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"Atlantic City Casinos Bracing for Competition", The Record, Hackensack, (c) Teresa M. McAleavy, 1/2/06

If Silvia De Julia were a betting woman, she would put her money on Atlantic City -- even if casinos come to New York State.

As president of the Saddle Brook Seniors, De Julia knows her contemporaries are Boardwalk-betting loyalists.

"I don't gamble myself, but I know the club members love Atlantic City," said De Julia, who runs monthly bus trips for about 100 North Jersey seniors to the famed seaside resort.

"They may visit a new casino in New York, but they'll still mainly like Atlantic City because they're familiar with it. It's in their own state, and it's home to them."

Atlantic City casino operators hope De Julia is right. But many aren't sure.

They are worried that Gov. George Pataki's recent push to bring gaming to New York could whittle away some of Atlantic City's $4.3 billion annual business, which produces about $342 million in state tax revenues.

In October, Pataki signed into law a bill that would allow six Native American-run casinos, including three in the Catskills and three in the Buffalo area, and slot machines at five racetracks. If it passes expected legal challenges from anti-gaming groups and worried Atlantic City casino owners such as Donald Trump, New York could be hosting bettors in three to five years.

Some casino operators believe there are plenty of Atlantic City faithful who may only occasionally venture out to a new gaming house, as they did when the Mohegan Sun and Foxwoods casinos opened in Connecticut.

Paul Zito of Saddle Brook said he wouldn't trade his four monthly treks to the seaside gambling mecca for a slightly shorter trip to New York.

"I went to Connecticut once, and I wouldn't go again," said Zito, 75. "I wouldn't even bother going to the Catskills because just like Foxwoods, the machines will be limited and there's no diversion. My lady friend likes to walk the Boardwalk and shop. There's none of that in the Catskills."

The biggest threat to Atlantic City's business, casino operators and industry analysts say, will come from New Yorkers and North Jerseyans with no affinity for the shore who will opt for a shorter drive to the Empire State.

"If it does happen in its current form, with three casinos in the Catskills and video lottery terminals at the racetracks, it will have a material negative effect on Atlantic City of between 10 [percent] and 15 percent," said Tim Wilmott, president of the Casino Association of New Jersey.

But don't expect Atlantic City to willingly give up its hefty revenues. Although Trump has promised court challenges to the constitutionality of gaming in New York, others are adding new attractions to keep Atlantic City desirable. Larger operations, such as Park Place Entertainment Corp. and Harrah's, plan to enter the new market, most likely as casino managers.

"I'm going to court to stop it because it's a tremendous threat," said Trump, who owns three of Atlantic City's 12 casinos. The prospects are so abysmal, he said, that he is seeking to renegotiate the terms of more than $1.6 billion in publicly traded junk bonds.

"Atlantic City is going to have to work very hard and very quickly to counter the threat, because we're talking about a huge number of people who will have closer destinations," Trump said.

Even so, Joe Ribarro of Saddle Brook doubts that shaving a half-hour from his monthly trips to gamble will sway him from Atlantic City.

"I would probably go to both places, but it's pretty tough to get away from Atlantic City because there's more down there," said Ribarro, 74. "It's not like the Catskills has a Boardwalk."

Gaming industry analysts tend to agree that Atlantic City will remain attractive because it has more to offer. Although they don't quite share Trump's bleak outlook, many acknowledge that Atlantic City will need to prepare for eventual competition from New York.

"Twenty-five percent of Atlantic City's business comes out of New York and a fair amount comes out of Bergen and other northern counties in New Jersey, so casinos in the Catskills could truncate business," said Eric Hausler, a gaming industry analyst with Bear Stearns in New York. "It's hard to gauge the exact impact at this point, but it will not shutter Atlantic City."

Hausler said the shore-based casinos will have to work hard to keep those existing customers from opting for a shorter drive to the Catskills. Adding rooms that can be given away to frequent bettors and wooing new customers with various discount packages will help.

"They will have to take appropriate measures to make sure their business fundamentals stay strong," Hausler said. "But Atlantic City is a historically strong gaming market. They have shown they can hang in there."

Dave Jonas tends to agree. As general manager of Harrah's Atlantic City, whose parent company is poised to enter the New York market, Jonas said the seaside casinos will have a competitive edge over New York because the industry there is already established. He believes pending projects will only help Atlantic City solidify its customer base.

The new $330 million tunnel connecting the Atlantic City Expressway to the city's marina district is already open, and construction is under way on The Borgata, a $1 billion, 2,000-bed resort casino set to open in 2003. The Borgata is a joint project of MGM Mirage and Boyd Gaming.

"Gaming in New York is not happening immediately," Jonas said. "It gives us time to improve our infrastructures and get ready. Really, it's a wake-up call for us, and wake-up calls aren't bad."

Other casino operators are also optimistic.

"Clearly, there will be more competition for Atlantic City," said Robert Stewart, a spokesman for Park Place Entertainment Corp. "But we believe the strategy with Atlantic City needs to be to really enhance its uniqueness as a beach resort with a critical mass of facilities."

The Las Vegas-based Park Place is no stranger to competition. It is the single largest casino operator in Atlantic City, with the Hilton, Bally's, Caesars, Bally's Wild, Wild West, and the Claridge. Now, it is poised to manage an Native American casino at the former Kutsher's Country Club in the Catskills.

"We have believed for a long time that gaming would gradually expand in the East Coast and have acted accordingly," Stewart said.

New Jersey's casino industry trade association will tackle the threat on other fronts. The most immediate will be to come up with a wish list for state lawmakers aimed at keeping Atlantic City viable, Wilmott said. Though he declined to say just what the list would include, he acknowledged that easing mandatory staffing levels and tax relief would help.

"From an association standpoint, our focus right now is to look at this as an opportunity for the state of New Jersey to consider statutory changes that could help Atlantic City compete with neighboring states," Wilmott said.

The industry will make its case, in part, based on the debut of Foxwoods and Mohegan Sun, which left Atlantic City revenues off by about 10 percent to 15 percent, Wilmott said. But analysts noted that the competition didn't deal a fatal blow to Atlantic City.

"What we found with Foxwoods and Mohegan Sun is that growth in the Atlantic City market slowed," said Lawrence Klatzkin of Jefferies & Co. in New York. "It didn't grow at the same pace, but it did grow. Those major casinos didn't shrink the market."

Wilmott acknowledged that in addition to help from Trenton, casino operators will have to make improvements to keep the Boardwalk scene desirable. With 12,000 hotel rooms available and an industry occupancy rate of 95 percent, he and gaming analysts agree that adding more rooms is a must.

"Growth in the market has been driven by an increase in the number of occupied rooms," said Wilmott, who is also the eastern division president of Harrah's Entertainment Inc.

"The way Atlantic City has to respond from the threat of gaming in New York is to create more hotel rooms so that we can extend the stay of our current customers and convert our non-lodgers into lodgers."

With current projects set to bring the number of hotel rooms there to about 17,000, analyst Klatzkin said Atlantic City has little to fear if three free-standing casinos open in the Catskills.

"Atlantic City has a lot going for it," Klatzkin said. "Even with the expansions, it will still be way under-roomed, and even if Indian casinos in New York shrink the market, they will be shrinking a stronger and bigger market."