First of all, let me give a shout out to the band, Queen, for inspiring the title and heading of this editorial.
With that out of the way, Atlantic City is a resort-casino town located on one of the Easternmost points of the United States running along, as the name would imply, the Atlantic Ocean. Atlantic City is home to twelve casino resort properties ranging from high-end names such as Borgata and the recently-completed 2.4 billion dollar Revel Casino to longtime staples such as the CET properties, Showboat, Bally’s Caesar’s and Harrah’s. Atlantic City is also home to Trump Entertainment properties the Trump Plaza and Trump Taj Mahal as well as Resorts, Tropicana, the Atlantic Club and Golden Nugget, formerly known as Trump Marina prior to a 2011 purchase by Landry’s Inc.
...Wait, that was three years ago.
In 2014, four of the Atlantic City casino properties including The Revel, Trump Plaza, The Atlantic Club and the still profitable Showboat shuttered, though the Showboat has reopened and is operating as only a hotel with a number of lounges and restaurants. Revel, the second-tallest casino property in the United States at the time, only managed to remain open for approximately one-third as long as the time it took to build.
With that, the Atlantic City market seemingly settled and it looked as if the eight remaining casinos might survive. The Trump Taj Mahal was still in some serious trouble, however, and almost closed in December of 2014 in the face of an appeal by the workers of a judicial ruling allowing the casino to cut back on pension and healthcare benefits to its unionized employees.
Of course, the casino had been losing money for a few years leading up to that decision, so the reduction of these benefits was not to make the casino profitable so much as it was to slow down the bleeding. The property would eventually be sold to billionaire investor, Carl Icahn, who was essentially the sole holder of the property’s debt. In exchange for the forgiveness of some 240 million in debt, Icahn assumed control of the property and assigned the management of it to his team that manages The Tropicana, which he also owns.
In fact, Icahn had shown at least a little bit of a willingness to try to bring the property back to life if he could get the union, Unite Here 54, to work with him. At the time that the union agreed to drop its appeal, in December 2014, Icahn invested an additional twenty million dollars into the property. Upon having transferred to him sole control of the property, Icahn pledged an additional 100 million dollars in support, but then later reduced that sum to twenty million pending a New Jersey ballot measure that will come up in November of this year that, if passed, will authorize New Jersey to allow commercial casinos to be built in North New Jersey.
Throughout all of this, The Trump Taj Mahal continued to hemorrhage money showing absolutely no potential for profitability, at least in the eyes of most observers. Hanging like a cloud over the property was the fact that the workers were not being compensated as well there as they were at other casinos, and also, gamblers tend to shy away from casinos that seem as though they might close within a few months of any given time.
The Taj, as it is known by those familiar to it, also suffered from an inability to meaningfully capitalize on the newfound lack of competition in the Atlantic City market. The casino that marketed most effectively to patrons displaced by the closure of other casinos, by far, was the Golden Nugget, though the CET properties could be presumed to have retained a good bit of their Showboat crowd due to their Total Rewards players club program. Golden Nugget, however, did a stellar job of marketing to players of The Atlantic Club, Trump Plaza and The Revel, perhaps more so the former two than the latter as loyal Revel patrons were likely to switch their allegiances to Borgata or one of the CET properties.
With the supply side of the market having finally adjusted to weakened demand, many of the Atlantic City casinos that had been losing money began to show profits again. Among these properties were the three remaining CET properties (Harrah’s, Caesar’s, Bally’s) as well as Tropicana. Naturally, in the light of this balancing of the market, the union wanted to have restored the benefits that they had given up over a year prior to help those casinos weather the storm of the closing years of the recession as well as an oversaturated market on the supply side that had to balance itself out.
It was for that reason, in June, Unite Here 54 threatened to strike against those four casinos in the event that the benefits were not restored. Perhaps they also intended to strike against the Trump Taj Mahal at that time, but The Taj was not mentioned until a later press release. In any event, the three CET properties as well as the Icahn-owned Tropicana reached tentative agreements with the union and avoided their July 1st strike date. Taj Mahal, on the other hand, reached no such agreement.
Among other things, The Taj has defended its actions citing that the casino literally loses millions of dollars a month as it is, so reinstating benefits that will add up to a few million more a month would make it utterly difficult for the casino to have any hope of ever becoming profitable again. Unfortunately, the union was likely stuck between a rock and a hard place because they could not threaten to strike against all five of those casinos and then refrain from striking against the one that does not acquiesce to their demands, or it would show that their threat to strike was toothless. As a result, the union began striking against The Taj and over one thousand workers walked out on their jobs.
The Taj did their best to respond to the strike by having some management and other non-union personnel, such as dealers, fill in at other roles such as moonlighting as servers or housekeepers. Overall, the property seemed to continue to operate well enough, and certainly not all of the union members walked out on their jobs, but there was obviously substantial overtime that was going to be due these moonlighting workers.
The Trump Taj Mahal is not wholly without guilt in all of this, though. While they find themselves in a difficult position now, there is absolutely no excuse for a building less than thirty years old to look the way this one does in some places. Approaching the main entrance of the casino from the parking garage via the covered walkway, one can look up and notice enormous holes in the ceiling, some of which have wiring dangling out of them. As one approaches the casino, many of the light bulbs that would have otherwise brilliantly shined in the night sky are out with, perhaps, fewer than 50% of them illuminated. In fact, those light bulbs are the least of their problems, most of the word, ‘Trump,’ as one approaches the front entrance, were out just last week.
Once the most expensive casino project in America, the property remains superficially nice in many ways. The front desk area of the hotel side is very attractive and the rooms, at least the one I stayed in, were well-furnished and well-cleaned. The blanket was a little bit dated, I suppose, but that was the only fault that I could find with my room in early July where I had stayed, interestingly enough, when the strike began.
Perhaps a ceiling over a walkway that very few people look at is a bit nit-picky, though. How about one of the doors on the widely used Boardwalk entrance being completely shattered and held together with tape for longer than a month? The point is that there are a number of repairs and touchups, many of them cheap, that would make a world of difference with this property. Power washing the self parking garage is another example of something that could be done, there is actually a layer of dust that will form on your vehicle if you are parked there for longer than a few hours!
The fact that these repairs have not been kept up with is indicative of poor property management over the last several years, and quite frankly, I am forced to assume that New Jersey does not have building inspections of any kind because I see almost no way the Taj Mahal would pass if they did. However, the union is certainly not helping by demanding that the property reinstate benefits that, as is clear to anyone, they simply cannot afford to reinstate.
An additional potential problem is that little vote in November that I mentioned earlier. While it is unknown precisely how much business Atlantic City would lose as a result of having to compete with other casinos in the state, the answer is definitely a non-zero percentage. In fact, despite the fact that they currently have agreements with the union, there are a few other casinos that are worried they might end up closing their doors in the face of new competition.
As with anything else in the world, there are a variety of factors at play in the demise of the Trump Taj Mahal. Perhaps the most important factor, though not the most chronologically immediate, is the opening of SugarHouse Casino, Parx Casino, Harrah’s Chester and Valley Forge Casino all in or near Philadelphia, PA between 2007-2012. There have been other casino openings and/or expansions since then, too, such as prior to that when West Virginia first authorized table games. Within the last decade, Ohio has legalized and built several regulated land-based casinos and Delaware has legalized both those and VLT’s, which are currently operating. New York State has a few casinos with Class II VLT’s as well as electronic table games. Massachusetts has legalized commercial gambling and construction finally began on the Wynn Boston Harbor just last week.
The short story is, all of the states from which Atlantic City drew visitors, and Maryland is another example, mostly now have their own commercial casinos and a few of those casinos are offered in resorts both newer than those in Atlantic City, and some who are not partial to the ocean might argue, more attractive than those in Atlantic City. Certainly not all of the states from which Atlantic City drew customers legalized gambling, but many of them did, and there is certainly enough availability of casinos on the eastern half of the United States that Atlantic City is far from being the closest gambling destination for most people.
There was a time that only two states, Nevada and New Jersey, had legalized and state-regulated commercial casinos, so Atlantic City was a draw not just for the ocean, but they were a draw for anyone who wanted to go to a casino without going all the way to Vegas or Reno. Effectively, Atlantic City was the Las Vegas of the East Coast of the United States.
Atlantic City finds itself in an interesting position now because they no longer have the newest casinos, and they certainly won’t when Wynn Boston Harbor is finished (2019) or when any casinos approved for North New Jersey are opened, and it is no secret that Atlantic City does not have the nicest beaches, either. There was a time that the demographic for Atlantic City was anyone who wished to gamble without having to go to Las Vegas, now the demographic seems limited to anyone who wishes to specifically gamble and go to the beach in the same trip, well that, and locals.
In light of the decreased demand, the Atlantic City casinos had to become more aggressive with niceties, such as free play, food comps and hotel rooms to get people to come to their properties. While it is certainly true that the Trump Taj Mahal also followed suit in this regard, so did other properties, properties that are considered nicer (and probably actually are nicer) than the Trump Taj Mahal. The result is that all of the casinos, except perhaps the Borgata (which still performs excellently) and The Revel (you see how that went) had to target lower and lower socio-economic demographics, and eventually, there simply weren’t enough people left for what is, arguably, Atlantic City’s worst still open casino property.
In the light of the new market, or lack thereof, I would say that the Trump Taj Mahal stayed open a surprisingly long time. They stayed open through the closure of the Trump Plaza which, at the time, was a sister property, and could do nothing but watch as they largely failed to get their own customers to come to the Taj Mahal. In fact, most properties would have likely closed long prior to The Taj, but Carl Icahn seemed poised to at least ride it out until the result of the November vote was known. He probably would have closed it either way if the vote ends up being a, ‘Yes,’ though.
Anyway, the union began its strike in early July and came out swinging disseminating literature that was detrimental to The Taj, portrayed it in an unfairly negative light, and quite frankly, had absolutely nothing to do with the subject matter of the strike. The Taj Mahal claims to have offered a reduced benefits package to the union employees, at least one that was better than what the employees are currently getting, but the union deemed it as being insufficient to present to its members for a vote.
There has been a lot of sniping in press releases back and forth between The Taj and Unite Here 54 President, Bob McDevitt. For his part, McDevitt accuses Carl Icahn of being petty and closing The Taj for no other reason that he would rather control the ashes of the shuttered building than give the workers what was fair. In the press release announcing the closure, however, The Taj described the union as, ‘Single-handedly,’ causing it to close down.
The original announcement that The Taj was going to close came on Wednesday, August 3rd stating that the property would close sometime after Labor Day. In a follow-up on Friday, August 5th, the property stated that the specific date it is going to close its doors is October 10th.
There are very few people who would look at The Taj in its current state and believe that it was, at one time, the most expensive casino property ever built, but that’s the truth of it. Interestingly enough, Atlantic City will now be home to two casino properties that were the most expensive of their kind at the time they were built...and both of them will have closed within a period of just over two years.
Personally, other than the fact that the painted themselves into a corner, I don’t understand why the strike at The Taj had to happen. It is apparent to just about anyone that the property was very likely going to have to close in the not so distant future, anyway, so all that the strike did was speed up the inevitable. There is no way that a property losing several million dollars a month could possibly afford to reinstate the health and pension benefits of the workers, no matter how nice it would be if that were possible. Instead, independent shop owners, all of the union employees and all of the non-union employees will find themselves out of jobs, or very close to it, on October tenth.
The union, apparently, doesn’t share my opinion that any job is better than no job, in that respect. Even after the Taj Mahal announced that it was closing, the union continued the strike against it. When I asked one of the organizers, Ben Albert, I was told that the strike would remain in effect until the union workers either got the deal they wanted, or until the very last minute that The Taj is open, whichever comes first. My full interview with him can be read in an article of WizardofVegas.com that I will link to in the comments.
That might lead some people to ask why there were not more substantial reinvestments made in the property earlier to prevent this from happening. The answer to that is that The Taj did not have the money and Carl Icahn was (some would say intelligently) not willing to risk lending anymore with the management that was in place. One doesn’t become a billionaire by constantly chasing bad money with good, after all.
Quite simply, to bring the Trump Taj Mahal to even within a shadow of its former glory would require such a substantial investment that it could be rightfully described as nothing more than a, ‘Leap of faith,’ and unlike most leaps, this one would be potentially bottomless as there seems to be no limit to the amount of money the property is capable of losing.
I was walking through the property mulling over these things and taking what may have been one last look (though I do plan to return before it closes) around the establishment when it occurred to me that the closure of the Trump Taj Mahal is not a sign that Atlantic City is dying, but rather that it is transforming. Atlantic City, I reasoned, simply had not hit bottom yet. It had seemed to when the four casinos closed in 2014, but as I stated before and everyone was aware, the Trump Taj Mahal still failed to have so much as a profitable month during that time.
We will see to what degree the union is to blame when the Atlantic City casino revenues report comes out for July and we can compare how The Taj did as opposed to its June numbers compared to other casinos. If the Trump Taj Mahal has suffered decreased revenues, then the union will have accomplished their objective, and if it endures an even greater operating loss than usual, even more so.
While the union was not quite as rambunctious as they were during my visit in early July, they still engaged in tactics on my recent visit ranging from blaring what sounded like police sirens in front of the building to shouting, ‘Shame on you,’ and booing cars as they pulled into the property. While I have no idea what the revenue reports will say, yet, I certainly believe that The Taj lost some visitors as a result of these organized activities as the slot floor was absolutely barren at times, and moreover, I believe there was only one occasion on seven separate visits over a three day period that I was unable to park on the first floor of the self parking garage.
While the Taj Mahal is probably going to close, such closure could make the other Atlantic City casinos temporarily stronger, unless they end up having increased competition in North New Jersey. For one thing, the revenues at the Taj Mahal will end up being distributed to the other Atlantic City casinos, in the form of additional customers, in one way or another. The Golden Nugget, for starters, has proven to be extremely adept at capitalizing on garnering additional visitors as a result of the closure of other Atlantic City properties.
It could be argued that, with one casino of the city’s eight losing money, that the supply and demand sides of the market had not yet sufficiently balanced and that the closure of The Taj represents the final step in that process. However, I cannot help but be concerned for a few other casinos in the city, particularly during the off-season, if they end up having to compete with additional casinos within the state. I can not state with specificity which casino or casinos I believe will close in the event that new casinos come to North New Jersey, but suffice it to say that I would be surprised if there were not at least one additional closure within the next three years.
However, some have speculated that additional casinos in Atlantic City might open. Among other theories, I heard it from a friend who heard it from a friend, so to speak, that the Showboat is going to attempt to pursue the possibility of operating as a casino again. Additionally, there is some speculation that Carl Icahn might make a play to buy the Revel from Florida developer Glenn Straub and would obviously seek to turn that into a casino again.
Of course, there is no way that the Revel could survive without dealing with the union and giving them the sort of contract that they enjoy at other casinos. Not only would they have difficulty finding workers, but the opening of the property would be protested from day one and the press would be terrible. In fact, it is difficult to say, in light of recent events, how the public would respond to another Carl Icahn operated casino.
In addition to the workers at The Taj losing their jobs earlier than they really had to, even if there is some chance that is only by a couple of months, another sad aspect of the whole things is that The Taj does have some potential to reclaim its standing as a beautiful property. Looking around my room when I stayed there in early July, I saw a hotel room that could be put up favorably against those at most other casino properties I have stayed at, including those that are turning a profit right now. Even walking along the casino floor, there is a shadow of beauty and opulence when one gazes up at the exquisite chandeliers that dot the ceiling every several feet and cast their light onto the floor below.
The scene on the day that the closure was announced was strangely not much different than it would have been at any other time. There was a gentleman I spoke to carrying away one of the union’s signs as a souvenir because he thought the union had ended the strike in light of the property’s announcement that they would close. While he may have thought the sign was abandoned, legitimately, it turns out that he technically stole it because (unbeknownst to him) the union had just moved all of their people at The Taj to the Boardwalk side because that is where the press was conducting interviews.
I walked along the casino floor and stopped and played a game briefly and looked around at the faces of people who were either unaware of the announcement that had been made, or otherwise, were particularly unconcerned. That surprised me because the foremost thought on my mind was the three thousand people, or more, that worked for the property and their families wondering what they are going to do now that the property is closing. The staff of the casino was also doing their best to remain cheerful, not just with the customers, but with one another. I noticed a few security guys walking down a corridor joking around, but there was a detectable hesitation in their laughter brought on by the nervousness that neither of them apparently cared to speak aloud.
Eventually, I made my way to the Boardwalk side of the casino and saw the union members congregated and posing for pictures at the direction of the press. In unison, they stood and faced the building whilst holding up their signs, and then after that, some people from the press took individual pictures of some of the protesters. Union representatives also appeared to be taking pictures of some of the members which, if I am not mistaken, have since found their way onto the union’s site in a few cases.
I couldn’t help but wonder how this constitutes a victory for the union members employed by The Taj who may be losing their jobs earlier than they really had to. As of the following day, Thursday August 4th, it would break the record as the longest Unite Here 54 strike in the history of Atlantic City. The old record was held as a result of a strike against seven different casinos back in 2004, but that strike had a much different ending.
What happened with The Taj was probably the only way this strike could end.
Even if employees of The Taj that were unionized went along with the walk out, I wonder how many of them actually believed that they would have the benefits that they were fighting for reinstated? How could anything but what ended up happening, which I as much as predicted when the strike began, end up being the result? Are the employees better off now that they will be out of work on October 10th, rather than working until the casino otherwise closed on its own, and have that many fewer months of their lives during which they can collect unemployment as they contemplate relocating and/or try to find different jobs in Atlantic City?
Another question is how many of them will actually be successful in finding different jobs? Think about it: If the other casinos are offering a benefits package and The Taj is not, then does it not stand to reason that employees of The Taj would have already went over to the other casinos if there were jobs there available to them? I think that there might be a few jobs in other casinos, in low-level positions, that may be added simply because the spillover from what few customers still visited The Taj scattering to other casinos will result in the need for employees, but it will certainly not be enough to replace the jobs that were lost.
The final question is one of assignment of blame. One of the statements made by organizer Ben Albert when I talked to him was essentially that it is not the employees fault if the casino is losing money. I would certainly agree that it is not exclusively the fault of the employees, perhaps very very little of it is the fault of the employees, but does it stand to reason that the employees should take no responsibility whatsoever for the failure of the property? I refuse to believe that there was not so much as one employee that managed to pi$$ a customer off and that customer chose not to come back as a result. Everyone makes mistakes, that’s a fact of life, but the employees and the company, if they want to be successful, need to focus on working together to succeed rather than focusing their attention on trying to assign responsibility for the failures.
The union, in my opinion, did not seem terribly willing to work with The Taj in order to give it a chance. While I clearly do not blame the union for the fact that the property is apparently going to close, I am inclined to blame them for the fact that it is going to happen so soon. At a minimum, Carl Icahn seemed willing to ride out losing a few million a month until seeing what the result of the vote was to allow casinos in North New Jersey. It’s true that he could theoretically personally afford to extend the full benefits package to the employees of The Taj again, at least for a time, but there is a difference between a sound business decision and charity. If there is nothing that could result from a decision other than losing money, then engaging in that decision is an act of charity.
Charity is fine, of course, I donate to charities all the time. However, every time I donate, I understand that I will not be getting that sum of money back. Carl Icahn was willing to invest in the property on the outside chance of enjoying future returns on that investment, actually, hell, I think he would have just been happy to pump tens of millions into it and break even from that point forward.
The closure of the Trump Taj Mahal also has the potential consequence of being detrimental to advantage players, as well. The reduced competition in Atlantic City is likely to result in diminished offers, especially since the one casino to close is known as a low-rollers place that generally has pretty decent offers. In the light of this reduced competition, especially next time the Summer demand season comes around, the casinos may not feel inclined to offer players as much because they will not have a property positively desperate to get people to visit to compete with.
That’s a negative for negative expectation gamblers who visit Atlantic City too, of course. The result of the reduced competition might be that it takes more ADT (average daily theoretical loss) or actual loss to generate the same RFB and free play offers that they currently enjoy now. Perhaps some of these visitors will be directly priced out of the market by way of higher room rates and no longer qualifying for room comps as a result of the need for more play. That would certainly be a shame because, if there is a word I could use to describe Atlantic City as a vacation destination, ‘Affordable,’ would be one of the first to spring to mind. It’s not terrible, and it’s not excellent, but it is affordable for most people, at least once a year, anyway.
The end result is that nobody, ‘Wins,’ as a result of the Taj Mahal closing with exception to Carl Icahn and the other casino properties. Icahn gets to finally stop losing money, and perhaps he will be able to get rid of the property for some amount, hell, maybe Glenn Straub will buy The Taj off of him as he made a play for Showboat. The owners of the other casinos should get to pad their coffers with their shares of what the Taj Mahal otherwise would have made. However, the employees, independent businesses that operate shops within The Taj, the Boardwalk and shops along it on The Taj side and all of the players will be worse for the closure of The Trump Taj Mahal.
