Do I smell a second bailout cooking, Save Jerseyans?
Revel, Atlantic City’s newest casino resort, is struggling to obtain profitability… if you believe Senator Sweeney, BADLY.
The hotel has never shown positive numbers since it opened six months ago, and now it is taking the stance that its exorbitant debt load of $1.3 billion may now lead to bankruptcy or foreclosure per NJ.com. Revel cost $2.6 billion to construct, and it has been underwater since it opened back in the spring, with no realistic hopes for turning a profit any time in the near or distant future.
According to Atlantic City officials (and The Associated Press), Revel allegedly owes $12 million in overdue property taxes.
Senate President Stephen Sweeney is not happy about the current financial state of Revel, voicing his concern about the potential failure of the casino and the negative impacts it could have on our state economy, especially after the devastation of Hurricane Sandy. In fact, he stated the following in a letter to the state Division of Gaming Enforcement: “I refuse to stand by and simply hope that the Revel will decide to meet its obligations.” That’s certainly a loaded statement…
So, I guess it would naturally follow that the state Economic Development Authority would approve a $261 million tax incentive package for Revel. At least they are being forced to turn a profit before being able to cash in on the tax credits included in the package, but the magic question is – can Revel actually become profitable?
This is an interesting turn of events.
Revel, in my opinion, seems to have adopted the spending philosophy of our federal government (and ironically enough, the actions of the resort are being critiqued by a Democrat – go figure).
Borrow a boatload of other people’s money, spend, spend, SPEND it, and when the spending yields no benefit, think of new (read: expensive) ways to expand on the existing unproven model (additional gaming, food and beverage attractions to draw more crowds???) and continue with the cycle.
Unfortunately, this is a model employed by many businesses struggling to make a profit because they are desperate to keep the wheels turning. But bad business decisions ultimately come back to bite business execs, and at the end of the day, they will be stuck with a huge debt, a list of creditors a mile long, and still, they will have a failing business.
There are companies that provided services to Revel for which they should get paid, but because of the resort’s flawed business model, Sweeney says it cannot make the money that it needs in order to settle its debts. Revel is “burning cash at an alarming rate,” according to him. And yet, the resort keeps borrowing, seemingly with no real direction or exit strategy.
Does this sound familiar to anyone else? Or am I the only one detecting a pattern?
This is such a shame, because the Revel really is a beautiful property. I spent three days there this summer, and the casino, the restaurants, the rooms, the pool – all beautiful. And you could actually breathe because of the no smoking policy. I really hope they can figure out a way to rescue it.