Question

Compare the gaming economic models of Las Vegas, Nevada and Atlantic City, New Jersey between 1985 and 2020. What caused Las Vegas to ultimately be more successful than Atlantic City? Please provide relevant data and examples.

Answer 1

Atlantic City was going to be the next Las Vegas when its first casino opened in May 1978. The city was transforming itself from a vacation resort focused on its beaches and amusement park — including an attraction of horses diving into a small pool of water — into one built around the gambling industry.

Now, after four Atlantic City casinos closed last year, bankruptcy possibilities swirling and leaders trying to figure out alternative ways to attract tourists and businesses, hardly anyone is comparing Atlantic City to Vegas. AC has been crumbling, while Vegas saw the largest number of visitors in its history in 2014, beating out the previous high set in 2013.

So, how does Atlantic City compare to Vegas these days in terms of revenue, casinos, visitors and other areas associated with the two cities? And did it ever come close to Vegas?

Biggest years for casino revenue

Atlantic City’s glory days surprisingly weren’t that long ago. Its peak came in 2006, at $5.2 billion. Las Vegas made about $10.6 billion that year.

According to the Las Vegas Convention and Visitors Authority, the Vegas Strip accounts for about 2/3 of the total Clark County gambling revenue. So in 2006, Atlantic City wasn’t that far behind the Strip’s gaming revenue, which would have likely been about $6-$7 billion.

Casino revenue 2014

But the bottom fell out quickly for Atlantic City. Its 2014 casino revenue was around half its 2006 high, at $2.7 billion. Vegas’ remained high, at about $9.5 billion in 2014. Here’s how Atlantic City (red) has declined compared to Vegas (yellow).

Don’t expect 2015 to be much better for Atlantic City, either. As of June, its gaming revenues were about $1.1 billion.

Atlantic City once grew faster than Las Vegas

Early supporters of Atlantic City had reason to believe its good fortune could last. Its average annual growth rate in casino revenue for its first seven years of legalized gambling, from 1978 to 1985, was 55 percent. Las Vegas’, during its first seven years of legalized gambling from 1970 to 1977, had an average annual growth rate of 15.6 percent. Vegas’ annual revenue was about $1 billion in 1977. Atlantic City’s was about $2.1 billion in 1985

Though the Atlantic City dropoff has been apparent the last several years, officials should have probably seen it coming in the ’80s. After those first few years of massive growth, gambling revenue began to slow down. Its average annual growth rate the next 20 years, from 1986 to 2006, was 4.4 percent. Vegas, by contrast, continued to grow at an annual average rate closer to 10 percent in its next 20 years, from 1977 to 1997.

Since 2007, gambling revenue has fallen by an average annual amount of about 8 percent. Blame the proliferation of other East Coast casinos. New Yorkers, Philadelphians and others in major East Coast population centers used to have to travel to Atlantic City to gamble. Connecticut’s gambling industry started growing in the 90s. Pennsylvania, which is now No. 2 in annual gambling revenue behind Nevada, allows for Philadelphians to use SugarHouse Casino in the city, and Bethlehem’s Sands casino provides a resort-style atmosphere that used to be unique to Atlantic City. There are also casinos at Valley Forge and the Poconos and a second one coming to Philly. Even northern New Jersey has a shot at getting casinos now.

Like Atlantic City, Vegas’ annual casino revenue peaked in the mid-aughts. But its 2014 casino revenue, about $9.5 billion, is only 12 percent lower than the peak.

Vegas is still growing in terms of visitors; Atlantic City is not

Experts say Atlantic City has fallen apart because it failed to diversify and use innovative ideas, as Vegas has continued to thrive because it has diversified its offerings. Its number of visitors declined for a couple of years during the recession, going from 39 million to 36 million, then shot back up starting in 2010, growing up to 41 million in 2014. As of 2013, Atlantic City’s number of visitors has declined every year since 2005. The 2005 peak was 35 million visitor trips — just a few million behind Vegas. In 2013, it saw 26.7 million visitor trips