in the city. With only 11 casinos— and only one of them built in the past 15 years to the luxury standards of the Vegas Strip—Atlantic City is far from Las Vegas by any definition. When Boyd Gaming opened the Borgata resort with MGM Mirage in 2003, the resort soon became the biggest and most profitable revenue generator in Atlantic City. The Borgata is also attracting new, more discriminating customers who would not otherwise travel to Atlantic City. Though some wonder whether Atlantic City’s proximity to multiple gambling markets will make it hard for the city to rise much beyond its roots as a gambling fix for day trippers, others say the city is primed for Las Vegas-style growth. Among major new attractions coming to Atlantic City: MGM Mirage is planning a US$5 billion resort with at least 3,000 hotel rooms called CityCenter East; Revel Entertainment, with investment bank Morgan Stanley, is proposing an oceanfront resort with two hotel towers of 1,900 rooms each; Pinnacle Gaming, which bought and imploded the old Sands casino in Atlantic City, also envisions a major resort in the city. There’s already evidence that the Borgata’s non-gaming attractions are motivating customers to stay longer than one night. On the Strip, where non-gaming spending is nearly 50% of the total, fancy dinners, expensive baubles and elaborate entertainment are helping offset only moderate growth in gambling revenue. In Atlantic City, nearly 80% of revenue comes from gambling, though that number is as low as 65% at the Borgata. With the Las Vegas Strip becoming saturated and riverboat markets across the country becoming a more competitive place to make a buck, Atlantic City—which sits next to one of the largest and most dense affluent populations in the country, with New York on one side and Philadelphia on another—has become more appealing for long-term investors, analysts say. Atlantic City will add more than 2,000 hotel rooms next year, including 800 premium rooms at the Borgata’s upcoming Water Club addition, offsetting some of that new competition from Pennsylvania. The city will eventually offer a critical mass of attractions to lure customers from Pennsylvania’s more conveniently located casinos, Perkins said. 45 Briefs Casino Billionaires See Fortunes Shrink The slump in the share price of gaming company stocks, along with the fall in the wider market, has wiped billions from the fortunes of three billionaire casino investors. Sheldon Adelson, chairman of Las Vegas Sands Corp. (LVS), has seen the value of his shares in LVS drop by US$10.8 billion, or 40%, since October. His holdings in the company were valued at US$15.9 billion near the beginning of February. Mr Adelson, the third-richest American, was worth US$28 billion in September when Forbes magazine published its list of the 400 richest Americans. Kirk Kerkorian, the Los Angeles-based majority shareholder of MGM Mirage, lost US$4.6 billion, or about 30% of the value of his stock holdings in the world’s second-biggest gaming company. Forbes ranked Kerkorian at No. 7 on the Forbes 400 list with US$18 billion in net worth. Steve Wynn, chairman and CEO of Wynn Resorts, has seen the value of his stock holdings in his company decline by one third, or US$1.4 billion, since Wynn Resorts hit a high in October.Wynn had a net worth of US$3.9 billion and ranked 86th on Forbes’ list of the 400 wealthiest Americans. The stocks of LVS, MGM Mirage and Wynn Resorts, which have similar markets, swung from being overpriced in October to being underpriced more recently, said Bill Lerner, an analyst with Deutsche Bank Securities. Wall Street in October assumed that the three companies would operate and develop new projects with perfection, but, since then, investors have started assuming less-than-perfect results, Lerner said. Investors are concerned that consumers have less discretionary income to spend on gambling and vacations. Shares in all three companies hit 52-week highs in October. The calculations of the three gaming executives’ losses are based on their stock ownership as reported by Yahoo! Finance . Adelson directly held 185 million shares of LVS as of March 2006, the website reported.Kerkorian’sTracinda Corp.owned 154million shares of MGM Mirage in August.Wynn owned 24 million shares of Wynn Resorts as of May, according to the site. Sheldon Adelson