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Can Ocean Resort Casino Be Saved? A New Owner’s Investment Could Be The Answer

Barbara Nathan January 14, 2019 0 comments
ocean resort atlantic city

Anyone visiting Ocean Resort Casino for the first time cannot help be awestruck by how beautiful this property is, both inside and out.

Players have nine casinos to choose from in Atlantic City. Also, there’s a growing list of gambling options in Pennsylvania and other nearby states, all competing for business.

Despite its beauty, Ocean Resort Casino is not receiving anywhere near its anticipated share of the market.

The property can only continue to operate unprofitably for so long before something has to give. Ocean Resort is in trouble, and the whole town knows it. The property is facing not only severe financial problems but legal ones as well.

Ocean Resort’s ownership change

After only six months of existence, on Jan. 10, Bruce Deifik announced that the property is getting a new owner. He indicated that he would retain a non-controlling ownership interest.

However, a still unnamed outside company would be the principal owner.

Deifik indicated that the new controlling entity, whoever it may be, is planning to invest about $70 million toward enhancing the property’s offerings. Among the specific improvements mentioned were additional rooms and suites, enhancements to the casino floor, a buffet and “a substantial increase” in entertainment and special events.

The plan is to keep the AC casino open

At least for now, the jobs for the approximately 3,000 people working there are reportedly secure. However, this is contingent on the identity of the new owner, passing the mandatory background check and approval by state gambling regulators for a license.

Meanwhile, these were Deifik’s comments to the Associated Press.

“It has been truly an honor for myself and my family to have taken this property, opened its doors and brought back the players, the families, the convention guests and the sports betting enthusiasts. My family and I want to thank the 3,000-plus employees at Ocean for their tireless work to bring our property to life and put it on track to become the best gaming property in New Jersey. If approved and closed, this next round of investment into Ocean will put this property on an exciting path to growth.”

The transition won’t be easy

Implementing the proposed lofty plans for Ocean Resort Casino will take time. But assuming they go through as hoped, the undeniable shortage of offerings won’t be the only things on Ocean Resort’s agenda that need fixing.

Financial woes

It took two days of testimony and deliberations to finally convince the Casino Control Commission to grant Ocean Resort a license one week before opening.

A major concern was the company’s financial stability.

The commission must have been impressed that Deifik was able to come up with $200 million to buy the property from then-owner Glenn Straub and commit to investing $50 million more in renovations.

But given the new owner’s lack of experience running similar properties, the commission still had reservations.

It wanted more assurance that a new name and a new buyer with deep pockets for the facility wouldn’t be a reincarnation of the doomed Revel.

Predictions versus reality

The projections made by Chief Financial Officer Alan Greenstein were vital in convincing the commission that Ocean Resort Casino deserved a chance.

Greenstein stated that the resort anticipated gaining about 10.5 percent of the AC market during its first year of operation and 12 percent by 2021.

He also predicted that during its first year alone, the property would take in $292 million in gambling revenue and $127 million in non-gaming revenue.

However, the reality has proven otherwise.

According to the New Jersey Division of Gaming Enforcement (DGE), the revenue the casino-hotel took in has been far short of its projections. From the start of July 2018 to the end of November (the last month for which complete statistics are currently available), Ocean Resort Casino has consistently lagged behind its competitors.

In fact, every month the casino’s revenue from gambling was at or near the bottom of the pack. August and November were the only months when Ocean Resort Casino did not rank dead-last.

During the third quarter of 2018, Ocean Resort Casino registered a gross operating profit of $1.4 million; comparing that with the other new AC casino hotel, Hard Rock, which had a gross operating profit of $8.2 million.

Lack of customers

Of course, it’s hard for a casino-hotel to stay afloat when customers are scarce.

I visited Ocean Resort last month with a friend from New York City who hadn’t been there yet. After giving her a tour, we had dinner at Amada. We both couldn’t help but notice that the restaurant and the casino floor were nearly empty.

Legal woes

Ocean Resort Casino is also facing legal problems, as evidenced by a recent string of lawsuits.

In December, Joseph Morrisey, former manager of HQ2, a nightclub at the resort, filed a multimillion lawsuit against Deifik and lender JP Morgan Chase Bank for breach of contract.

Morrisey claimed that the reason for his firing was to thwart his partnership interest that was part of his management deal now that Deifik wanted to sell the property. Morrisey also claimed that JP Morgan hadn’t been made privy to his stake in the property.

In addition, according to records from the Atlantic County Clerk’s Office and the Press of Atlantic City, two construction liens against Ocean Resort are still outstanding. The filers are demanding a collective $1.1 million for work performed by contractors and subcontractors who have yet to receive payment.

Ocean Resort’s tumultuous history

To better understand why Ocean Resort is in a predicament it is in now, let’s briefly summarize the history of this facility.

Chapter 1

When the $2.4 billion Revel Hotel and Casino opened on the Atlantic City Boardwalk on April 2, 2012, it was heralded as a game-changer.

The facility will be forever remembered in this town, but not in the way intended.

From day one to its September 2014 closing, it never turned a profit. The Revel was ill-conceived, mismanaged, not the right fit and doomed from the get-go.

On Sept. 2, 2014, after two bankruptcy filings in two years, the Revel closed its doors permanently.

Thereby, concluding Chapter 1 of a story on how not to succeed in business.

Chapter 2

In April 2015, Straub purchased the shuttered property for a mere $82 million. He then sat on it for nearly three years, without ever completing the promised renovations or obtaining the license to open it.

In September 2016, Straub renamed the vacant property TEN (after Bo Derek). But for all of the people still waiting for the casino and hotel to reopen finally, but losing hope that it ever would, the only rating possible was zero.

A major part of the problem was Straub’s insistence that he didn’t need a license because he would be turning over the management to a third party. The Casino Control Commission insisted otherwise, and the two parties came to a standstill.

Finally, in January 2018, a new buyer came forward.

A company called Ocean Walk, headed by Denver-based developer Deifik, reached a deal to purchase the idle casino hotel from Straub.

Deifik handed over $200 million to Straub and renamed the property Ocean Resort Casino shortly after that.

That concludes Chapter 2 of the saga.

Chapter 3

On June 27, 2018, a day ahead of schedule, Ocean Resort Casino and Hard Rock AC simultaneously opened to the public. However, for Ocean Resort, it was only a week after the Casino Control Commission granted it a license.

Hopefully, Chapter 3 won’t end the same way the first two chapters did — with a closed casino.

Did the casino open too soon?

Granted Ocean Resort Casino faced a big uphill battle given all that went wrong with its two predecessors. But given this new facility’s lackluster start, too, one only has to hope that it isn’t déjà vu all over again.

All of the enhancements that Deifik mentioned as a priority going forward with the new owner are clearly needed. But what is mind-boggling is the enormous haste with which Ocean Resort Casino opened (less than six months after Deifik purchased the property).

Secondly, another six months have passed since then. Certainly, the resort could have done a lot more during that time. It could offer amenities that would make it a viable casino destination, not just for high rollers, but for a wide range of players.

Ocean Resort Casino may have fared better copying a page from the Golden Nugget Atlantic City playbook.

Ocean’s decision to open on the same day as Hard Rock may have been shortsighted, too. Initially, the huge spillover of players and visitors from Hard Rock to Ocean Resort was undoubtedly good for business.

However, the simultaneous opening meant that not just initial but ongoing comparisons between the two resorts would be inevitable.

Did Ocean Resort Casino open too soon? I think so. The owner may have bitten off more than he can chew, and now the property, its staff and loyal players all have to deal with the consequences.

What went wrong and why

Ocean Resort Casino resides at the far northern end of the AC Boardwalk, on the site of the former Revel.

However, I don’t think the less-than-ideal location has been more than a minor factor contributing to this casino’s problems.

The resort is walking distance of Hard Rock and jitneys. Trams transport customers cheaply to and from the Boardwalk entrance at frequent intervals. There is also plenty of parking.

Not being in walking distance of other casinos certainly hasn’t hurt the Borgata.

I think the problems lie far more with the shortcomings inside the facility and lack of preparation by the person heading it.

An article I wrote for NJ Gambling Websites on July 30, 2018, highlighted my initial impressions of both of the new casinos in Atlantic City, summarizing what was great and what wasn’t.

Unfortunately, much of what I said needs improvement back then at Ocean Resort still does.

No established brand and no comparable previous casino experience

Unlike Hard Rock Atlantic City, which came to Atlantic City as a readily identifiable brand with years of experience operating large casino properties all over the world, Ocean Walk was an unknown entity.

And Deifik’s limited experience in the casino gambling industry was confined to financial interests in much smaller properties.

He came to Atlantic City with zero experience running a casino-hotel of the same type, much less taking over a property with a history of repeated failures.

Furthermore — incredible as it may sound — Deifik not only purchased the property before ever seeing it but had never even been to Atlantic City either. Creating a successful casino-hotel in AC from scratch requires a basic knowledge of the area and the clientele one hopes to attract.

Gaming industry consultant and professor of casino management at Fairleigh Dickinson University Robert Ambrose told Philly.com that, “Ocean Resort appears to be struggling… against better-known properties.” He also said that “building the customer base and the loyal following is very difficult, especially if you don’t have an established brand.”

Ambrose conceded that “it’s tough being a new business and being a new kid on the block. … It’s a risky business.”

Confusing layout

This is a place where a first-time visitor, and even repeat visitors, can easily get lost. The entrance is on the Boardwalk, yet the elevator lists the level as RB.

The lobby is not on the ground floor, as expected, but on a high floor above the casino. Restaurants and specific gaming areas are also hard to find since there are not enough signs telling patrons where to go.

William Hill Sportsbook: Great for what it is, but not newcomer friendly

Ocean Resort Casino did an admirable job partnering with sportsbook giant William Hill to create a state-of-the-art sportsbook. High rollers will feel right at home there. So will anyone who loves to bet parlays, teasers, and props, as no Atlantic City sportsbook offers players more betting options.

However, where the Ocean Resort sportsbook falls short is in its failure to address the needs of casual bettors and newcomers.

The sheer volume of betting options can be overwhelming to someone who wants to make a couple of moneyline or point spread football wagers on a Saturday or Sunday.

In addition, it does not accept verbal bets. Instead, bettors need to fill in the grids on designated betting sheets and hand them to the clerk at the window. This can be confusing and time-consuming to an inexperienced bettor and result in many mistakes.

I found the sportsbook staff less friendly and helpful than at some of the other sportsbooks in town. Very long lines are another problem.

Furthermore, sports bettors are as deserving of comps as those who give comparable action play other casino games. In fact, the two groups are far from mutually exclusive. This casino’s William Hill sportsbook does have a rewards program for sports bettors, but it is not linked to the casino’s player rewards program.

After placing $1,000 in bets, the bettor receives $1 in additional free bets. That’s it — not much incentive to keep playing there.

Tiny poker room

Ocean Resort Casino does offer poker, but the room is small and hard to find.

There are only a few open tables, with one to two no-limit games usually the only option. With no tournaments or special promotions for cash game players, there’s little incentive to play there.

Not enough first-rate entertainment

The resort has only one concert venue, Ovation Hall, which also doubles as a venue for boxing matches.

During the past year, scheduled entertainment has been very limited, especially big-name acts, and the offerings have clearly paled in comparison to its nearest competitor, Hard Rock Casino.

If Ocean Resort Casino is to succeed in attracting bigger crowds, it needs to step up its entertainment offerings considerably.

The casino could also benefit from having frequent special events that get a lot of people in the door, like holiday celebrations, food and wine tastings, and prize drawings.

High-cost dining

The problem is not lack of places to eat, but the lack of reasonably priced places to eat. Even the casual eateries are pricey.

I think this casino needs to offer at least a few specials where patrons can get a full meal for a discounted price.

There could also be bigger representation in the annual 50 Bites promotion, as well as special events for foodies, such as Savor Borgata or celebrations of specific foods, such as Bacon Week and Chocolate Week at the Tropicana.

Conclusion

Ocean Resort Casino continues to struggle to find its niche in a shrunken market. The naysayers, who claimed last spring that nine casinos are too many and Atlantic City is headed toward another downward spiral, are repeating the same dire predictions.

However, according to a Jan. 11, article in The Press of Atlantic City, casino gambling experts like Ambrose and Rummy Pandit, executive director of the Levenson Institute of Gaming, Hospitality & Tourism at Stockton University, disagree.

Ambrose believes that Ocean Resort Casino, “under the right branding and marketing, can survive as a resort experience and contribute to Atlantic City.”

In addition, Ambrose and Pandit both regard the new investment in the property announced by Deifik as “a positive sign not only for the property but for the city itself.”

City Council President Marty Small echoed the same sentiments when he stated the following:

“Moving forward, hopefully with further investment, they (the new majority owner) will bring a new vision, not only to make the Ocean Resort sustainable, but profitable as well.”

Will The Federal Government Take Back Control Of Legal US Sports Betting?

Barbara Nathan January 7, 2019 0 comments
US congress

It took 26 years — more than a quarter of a century — for the US Supreme Court to finally declare the Professional and Amateur Sports Protection Act of 1992 (PASPA) unconstitutional and overturn it.

That historic ruling opened the door for each state to decide whether or not and to what extent legalizing sports betting is something it wants for its residents.

But those moves have also sparked concern from the federal government and sports leagues.

Where different states stand on legal sports betting now

States where legislation has already passed

New Jersey sports betting became official in June 2018. But several other states, including Delaware, West Virginia, Mississippi, Pennsylvania, and Rhode Island, have been quick to act, too.

In fact, full scale legalized sports betting on individual contests is now available in all of these states, along with Nevada, where it has already been operating legally for many years.

Joining them is Washington, D.C. Contingent on congressional approval, Washington, D.C. will be the first US jurisdiction without a single licensed casino to authorize sportsbooks. When these sportsbooks will open, where they will be located, and who will run them remains to be seen. Plus, there are still a few rumblings happening.

Meanwhile, the situation in New Mexico is also unique, but in another way. That state has not passed any sports betting legislation yet. However, a tribal gambling compact has enabled the Santa Ana Star Casino & Hotel to take sports bets legally since October.

States with sports betting bills in the process

Also, many other states have shown interest. However, the process of actually implementing legislation is taking longer.

Among them, both Arkansas and New York have legislation permitting sports betting already in place, but not the option itself.

In Arkansas, voters in the November election passed a referendum to allow sports betting at four casinos. In New York, a law passed in 2012 allows sports betting at four locations as well. However, regulations and details are not complete.

Here are the other states, where legal sports betting in the near or foreseeable future looks promising:

  • California
  • Connecticut
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maryland
  • Michigan
  • Minnesota
  • Missouri
  • Ohio
  • Oklahoma
  • South Carolina
  • Tennessee

Five states on this list — Kentucky, Missouri, Ohio, Tennessee, and Virginia — already have bills in place for early 2019 consideration.

States less likely to legalize sports betting

The remaining states have taken no known action on the matter at all and are unlikely to do so anytime soon.

That includes two of the four states that were exempt from PASPA, Oregon and Montana. Their exempt status enabled them to offer only limited sports betting. That hasn’t changed with the repeal of PASPA.

But just like all of the states where PASPA made all forms of sports betting illegal, Montana would need new legislation to expand their offerings to full-scale sports betting. Oregon may not need any such legislation, according to recent reports.

Protecting sports integrity

All of the available data points to the likelihood of sports betting becoming legal in most states. In fact, Eilers & Krejcik Gaming predicts 30 states will be moving in that direction this year.

As anticipated, there will be some holdouts. But even so, the spread of legal sports betting across America seems inevitable.

This expansion leaves many government officials, along with the pro sports leagues, concerned about the possible impact on sports integrity.

At the second annual US Sports Betting Summit held Nov. 15 in Washington, D.C., the speakers presented divergent opinions on some of the challenges that legal sports betting presents.

However, on one topic, an agreement was unanimous. The increased visibility and accessibility of sports betting calls for strong measures to ensure the continued protection of the integrity of the games.

Should the federal government be involved?

Several speakers, such as Naimia Stevenson, associate general counsel for the NCAA, were firmly in favor of involving Congress. Stevenson said she would like to see federal legislation requiring sports betting operators to work with the leagues.

She would also like federal sports betting regulations that would make it illegal for anyone younger than age 21 to bet on sports.

Clarence Nesbitt, general counsel for the NBA, wants to see federal regulations to ensure clearer rules on acceptable versus nonacceptable conduct and better protection of players’ rights.

Ohio State Sen. Bill Coley wants tighter regulations to keep out illegal operators and criminals.

Keith Whyte, executive director of the National Council on Problem Gambling, called for federal legislation mandating that 1 percent of sports betting be set aside for treatment programs for sports bettors with a gambling problem.

Sports Wagering Market Integrity Act

The likelihood that Congress and the federal government will indeed step in increased Dec. 19 with the introduction of the Sports Wagering Market Integrity Act.

Senators Charles Schumer, D-New York, and Orrin Hatch, R-Utah, put aside their political differences to jointly sponsor this new bill.

If passed, the new legislation will put a lot more control over sports betting back in the hands of the federal government.

Provisions of the Sports Wagering Market Integrity Act

According to reports from the Associated Press, the federal bill calls for all of the following:

  • The US Justice Department would set minimum standards with which all states offering legalized sports betting would have to comply.
  • Sportsbook operators would be required to use data provided or licensed by the leagues.
  • The states would not necessarily be required to give the sports leagues a cut of their gambling revenue. However, the option would still be permitted.
  • Federal funding would also have to be provided from taxes generated by sports betting for programs to provide treatment for those with a gambling problem.

It is plausible that at least one of these provisions could create some resistance: the requirement for sportsbook operators to use official data from the leagues.

Courts have already ruled that fantasy sports operators should not have to follow these requirements. Meanwhile, some of the leagues, notably the NBA and Major League Baseball (MLB), already have private agreements with certain casinos regarding the use of their data, particularly for wagers made on games in progress.

Reasons for the bill

Schumer expressed that the bill was necessary for Congress “to ensure that the integrity of the games we love was never compromised.”

He also believes that “the time is now to establish a strong national integrity standard for sports betting that will protect consumers and the games themselves from corruption.”

Hatch indicated ever since the Supreme Court struck down PASPA  in May, that he has been “working with stakeholders to ensure we were doing everything possible to protect the integrity of sports from corruption.”

According to Hatch, the bill was not a hastily drawn up document, but “the culmination of eight months of high-level meetings, discussions and negotiations.”

Although Hatch was about to retire, he felt it was important to show “bipartisan support for federal regulation.” He hopes that Congress will continue working toward that end.

Support from the sports leagues

The major sports leagues are apparently on board with the plan, too.

The NFL went on record on Dec. 19 with a letter to the two senators expressing support for the bill. Jocelyn Moore, an NFL executive, made the following statement:

“Without continued federal guidance and oversight, we are very concerned that sports leagues and state governments alone will not be able to fully protect the integrity of sporting contests.”

A statement from the MLB echoed a similar sentiment on the importance of protecting the integrity of baseball games:

“Legalized sports betting is rapidly spreading across the country, creating a clear need for a set of consistent, nationwide integrity standards to protect the sport that millions of Americans love.”

The PGA Tour also voiced support for the new bill and for establishing a national body to oversee the integrity of sports in this country.

Legal sports betting and the future

As of now, legal sports betting is still available in only a handful of states, but that is going to change.

Unfortunately, along with all of the good results that widespread sports betting can help make possible, there is also potential for some real problems.

It is admirable that politicians are recognizing the need now in this early stage of legal sports betting, rather than down the road when it may be too late, to work on making sure there are proper regulations in place to protect sports integrity.

The same applies to making sure the people with a gambling problem can get help they need before the addiction escalates. For the millions of people who love sports and can bet responsibly, legal sports betting is fun. However, many people will be tempted to bet on sports who should not be betting at all. I agree that more programs to help gambling addicts are a must-have in every state.

I also hope that the leagues and those responsible for the regulations don’t become so zealous as to go overboard in removing current betting options or give bettors a reason to feel an invasion of their privacy.

Of course, with a government shutdown entering its third week and no end in sight, when or if the proposed legislation moves forward is unknown.

Here on NJ gambling websites, we will continue to keep you informed of the latest developments as they happen with regard to possible federal government involvement in legalized sports betting.