United Airlines departure from Atlantic City a setback to city’s recovery plan

As Gov. Chris Christie and local and state officials gather in Atlantic City today to discuss the struggling community’s future, they are reckoning with a new bit of bad news on top of the numerous blows the region’s economy has taken recently.

The latest setback to the effort to rebrand the city as a general-interest tourist destination was United Airlines’ announcement on Friday that it will end flights to Atlantic City International Airport from Chicago and Houston on December 3, just eight months after launching the service.

The routes “didn’t meet our expectations” and “are no longer sustainable,” the airline said in a statement. The move leaves low-budget carrier Spirit Airlines as the only commercial airline flying into Atlantic City International.

Christie said on Monday that he had no advance notice of United’s decision and would “like to have a deeper explanation than the one I have gotten so far, which is none.”

Enticing tourists from around the country to fly or drive to Atlantic City for conventions, shopping, the beach and the boardwalk is key to the state’s plan to save the local economy. The effort predates the crisis that hit this year, and it appears to be paying off, with nongaming revenues increasing $160 million in the past two years to nearly $1 billion.

However, it is far from clear that the new sources of revenue and employment will be able to fill the huge void left by the declining gambling industry. The strategy will get its big test next year, when a new conference center, a giant Bass Pro retail center, and a major new ride at the Steel Pier amusement park will debut, giving more substance to the city’s claim that it can entertain a much wider range of visitors.

Atlantic City’s betting parlors have been losing business for years in the face of competition from casinos that have sprung up in New York, Pennsylvania, Delaware, and other states. In September the city saw its fourth casino closure of the year, and monthly gambling revenues slumped to $199 million, down 17 percent from the same month last year, according to the state Division of Gaming Enforcement.

“Atlantic City’s mission is clear: diversify,” Mayor Don Guardian wrote in a recent article. “Atlantic City will always welcome gamblers, but we must do more to attract a wider array of visitors, particularly as legal gambling options proliferate.”

Casino gambling earnings dropped to $2.05 billion in the first nine months of 2014, 7.5 percent less than in the same period of 2013. New Internet gaming options have brought in an additional $94 million so far this year, less than boosters had predicted but enough to pare the loss in total gambling revenues to 3.2 percent.

Gambling revenues totaled just under $2.9 billion in 2013, a steep tumble from a high of $5.2 billion in 2006.

The resulting loss of tax revenue has hit the city budget hard. As casinos have lost value and their owners have won tax appeals, homeowners have seen their property taxes shoot up 53 percent in two years. Senate President Stephen Sweeney (D-Gloucester) on Monday presented a proposal to shift some $30 million a year from the Casino Reinvestment Development Authority to tax relief for residents.

Fewer Drivers, Fewer PassengersThe falling profits reflect a steady leakage of annual visitors. From a recent peak of nearly 35 million in 2005, individual visits to Atlantic City fell below 30 million in 2010 and under 27 million last year, according to the CRDA.

Visitor numbers for 2014 are not available yet but are expected to come in even lower, as suggested by the casino revenue figures. Traffic on the Atlantic City Expressway was down 2 percent in the first nine months of the year, compared with the same period in 2013, and the number of casino bus passengers plunged 16.5 percent, according to the South Jersey Transportation Authority.

Atlantic City International Airport is actually seeing more passengers than last year, but that may reflect the recovery from Hurricane Sandy rather than a long-term trend. From January to September, 935,604 passengers used the airport, up 8 percent compared with the same period last year, according to the South Jersey Transit Authority. But passenger numbers are still well below 2012 levels, when more than 1.1 million flew through the facility.

Low demand led to United’s decision to pull out of the airport, despite potential subsidies offered by the CRDA and other enticements. This year the CRDA created a $5 million “risk-abatement” grant program designed to attract airlines to Atlantic City International by reducing their operating losses. United had been eligible to apply. The agency also budgeted $2 million over two years on destination marketing for new airlines.

United had reportedly agreed to establish the new service in exchange for a commitment by the Port Authority of New York and New Jersey to extend the PATH train line to Newark airport, though Friday’s announcement suggest that reports may have been incorrect. Christie played a key role in the deal, pushing the Port Authority commissioners to make sure their long-term capital plan included the PATH extension, and encouraging the Port Authority’s takeover of Atlantic City airport last year.

Some analysts have questioned the relationship of airport traffic to the resort economy, saying that most gamblers and tourists live within driving distance and the airport is largely patronized by other travelers. But Mayor Guardian and other city boosters argue that convenient nationwide and possibly international access to Atlantic City via the airport is essential to its rebranding as a general leisure resort.

Non-gambling Visitors Slowly IncreaseThe casino closures began in January when the bankrupt Atlantic Club shut its doors, followed by Showboat in August, and Revel and Trump Plaza in September. Eight casinos remain, though investor Carl Icahn, who holds a large stake in the Trump Taj Mahal, has said the casino will close in December unless it receives a large state tax break.

The resulting jobs losses have devastated the city and the region, which have depended on gambling and hotels as steady sources of union employment. Nearly 8,200 casino jobs have been lost so far, out of a leisure and hospitality industry workforce in the Atlantic City area that averaged 46,700 workers last year. Another 3,100 jobs could be eliminated next month if the Taj Mahal shuts down.

Many of the jobs appear to be permanently lost as the gambling industry downsizes, though reuse of the former casinos could generate new employment opportunities. Brookfield Asset Management, the buyer of the two-year-old Revel, plans to reopen the building as a casino, and Stockton College is considering opening a campus in either the former Showboat or Atlantic Club.

Additional new jobs, as well as tax revenue and other economic benefits, will have to come from faster growth of noncasino businesses, state and local officials say. While renewed efforts to get people into the city for reasons other than gambling are working, they are in the early stages and the impact is relatively small.

The city’s Boardwalk Hall concert and event venue, for example, has seen an uptick in concerts and other events, including the Miss America competition, which returned to the hall after a nine-year absence. A boxing match last week was attended by several thousand fans. The venue drew more than 320,000 attendees in the 12 months ending in September, a 34 percent jump from the same period a year earlier.

Over the summer, some 130,000 people came to free concerts by Blake Shelton and Lady Antebellum that were sponsored by the Atlantic City Alliance, a casino-funded marketing group.

A number of other popular performers are scheduled to play at Boardwalk Hall in the next several months, including Usher, Linkin Park, Fleetwood Mac, Miranda Lambert and The Who, and more free concerts could be on tap for next summer. The CRDA will pay Live Nation Entertainment an incentive of up to $500,000 for booking 12 or more events at Boardwalk Hall per year.

The Atlantic City Convention Center is also reporting increased activity, with the number of event attendees jumping 25 percent to almost 377,000 in the past 12 months, even as the building has hosted slightly fewer events. Attendees’ spending rose by a similar percentage to $150 million.

The convention center so far has 33 medium and large events scheduled for the next 12 months that will draw 318,000 people, according to the website of the Atlantic City Convention and Visitors Authority. The largest are the Progressive Atlantic City Boat Show, with about 36,000 attendees; the Atlantic City Classic Car Show, 32,000 attendees; the annual New Jersey Education Association meeting, 35,000; and the AC Boardwalk Con, a comics and cosplay event expected to bring in 55,000.

To help boost convention business, the Atlantic City Alliance is providing up to $1 million a year in incentives to bring first-time meetings to the city.

Atlantic City’s non-gaming revenue now amounts to nearly $1 billion a year, according to the CRDA. That compares to gambling revenues that could fall to as low as $2.7 billion this year.

New Conference Space, Stores and AttractionsThe CRDA, which uses a percentage of casino revenues for community and economic development projects, is committing hundreds of millions of dollars to the new vision of Atlantic City.

One of the CRDA’s biggest current investments is $45 million for Harrah’s new Waterfront Conference Center, a $126 million project that will offer 100,000 squarefeet for small and midsize business conferences when it opens next year. The state Economic Development Authority is providing another $24 million in incentives over 20 years. The conference center has so far booked 25 events, including a 1,400-person trade show that UniPro Foodservice of Atlanta will put on next October.

To help build a Bass Pro shop downtown, the CRDA gave the developer a $5 million plot of land, and the retailer a $12.3 million construction loan and $11 million in sales tax rebates over 11 years. The 86,000-square-foot store will have an aquarium and boat showroom when it opens in 2015.

The agency is putting $10 million into the Steel Pier to make improvements and add rides, including a $4 million, 250-foot high “observation wheel” with air-conditioned cabins. The CRDA also contributed to a $9.5 million indoor public market now under construction, a newly opened community college campus, and renovations at Resorts, Tropicana, Bally’s, and Caesers, among other projects.

A new look may also be in store for the Pier Shops at Caesers. Stores at the upscale mall include Gucci, Louis Vuitton, and Tiffany & Co., but the property has struggled with empty storefronts as shoppers have stayed away. Philadelphia developer Bart Blatstein and a partner have agreed to buy the mall, though they have not yet announced their plans.

Attracting visitors to the new shops and rides is partly the job of the Atlantic City Alliance. The casino-funded nonprofit pays for the free summer concerts and other events and provides the incentives for first-time conventions. In October it sponsored “Toll-Free Tuesdays,” making eastbound tolls free on the expressway from noon to midnight on four Tuesdays, though the promotion was not expected on its own to increase tourism numbers.

The organization is also running a new set of its “Do AC” TV commercials, which since 2012 have promoted the city as a general-interest vacation destination. Versions of the commercials created in 2013 added brief shots of the casinos, and ran again this year in Baltimore and New York. A separate, smaller campaign, coinciding with the launch of United’s new flights and funded by the CRDA, targeted Chicago and Houston.

The ACA produced a different advertising campaign for the Philadelphia area this year based on research about potential visitors in that market. They feature unscripted comments by people who are visiting Atlantic City about why they like the resort, with heavy focus on the beach and boardwalk, and just brief mentions of gambling