Just One More Hand: Life in the Casino Economy (2015)
Chapter 3
Going Upscale in an Era of Income Polarization
Atlantic City area locals still refer to day trippers as “shoobies,” a term that dates back to when Philadelphia families traveling by train to the Jersey shore for the day would carry their lunches in shoe boxes. When the casinos came to town, a new type of shoobies did as well. Visitors arrived by car or bus for the day, mostly to play the slot machines.[1] The cliché customer was a senior citizen with limited mobility planted in front of a whirling display of flashing lights and dinging sounds. In the words of one Showboat executive, “people in the industry thought of Atlantic City as nothing but a bus market for blue-haired nickel-slot players.”[2] For a long time, the casino owners and managers seemed content.
But as gambling venues on the East Coast multiplied, it became clearer that Atlantic City needed to differentiate itself as a destination resort. Las Vegas, which had transitioned to the era of megaresorts, became a source of envy rather than scorn. One problem facing the local industry was that 90 percent of revenues came from gambling, in contrast with Nevada, where approximately half of the dollars spent went toward rooms, food, and entertainment. In describing the differences between the two gambling centers, entertainment industry analyst Harold Vogel observed how much Atlantic City had been left behind in the evolution of the industry during the 1990s: “while Las Vegas truly became a global entertainment capital—a citywide theme park in itself—Atlantic City casinos remain largely a collection of slot-machine malls attracting primarily day-trip visitors.”[3] Those day-trippers now had slot parlors closer to home. And, given the economic squeeze that middle-class Americans were facing, they had less and less disposable income for gambling. As noted by a Credit Suisse analyst in a 2014 article on the industry’s troubles in Bloomberg Businessweek, “Gaming can skew a little more blue-collar and middle-income, and if you look at the national economic statistics, that’s a subset that remains challenged.”[4] In the same article, the general manager of an Ohio casino observed that the weak economic recovery since 2009 had squeezed the budgets of the key demographic playing the slots—women over fifty. To survive, Atlantic City had to attract new customers.
In response, New Jersey’s policy makers and civic leaders have tried, haltingly, with some successes and some failures, to lure a new wave of redevelopment that would bring overnight guests seeking multiple distractions. Convention business, which had shriveled up following the 1964 Democratic National Convention debacle, was actively solicited, and accompanied by building sprees to add hotel rooms to accommodate larger groups.[5] The beach and the Boardwalk, the sand and the surf, ignored for several decades, were once again touted as selling points to prospective visitors.
There is economic logic behind this strategy. Any student studying supply and demand in introductory microeconomics will tell you that an increase in the number of suppliers in a market puts downward pressure on equilibrium prices. Lower prices are supposed to boost the quantity demanded for your product. The product that the casinos sell, however, is extremely intangible. The sunk costs in capital equipment are incredibly high. Substituting “nickel slots” for machines accepting quarters in order to “lower prices” is not an easy fix. Minimum bets on table games can be lowered as a marketing ploy. Whether such price changes boost revenue depends upon a concept that economists call demand elasticity. If consumer demand is elastic, a small change in price will cause a significant increase or decrease in their willingness to buy. In this case, lowering the price will draw in new customers. But if demand is inelastic, consumer demand is relatively stable and inflexible, so price decreases will not motivate buyers; instead, a price decrease will reduce total revenue. At least one study indicates that demand for casino gambling is, in fact, inelastic.[6] Further, the routine price adjustments that economists expect in competitive markets do not always occur as neatly as they do in supply and demand graphs. Prices can be sticky, especially in a highly regulated industry where new firms have to be licensed in order to enter the market and casino operations are subject to review. The licensing requirements serve as barriers to entry. An alternate economic strategy for larger firms is to try to increase the demand curve itself, keeping prices stable while attracting new customers.
Political economists have long studied the ways in which businesses attempt to shift demand and increase their market power using strategies other than price adjustments. Casino operators can try to increase their market share compared with their competitors, a common strategy in oligopolistic industries. As casino management is increasingly coordinated by large corporations or hedge funds with multiple holdings, the market structure is more clearly that of an oligopoly, that is, dominated by a few firms. The American Gaming Association reports that mega-mergers of casino companies became the norm as early as 2005, when MGM Mirage acquired Mandalay Resort Group (April 2005) and Harrah’s Entertainment, Inc. acquired Caesars Entertainment (June 2005).[7] Even in Nevada, where barriers to entry are far lower than in New Jersey, megacorporations dominate the casino landscape.
Oligopolies are also cemented by differentiating products so that customers make choices on factors other than the cheapest deal (that is, price). Customer loyalty and brand identification are critical in this process. One change was the advent of electronic “player cards” that track when a customer visits, how much they gamble and on which games, and even which other amenities they use. Since players accumulate points on the card for a particular casino (or casinos with shared ownership, such as the Caesars Total Rewards card) and the points earn them “comps” (cash, goods, or services), the rewards programs incentivize loyalty. In effect, they make player demand more inelastic, since they are more likely to return to the same casinos.
Lifestyle branding emerged as an identifiable trend in the United States and other postindustrial countries during the 1990s. Naomi Klein, in her book No Logo, portrays branding as an effort to sell “meaning” through products.[8] Customers purchase goods and services only partially for their use values or functions. A more important motivation is that the products we use—and people see us using—signal the type of person we are or aspire to become. Branding is a perfect match for casino gaming since the industry has always marketed fantasies and experiences rather than tangible products. In Atlantic City’s casinos, brand identification attracts customers by marketing the casino as appropriate for a particular demographic group or by focusing on aspirational desires to act out a particular lifestyle. Several casinos, for example, market to Asian American communities with familiar amenities including pits focusing on specific games such as Pai Gow and Pai Gow poker and noodle bars and other appealing food options; they have also recruited Asian dealers. While Bally’s Wild West Casino plays country music and evokes nineteenth-century saloons, Showboat has a New Orleans riverboat theme and even a House of Blues. Other casinos opt for less specific symbols of luxury, from marble columns to ornate chandeliers. In recent years, as we describe below, such segmented marketing has increased.
As part of their branding strategy, two newly constructed casinos (Borgata in 2003 and Revel in 2012) as well as several existing properties have targeted new demographics, especially upscale consumers with greater disposable income. Entertainment, nightclubs, beach bars, and dining have been redirected toward a youthful market. The new marketing strategies make sense in an era of increased income polarization. Documented by Robert Frank in his book Luxury Fever, rising incomes for the wealthy combined with stagnant incomes for the middle class have contributed to a surge in consumption and marketing of luxury goods and services.[9] Like the bank robber Willie Sutton (in a possibly apocryphal story), the casinos started “going where the money is.” New technologies, especially magnetized customer loyalty cards, have also enabled casinos to more precisely target their high-spending customers and to deemphasize the gamblers who travel by bus. “Those customers who arrive by car are much more profitable,” observed Mark Juliano, then-Trump Entertainment Resorts CEO, in a local newspaper article on the shift in strategy.[10]
In sum, casinos in Atlantic City have responded to competition by trying to boost demand (the demand curve) and thereby bring in new customers. Managers have also sought to retain the customers they have. In economic terms, they have tried to reduce demand elasticity for their own house, making demand for their casino more inelastic. This chapter will explore these efforts in more detail.
On the supply side of the picture, another possibility is to concentrate on cutting costs and crossing your fingers that you do not lose customers. Competitors in the same industry may merge to try to lower costs through economies of scale. Businesses can cut costs in a labor-intensive industry by (1) incorporating labor-saving technologies, (2) reducing customer service in order to cut down on the number of employees, and (3) reducing labor costs by cutting wages and benefits. Deregulation is another cost-cutting tactic, since regulations intended to keep the games honest or to assure quality in other ways can increase the cost of operations.
In casino gaming, market saturation and pressures from debt holders have led casino management, in critical instances, to shorten their time horizons. The problem with this strategy is that it may restore profitability to the corporations and private equity interests that own the casinos without improving the well-being of the employees and the local community.[11] As we have already seen in the stories of employees in chapter 1, many cost-cutting measures such as the elimination of coins, reorganization of work processes, and cuts in benefits have been implemented.[12] Overall, the level of customer service has declined, especially for anyone who is not a high roller, and some of the employees we interviewed indicated that the cuts and looser regulations have increased the amount of cheating that goes undetected. Chapters 4 and 5, which focus on the characteristics of frontline jobs, elaborate on the impact of these cost-cutting efforts. Chapter 6 examines the pushback from organized labor, specifically the two unions representing frontline casino employees in Atlantic City.
Politically connected business leaders have other ways of restoring profitability that cannot be neatly categorized as supply or demand factors. Government helps provide the physical and social infrastructure that enables businesses to function. The difficulty comes in discerning the difference between appropriate public initiatives to improve broadly shared economic well-being, on the one hand, and corporate welfare or bailouts, on the other. Dean Baker, director of the Center for Economic Policy Research and author of Taking Economics Seriously, argues that much of the debate over economic policy is really over the type of economic regulation, not its extent; in his words, “In the U.S. economy, there is no free market.”[13] Rather there is a tug-of-war over policies that primarily benefit corporations and policies that promote shared prosperity. One of the critical attributes of government, from this perspective, is that it enables corporate interests to lobby for subsidies, regulations, and other policies that externalize their costs, meaning the public pays some of the costs of doing business. When underpaid workers collect food stamps, when the Environmental Protection Agency cleans up toxic waste sites, or when banks pay zero interest on funds from the Federal Reserve, government is absorbing some of the costs that businesses would otherwise pay. In chapter 7, we explore recent initiatives to save Atlantic City’s casinos that have increased public subsidies and involvement in the fate of these private-sector businesses.
All three of these types of strategies—product differentiation, cost cutting, and externalizing costs—have been adopted in Atlantic City. The relative balance and the way they are implemented varies by property and property owner. And the composition of the mix has a profound effect on the workforce and the surrounding community. Therefore, cost-cutting strategies have generated tensions between labor leaders who adhere to a “high-road” model of casino operation and some, though not all, of the new corporate owners who are viewed as importing a “low-road” strategy from other jurisdictions. Policy makers and political leaders are being pressured to pick sides.
Economist David Gordon succinctly summarizes the distinction between these approaches in his book Fat and Mean: “The ‘high road’ seeks to build economic growth and prosperity through cooperation and strong worker rewards, including relatively rapid real wage growth. The ‘low road’ relies on conflict and insecurity, control and harsh worker punishments, and often features relatively stagnant or even declining real wage growth. Both are coherent strategies, both can conceivably work.”[14] Even though both strategies are plausible in the abstract, Gordon argues that habits and structural incentives tend to make low-road strategies more attractive for individual firms in the short run. For example, declines in the real value of the minimum wage, policies that make unionization difficult, and a tattered social safety net since the 1970s have signaled a new set of institutional structures in the U.S. economy that have seen rising productivity without wage growth. In an era in which financial markets respond favorably to labor discipline, individual corporations face shareholder pressure to cut labor costs.
Efforts to implement the first strategy, product differentiation to attract new customers, are explored in more detail in this chapter, as we examine the peaks and troughs of the casino economy starting in 2003. We identify two waves of efforts to rebuild Atlantic City in the image of Las Vegas. The first swell crested in the period immediately following the opening of the Borgata, but crashed along with the rest of the global economy by 2008. This was followed by a smaller breaker, as more of the existing properties pursued variations on Borgata’s successful attempts to bring in more prosperous demographics. By 2014, however, few of the copycats could claim the kind of success that Borgata enjoyed.
The grand opening of the Borgata, a $1.1 billion casino, during the Fourth of July holiday in 2003, marked a turning point after years of stability in the number of Atlantic City casinos. Much excitement ensued during construction of a fresh new property. Borgata emphasized table games over slot machines. Because a player can lose money quickly at the tables, they tend to draw higher-income customers. The casino’s developers were seeking to capitalize on the growing popularity of poker rooms, especially among a younger crowd who plays online. Poker differs from blackjack, baccarat, and other typical casino table games in that gamblers play against each other instead of the house; casinos, then, garner revenue through seat/table fees. Borgata also pioneered completely cash-free and coin-free slots. It reduced the need for slot machine technicians and cashiers in “cages.”
In the most significant departure from past practice, Borgata emphasized a hip, youthful image by offering trendy nightclubs (including one with bottle service) and restaurants associated with celebrity chefs such as Bobby Flay and Wolfgang Puck. (Las Vegas had already become known for fine dining.) Like the other two properties that are in the back bay Marina District rather than on the famous Boardwalk, Borgata does not have a program for gamblers to arrive by bus. While older casinos lured regular customers with comps—freebies such as buffets, show tickets, or prizes based on how much the player had gambled—Borgata drastically cut back on such marketing. The casino looked beyond day-trippers. Starting a trend, Borgata was one of the first Atlantic City properties to incorporate a spa offering massages and other treatments, as well as a small set of luxury shops. Commercials for the newly opened casino showed a group of stylish twenty-somethings arriving on motor scooters. According to Nora, a fresh college graduate who started at the Borgata as her first full-time job, the casino recruited a younger labor force in customer service positions. Over time, marketing utilized Facebook and other social media tools.
Borgata was deluged with employment applications from experienced staff at other casinos, quickly developing a reputation as a relatively good place to work. Patrice, a dual rate floorperson at one of the Trump properties, applied for a job when Borgata opened. At the time, she was forty-two years old, with fifteen years in the industry. She brought photocopies of her employee-of-the-month certificates and other recognitions. But the manager who interviewed her just wasn’t interested. Even though he reportedly commented that she looked nice in her black slacks and shirt, she left with the impression that “if I was a lot skinnier and I was lot younger, I wouldn’t have anything to worry about.” The new casino seemed to be looking for a younger clientele, and hired employees to match.
Drinks are served by “Borgata Babes” in skimpier-than-ever uniforms who helped market the casino by posing for an annual pinup calendar. Lily, a twenty-something college student paying her way through school by working as a Babe, described her first attempt to audition for a better position in a different club—one with bottle service. She compared the elimination of candidates in various rounds to the television show American Idol. Wearing a costume that she described as looking like it “could fit a twelve-year-old,” she and the other “girls” were brought into the audition room one by one. “We walked into this room and there were three big beverage managers and they were sitting at a table just like this,” she explained, as she gestured to the table that we were using for the interview. Her story continued: “We had to stand a couple of feet away from them and there was a light directly on us. So they’re sitting at the table and there’s a light directly on us. They were looking at us and they said, ‘Why do you want to work at the Borgata?’ And I’m just standing there, like, this is absurd. I just want to serve drinks. It was like a judge panel—judging who I am… . I gave them the usual B.S.—‘I love working here!’ I turned around and I went back. And it was interesting because after all the girls had done that, they came back and asked two girls to leave. So right off the bat, just from them telling their names. I can only imagine that they did it only based on appearance.”
Buffeted by its successful branding, Borgata quickly became the local front-runner, topping the city’s casinos in gross gaming revenue. At its tenth anniversary in 2013, it was still #1 atop the revenue charts. As the busiest casino, its toke (tip) rate is also the highest. Borgata initially built and still holds the largest poker room in the city. Reflecting upon the first ten years, a local newspaper reporter summed up the Borgata brand and results: “its mix of South Beach hipness and Las Vegas-style glitz has allowed it to remain the city’s dominant casino.”[15] Borgata’s success did not prevent loss of casino business to other nearby states, but it probably lessened it.
Other casinos tried to rebrand and remarket themselves to set themselves apart from the competition. Over time, more casino marketing departments incorporated use of Facebook and other social media tools. The year after the Borgata opened, Tropicana added a separate building called the Quarter, an “Old Havana” (meaning pre-Fidel Castro) themed shopping and dining complex with an Imax theater and comedy club, but no slot machines. Once the Atlantic City Council passed an enabling ordinance in 2002, several Boardwalk casinos set up beach bars during the summer months, finally capitalizing in a big way on their oceanfront locations. Restaurants were reconfigured to add windows offering ocean views. Non-gaming attractions were added outside, as well as inside, the casino walls. The first stage of the Walk, an outlet mall owned by Tanger Factory Outlet Centers, opened the same year as Borgata. The Walk has been praised for bringing tourists out of the casinos to walk the streets of downtown Atlantic City, while giving locals access to reasonably priced retail shops as well as entry-level retail jobs.
In 2005, the Atlantic City casino industry celebrated when gross gaming revenue topped the $5 billion annual revenue mark. A record number of visitors, 34.9 million, came to Atlantic City in 2005. And 2006 was the twenty-ninth consecutive year (1978-2006) of positive revenue growth for Atlantic City gaming. A forced shutdown of the casinos for three days at the start of the state’s fiscal year in July of 2006, a casualty of a budget battle in Trenton, the state capital, did not prevent 2006 revenue from growing 4 percent over 2005 figures. However, the rate of change in the increase in revenue had been decreasing for some time. That means gaming revenues were growing, the slope was still positive, but it was leveling off. While not yet saturated, the Atlantic City casino industry was maturing.
Plans for more new casinos, however, were in the works. Pinnacle Entertainment bought the Sands Casino Hotel in 2006 and imploded it to build a $1.5 billion megaresort. By mid-2008, there were rumors that Coastal Marina and Jimmy Buffett were planning to purchase the Trump Marina and convert it into a Margaritaville-themed casino. Another international company, Penn National Gaming, investigated property on the outskirts of the city, either on one of the causeways onto Absecon Island or the former municipal airport, Bader Field. Perhaps the most critical project involved MGM Mirage, under the helm of pioneering Atlantic City developer Steve Wynn. The company planned to build a $5 billion megaresort and convention center in the Marina District near Borgata. It was anticipated to have 3,000 hotel rooms and the largest casino floor in the city, as well as upscale shops, restaurants, and entertainment. If successful, the project would have eventually incorporated on-site condominiums, a unique feature for the city.[16]
Most of these dreams of an upscale destination resort were shattered by early 2009. Competition from Pennsylvania, coinciding with the onset of the Great Recession, proved lethal. Pennsylvania regulators granted permanent casino licenses to six racing facilities in 2006. Further, four stand-alone casinos were licensed and opened in Pennsylvania, spanning from Philadelphia to Pittsburgh, between 2007 and 2010. Then came the worst recession in the United States since the Great Depression. Consumers held onto their wallets. And the associated financial crisis triggered a credit crunch in late 2008, strangling most of the new development on which gaming advocates had pinned their hopes for a revival.
At first, it was difficult to disentangle the impact of short-term cyclical economic fluctuations—the recession—from longer-term, secular trends like market saturation. Atlantic City’s gambling revenue hit a peak of $5.22 billion in 2006. Then, the casinos registered a revenue decline of 9.9 percent in the first quarter of 2007. The skid continued in the second quarter, suggesting that the first annual decline in history was likely. Summer business was no help. Competition from neighboring states and a slowing national economy began to take their toll. Sands became the first East Coast casino to be imploded. Both gambling revenue and casino profits dipped in 2007.
As the United States plunged into the Great Recession, gambling revenues continued steady annual declines. During the economic crisis, southern New Jersey residents learned that casinos are not a “recession-proof” industry, in Atlantic City or elsewhere. Gaming revenue fell by 8.5 percent in 2008, 12.4 percent in 2009, and 9.6 percent in 2010 (our calculations based on annual reports from the American Gaming Association). Atlantic City was not alone. As a result, from 2007 to 2009, for the first time ever, U.S. casino revenues nationwide experienced decline. Casino stock prices dropped. The industry saw bankruptcy filings followed by restructurings, consolidations, and mergers. For example, Harrah’s Entertainment, Inc. (later renamed Caesars Entertainment Corporation) was acquired by two private equity firms—Apollo Global Management and Texas Pacific Group (TPG Capital)—in a $17 billion leveraged buyout during 2008, assuming a massive amount of new debt in the process.[17] At the same time, casino gaming as a global industry continued to prosper and expand.
Locally, casinos laid off employees or cut their workforces through attrition. Thousands of Atlantic City casino workers lost their jobs, about 10,000 from 2006 to 2013, despite a slight uptick following the opening of Revel in 2012 (see table 3.1). The gradual trickle of jobs leaving the industry—around 1 or 2 percent per year following Borgata’s 2003 opening—turned into a cascade. If we look at employment per house, it peaked in 1997 and has fallen dramatically. Casino hotels were closing off some of their rooms and services mid-week. The impact was broad—a ripple effect—as casino vendors saw their business dwindle.
New Jersey Casino Employment and Employees per House |
|||
Year |
# Casinos |
Casino Employment |
Employees per House |
1978 |
1 |
3,226 |
3,226 |
1979 |
3 |
11,301 |
3,767 |
1980 |
6 |
21,151 |
3,525 |
1981 |
9 |
27,842 |
3,094 |
1982 |
9 |
28,093 |
3,121 |
1983 |
9 |
30,197 |
3,355 |
1984 |
10 |
35,968 |
3,597 |
1985 |
11 |
37,004 |
3,364 |
1986 |
11 |
37,262 |
3,387 |
1987 |
12 |
38,829 |
3,236 |
1988 |
12 |
42,134 |
3,511 |
1989 |
12 |
41,627 |
3,469 |
1990 |
12 |
45,241 |
3,770 |
1991 |
12 |
43,910 |
3,659 |
1992 |
12 |
44,240 |
3,687 |
1993 |
12 |
44,111 |
3,676 |
1994 |
12 |
44,894 |
3,741 |
1995 |
12 |
47,286 |
3,941 |
1996 |
12 |
48,956 |
4,080 |
1997 |
12 |
49,123 |
4,094 |
1998 |
12 |
48,542 |
4,045 |
1999 |
12 |
47,366 |
3,947 |
2000 |
12 |
47,426 |
3,937 |
2001 |
12 |
45,592 |
3,799 |
2002 |
12 |
44,820 |
3,735 |
2003 |
13 |
46,159 |
3,551 |
2004 |
13 |
45,501 |
3,500 |
2005 |
13 |
44,542 |
3,426 |
2006 |
12 |
42,456 |
3,538 |
2007 |
11 |
40,788 |
3,708 |
2008 |
11 |
38,585 |
3,508 |
2009 |
11 |
36,082 |
3,280 |
2010 |
11 |
34,145 |
3,104 |
2011 |
11 |
32,823 |
2,984 |
2012 |
12 |
34,726 |
2,894 |
2013 |
12 |
32,427 |
2,702 |
2014 (March) |
11 |
30,380 |
2,762 |
Note: Data is as of December 31 each year, except as noted. Sources: New Jersey Casino Control Commission, annual reports until 2011; thereafter, New Jersey Division of Gaming Enforcement website, casino hotel employment statistics.
As Pinnacle, the owners of the gigantic hole where Sands once stood, announced delay after delay in breaking ground on the new casino that was supposed to rise from the dust, the empty lot seemed to taunt the local community. One city council member vented that “They had an operating casino running. They buy it, crush it and take all the jobs away. Now they can’t build.”[18] The loss of so many jobs was devastating, and sent a large supply of workers into the local labor market precisely when jobs were scarce. The bargaining power of the workers at the remaining casinos diminished. No one wanted to risk joining the burgeoning ranks of job hunters. One floor manager we spoke with in 2009 described the chill brought about by a combination of limbo over ownership changes, a spate of firings, and increased supervisory responsibilities for remaining staff. In an e-mail two years later, her brother told us that her workplace continued to resemble a “ghost town.”
Macroeconomic recovery for the U.S. economy, however, did not turn the trend around. Atlantic City’s gambling revenue fell to $3.05 billion by 2012—a 42 percent drop from the peak six years earlier. In fact, according to the American Gaming Association’s 2013 State of the States annual report, Atlantic City was the poorest performing casino market in 2012. What was even worse news is that in the AGA report—for the first time ever—New Jersey fell out of second place in terms of gross gaming revenue. Instead of being second to Nevada, Pennsylvania was second and New Jersey was now third. By 2013, eleven casinos operated in Pennsylvania, with two more planned. Delaware had three with two more planned. New York had fourteen (nine racetrack and five Native American). Annual visits to Atlantic City casino properties had fallen off. The winning streak was over.
The crisis intensified underlying weaknesses in the local gaming industry as the short-term recession undermined efforts to turn around the longer-term problems. Economic conditions weakened the incentives for would-be casino ventures by entrepreneurs. Gradually, most of the projects—Pinnacle, Bader Field, and the MGM Mirage complex—dried up along with their financing. The profits for the industry in Atlantic City no longer seemed to justify the high cost of capital attributable to building and maintaining a new casino. The Revel project, whose financing was hamstrung by the credit crisis, was the only new casino to emerge from the rubble.
In late 2012, Atlantic City casinos, still hemorrhaging from a weak economy and competition from neighboring states, suffered another severe blow—this time from Mother Nature. Hurricane Sandy, a Category 3 hurricane, battered the Eastern Seaboard for two days, affecting twenty-four states from Florida to Maine. Atlantic City was in the large eye of the superstorm at landfall on Monday, October 29, 2012. Governor Chris Christie ordered the casinos closed the day before as Absecon Island was evacuated. Five days later, the order was lifted, but the casinos were left with cleanup and remained closed for a week. Hourly workers were laid off and were not allowed to use their vacation time during the closing. Salaried workers sustained days or even a week without pay. Collectively, casinos lost $5 million per day in gaming revenue. The superstorm’s water damage was extensive near the coast and the back bays throughout Atlantic City and the rest of the barrier island. Even upon reopening after Sandy, casino business was slow to recover. And less than two years after Revel opened, the Atlantic Club Casino—the property that once housed the much admired Golden Nugget—went into bankruptcy and closed its doors, sending 1,600 workers scrambling for jobs.
As of mid-2014, there are eleven casinos operating in Atlantic City. By the time this book is published, there are likely to be fewer. The current properties are listed in table 3.2 along with their market shares. Borgata is in many ways the market leader, with over a fifth of total casino revenue, not just gaming revenue. The picture becomes more complex, however, when we remember that many of these properties are owned and/or operated by larger corporations and other entities with diverse holdings.[19] Even within the Atlantic City market, for example, Caesars Entertainment Corporation and its private equity owners hold four of the eleven properties, including the second- (Harrah’s), third- (Caesars), and fifth- (Bally’s AC) ranked properties. Trump Entertainment Resorts Holdings still owns two properties, “the Taj” and Trump Plaza. The third Trump-named property was sold off and given the revived name Golden Nugget. Table 3.3 shows that Caesars Entertainment is actually the largest firm in the local market with 41.0 percent market share in 2013.
Atlantic City Casino Market Shares at End of Year 2013 |
|||
Casino |
Total Revenue |
Market Share |
Rank |
Borgata |
$913,516 |
23.5% |
1 |
Harrah’s |
$530,881 |
13.6% |
2 |
Caesars |
$444,295 |
11.4% |
3 |
Trump Taj Mahal |
$353,932 |
9.1% |
4 |
Bally’s AC |
$346,399 |
8.9% |
5 |
Tropicana |
$318,194 |
8.2% |
6 |
Showboat |
$275,351 |
7.1% |
7 |
Revel |
$250,426 |
6.4% |
8 |
Golden Nugget |
$177,769 |
4.6% |
9 |
Resorts |
$176,547 |
4.5% |
10 |
Trump Plaza |
$104,685 |
2.7% |
11 |
Totals |
$3,891,995 |
100% |
Note: Atlantic Club is omitted because the casino closed in January, 2014. Source: New Jersey Division of Gaming Enforcement, quarterly financial reports from casinos, Fourth Quarter 2013
Atlantic City Casino Concentration Ratio and HHI in 2013 |
||
Corporation |
Market |
Square |
Caesars Entertainment [Caesars, Harrah’s, Bally’s, Showboat] |
41.0% |
1,681.0 |
Marina District Development Company, LLC [Borgata] |
23.5% |
552.3 |
Trump Entertainment Resorts Holdings, LP [Taj Mahal, Plaza] |
11.8% |
139.2 |
Tropicana Entertainment, Inc. [Tropicana] |
8.2% |
67.2 |
4-Firm Concentration Ratio |
84.5% |
|
Revel Entertainment Group LLC [Revel] |
6.4% |
41.0 |
Landry’s Inc. [Golden Nugget] |
4.6% |
21.1 |
DGMB Casino LLC [Resorts] |
4.5% |
20.3 |
Herfindahl-Hirschman Index (HHI) |
2,522.1 |
Source: New Jersey Division of Gaming Enforcement, quarterly financial reports from casinos, Fourth Quarter 2013
So how much competition is there really in the local industry? How dominant are the top firms? Economists and antitrust lawyers use two measures to assess how competitive or anti-competitive an industry is: the concentration ratio (CR) and the Herfindahl-Hirschman Index (HHI). These two measures shed light on the nature of a market. How concentrated an industry is can be measured by the simpler four-firm concentration ratio, the percentage share of total sales/revenue of the four leading firms. Isolating the Atlantic City market, the four-firm concentration ratio is 84.5 percent (see table 3.3). Such a high CR means that the Atlantic City casino industry is one of most concentrated markets in the United States, on par with beverages (Coca Cola as leader) and tobacco (Philip Morris as leader).
A weakness of the CR as a measure is that it does not give us information about the competitiveness of the rest of the industry. For example, do one or two firms in the top four hold the lion’s share, or are the four relatively equal players? Beyond the big players, are there only a few other firms (think Atlantic City) or hundreds of other small firms that would give consumers a choice (think Las Vegas casinos)? The Herfindahl-Hirschman Index (HHI) named after its developers, economists Orris Herfindahl and Albert Hirschman, is a more sophisticated measure of market power and thus possible anti-competitive behavior. It is the sum of the squares of the market shares of the fifty largest firms, or all of the firms if the number is less than fifty. This measure better accounts for the relative sizes of firms in the industry. The HHI can theoretically range from 0 to 10,000 with 10,000 for a monopoly: 1 firm with 100 percent of the market, (100 x 100) or 1002. The U.S. Department of Justice Antitrust Division uses the HHI to evaluate proposed mergers for possible anti-competitive effects. The Justice Department considers a market with an HHI higher than 2,500 points to be “highly concentrated.”
As shown in table 3.3 (organized by firm ownership), the HHI for the Atlantic City casino market is 2,522.1. This means that the casino market in Atlantic City is highly concentrated. Eleven casinos have only five owners. The arithmetic of the HHI is driven by Caesars, by far the dominant firm. This dominance presumably was a factor in the company’s seemingly anti-competitive recent behavior. Caesars and Tropicana swooped in and bought the closed Atlantic Club, with Caesars purchasing the building and physical assets. Then Caesars turned around and sold the building with a deed restriction that prevents it from being used as a casino in the future.
But Caesars is not exactly a firm, in the conventional sense. As noted by Eileen Appelbaum and Rosemary Batt, authors of Private Equity at Work, the primary shareholder in Caesars Entertainment is a fund controlled by two private equity firms, TPG Capital and Apollo Global Management. The buyout of Caesars was one of the largest in the history of private equity, and burdened the company with billions of dollars in debt. To manage the debt, the private equity managers “cut staff, reduced hours, outsourced jobs, and scaled back operations,” as well as “cut dealers hours and benefits.” And, they engaged in the type of behavior that Appelbaum and Batt warn about in the conclusion to their book: “all too often private equity owners have engaged in financial engineering … to maximize their own returns while putting operating companies and their stakeholders in jeopardy.”[20] In fact, Caesars’ employment policies in recent years have been particularly draconian, raising concerns that other gaming houses will follow the market leader.
We chose to complete this mathematical exercise for the Atlantic City gaming market. If we were to perform the same calculations for another jurisdiction—a city or region—we would find that the gaming marketplace is similarly concentrated, even when measured nationally or internationally. Excluding casinos owned and operated by Native American tribes, the global gaming market is comprised of oligopolies. In other words, large firms under few corporate owners are the market leaders and powerhouses.[21]
It is not surprising, then, to see market dynamics common to oligopolistic industries, where a few market leaders set the trends and most competition is focused on grabbing market share from other firms. Borgata’s rise to the top of the local market based on this new managerial strategy made it a model to be copied or surpassed. Many of these efforts overtly focused on marketing strategies to appeal to a more affluent customer base.
Economic revitalization needed a spark. The existing Atlantic City properties, along with local political leaders and policy makers, pushed even harder to remake the city’s image into a regional destination resort. Yet policy makers rarely mention the underlying political economy forces driving the strategy of appealing to young, hip consumers in their twenties, thirties, and even their forties who have higher levels of disposable income. Casinos are not the only U.S. industry that has targeted the luxury market in recent years, and with good reason.
Income inequality in the United States has been rising since 1979. Timothy Noah points out that while similar trends can be observed in other advanced industrial economies, “the level and growth rate of income inequality in the United States has been particularly extreme.”[22] In 1928, on the eve of the Great Depression, the richest 1 percent in the United States earned 24 percent of the income; by the 1970s, at the end of a period that economists Claudia Goldin and Robert Margo label the Great Compression, the share of the “1-percenters” was down to 9 percent. Incomes stagnated for the wealthy as well as the middle class during the 1970s, according to Noah. The Great Divergence, a term coined by Nobel-winning economist and New York Times columnist Paul Krugman, brought the income share of the top 1 percent back to 24 percent by 2007, the onset of the Great Recession.[23] During the entire period from the 1980s to 2005, Noah observes, “80 percent of the total increase in Americans’ income went to the top 1 percent.”[24]
Those earning just below the wealthiest also did quite well. After-tax income for the top 20 percent—what economic analysts refer to as the top “quintile”—rose 65 percent from 1979 to 2007, compared with a 37 percent increase for the households in the middle-income ranges. Stagnant wages, erosion of the social safety net, outsourcing of living wage jobs held by those with less education, lower union density, and other trends slowly undermined middle-class incomes. During the same period, financial bubbles and favorable tax policies concentrated income and wealth at the top of the ladder.[25] Economist Robert Frank noted as early as 1999 that luxury spending was growing four times as fast as overall spending, fueled by “unprecedented prosperity” of top earners.[26] Frank documents the explosion of conspicuous consumption on larger homes, yachts, high-end watches, professional cooking ranges, cosmetic surgery, premium wines, and other luxury items, as well as the impact of luxury markets on middle-class aspirations.
Conspicuous consumption, including glitzy décor, lavish buffets, and the affectation of carelessness with money were always part of the image that casinos and their customers projected. But the new expansion wave has amped up the signifiers of luxury. High-income consumers need to be attracted by more than the dream of hitting it big at the slots. Atlantic City has tried to give them what they want. For example, in 2008, Harrah’s, long associated with the low end of the market, built a more luxurious set of rooms called the Water Tower, outfitted with a 40,000-square-foot space that includes a massive pool and Jacuzzis as well as an Elizabeth Arden Red Door Spa. Adding to the burgeoning nightclub scene, “The Pool After Dark” becomes a Vegas-style nightclub with poolside cabanas offering bottle service and the chance to rub elbows with various celebrities—from reality television standouts to other pop culture icons—while dancing to the beats supplied by famous deejays. Marketing of the pool was separated from general marketing of the casino property in order to draw a younger crowd.[27] As a unique attraction, Harrah’s Water Tower also introduced the only Viking Cooking School in a casino. Capitalizing on the popularity of television cooking shows, the Viking schools offer classes where participants prep dishes under the guidance of a chef, then dine on and drink their output, all while using Viking’s professional-grade kitchen products and appliances. Casino houses also tried offering indoor surfing, trapeze lessons, and other attractions to draw customers.[28]
In 2010, casino manager Dennis Gomes, who had built the Quarter when he was at Tropicana, became CEO of Resorts when he and business partner Morris Bailey purchased it. Gomes had started his career in Las Vegas working for the Nevada Gaming Control Board as a regulator; his major case investigating organized crime was the basis for the 1995 Martin Scorsese film Casino. He also worked for New Jersey’s Division of Gaming Enforcement before going through the revolving door from casino regulation to casino management. Under his leadership, Resorts was rebranded with a Prohibition speakeasy theme, seizing on both the popularity of the HBO series Boardwalk Empire and incorporating architectural elements from the 1920s-era building’s former life as the Chalfont Hotel and Hadden Hall. Female cocktail servers wearing plunging backless flapper costumes became a prime feature of casino marketing on billboards and other advertising. They were following the trend set by the Borgata Babes. Back in 2007, a New York Times article about Atlantic City’s casinos observed, “These days, cocktail waitresses working the flashier casinos show more skin and are younger and more buxom than they used to be, and a few years ago the city adopted a new advertising slogan: ‘Always Turned On.’”[29] Controversy surrounded some of the casino’s rebranding efforts. Hundreds of former employees lost their jobs or took pay cuts.[30] This included a number of middle-aged women who had worked as cocktail waitresses before the ownership change at Resorts. Nine of the waitresses charged that they lost their jobs when they had to audition with a modeling agency to wear the skimpy new uniform. The waitresses were offered alternative positions in the company but declined to take them, opting to initiate an age and gender discrimination lawsuit.
On a more positive note, the new Resorts also broke new ground by being the first casino to explicitly target the gay, lesbian, bisexual, and transgender (GLBT) community. Atlantic City had once had a lively gay bar scene centered around New York Avenue, dating back to the 1920s, but the casino era along with other trends had displaced the once-thriving culture. Resorts opened the first GLBT-oriented dance club inside a casino, then added a drag show (that attracted straight audiences as well) and a piano bar. Other casinos have also sponsored drag bingo events to raise money for the South Jersey AIDS Alliance or hosted special weekends with circuit parties. The two developments are, in a sense, intertwined. As the casino deliberately sought to market itself as a hot destination, it signaled this by ramping up markers of sexuality, both heterosexuality (skimpier costumes on waitresses) and homosexuality. Gay men are viewed as trendsetters by some heterosexual consumers. Gay marketing frequently reflects common assumptions (often myths) that the GLBT community consists of relatively privileged and hedonistic consumers with few family responsibilities,[31] and this may have influenced the strategy as well.
Yet Gomes’s sudden death in February 2012 caused turmoil for a company that largely drew upon his vision and expertise. By the summer of 2012, Resorts announced that it had turned to Connecticut-based Mohegan Sun to become a minority owner and to manage Resorts’ operations. The deal gave Mohegan Sun its first inroad into the Atlantic City market and marked another step toward industry consolidation. Loyalty points earned at any of the three Mohegan Sun casinos (in Connecticut, Pennsylvania, and Atlantic City) are transferable. Less than one week after the agreement was made public, the new management team announced its intention to construct a major expansion in front of Resorts, where the old Steeplechase Pier once existed. The new complex built out over the beach would have a “Jimmy Buffett’s Margaritaville” theme, resurrecting the concept once intended to remake Trump Marina. The sprawling Connecticut Mohegan Sun complex already had a Margaritaville component that is popular with “Parrotheads” (the moniker for Buffett’s fans). The local news coverage noted that “Margaritaville customers are generally between the ages of 35 and 64 and are split evenly between males and females. More than 60 percent have college or graduate degrees, and 39 percent have household incomes greater than $100,000.” The article also indicated that the project was supposed to “generate 238 construction jobs, 45 professional temporary jobs, and 162 permanent jobs.”[32]
Resorts was able to secure some brand protection for Margaritaville, specifically, that it would be the only operation within 200 miles of the Atlantic City location, keeping the brand out of eastern Pennsylvania and Delaware. Ribbon cutting was Memorial Day weekend in 2013. A portion of the Resorts casino floor is now bright turquoise. Palm trees and surfboards abound. Just across the Boardwalk is the Landshark Bar & Grill, occupying the once-decaying pier. Roughly one year later, Resorts announced that it would stick to one principal theme: the Roaring Twenties was out, including the flapper uniforms, and Margaritaville was in. Also “out” (ironically) was gay marketing, including the drag show and bars. According to local casino consultant Michael Pollock, “Margaritaville represents a very desirable demographic. It’s a combination of young people and people who don’t realize they are no longer young.”[33]
Pursuing a different strategy for marketing and branding, several casinos are emphasizing the locals market. “Industry nights” target workers during their off hours who often are not permitted to patronize their own casino but can party at others. Tropicana introduced a “Tropicana Loves Locals” program as early as 2002, but interest in the approach has increased. The struggling Atlantic Club, in a last gasp before its demise, heavily marketed to locals starting in 2012; they lowered prices on meals, offered free parking, and gave gamblers comps they could use at local small businesses. In 2014, Caesars Entertainment introduced “Local Perks” at all four of their properties as part of their Total Rewards program. Customers have the option of using their comps at shops at the Walk, local restaurants, and even a nearby grocery store. The idea is to bring in customers from the surrounding suburban and exurban communities, especially on weeknights. One local restaurant owner who participated in the rewards program praised the strategy, noting, “Now that times are tough, you have to look in your back yard.”[34] Even Borgata offered weeknight discounts at their high-end restaurants, noting “We have some affluent customers locally.”[35]
If you can’t beat ’em, join ’em. Convenience gambling is undermining the usual emphasis of a tourism economy on bringing in money from other locations. As more people in surrounding states can gamble closer to home, Atlantic City’s casinos are seeking survival by sucking in dollars from locals rather than outsiders. This scenario has implications beyond Atlantic City, raising questions about the viability of casinos as a local economic development strategy. As casinos proliferate, each locality is more and more likely to draw its customer base from a smaller and smaller geographic radius. In a telephone conversation we had with John, a Massachusetts activist who worked to oppose the establishment of casinos in Holyoke and Springfield, he shared concerns that casinos located a mere sixty miles apart would primarily draw upon a radius of only thirty miles. Rather than bringing money into any particular local economy, the fear among gambling opponents like John is that casinos will be likely to divert local consumer spending to the corporate coffers of the casinos—to then possibly be reinvested elsewhere, anywhere but the community.
When the Atlantic City Sands Casino was imploded on October 18, 2007, it was a figurative ending of an era in Atlantic City. It took just less than twenty seconds. Then it was dust. Gone with it were the entertainment venues that hosted Frank Sinatra, Sammy Davis Jr., and other members of the “Rat Pack.” Gone, too, was the security of knowing that Atlantic City had an edge—a comparative advantage—in gambling. One strategic response has been an upsurge in branding, especially marketing to younger and more prosperous customers or other niche markets. With assistance from the Casino Reinvestment Development Authority and state officials, Atlantic City is trying to rebrand itself, with efforts to draw visitors to leave the casinos for shopping, clubbing, dining—and even to spend time on the beach and famous Boardwalk. Some of these economic development strategies seem to be successful, especially the non-gaming ventures. In fact, the Division of Gaming Enforcement now tracks gross operating profit as their primary indicator of the industry’s health rather than the more narrow gross gaming revenue.
But as every economics student knows, demand is only one half of Alfred Marshall’s famous “scissors.” Casino management has also pursued strategies to reduce costs on the supply side. While the specific strategies and approaches have varied across houses, owners, and management teams, the general trend has been a reduction in job security, hours, and benefits, especially for employees without union representation. As we will see in the upcoming chapters, even workers who loved their own jobs are increasingly wary of recommending the casinos as good places to work for the next generation. The promise of first-class jobs that would allow workers to support themselves and their families seems to be slipping through their fingers like sand. In the long run, cost cutting may restore profitability to the powerful owners. But without good jobs, we argue, this will not constitute an economic success story. The well-being of communities and the provisioning of its members is at risk.
1.
See Anthony Marino, “Transportation in Atlantic City,” in Casino Gaming in Atlantic City: A Thirty Year Retrospective, 1978-2008, ed. Brian J. Tyrrell and Israel Posner (Margate, NJ: ComteQ, 2009), 45.
2.
Gary Rivlin, “Atlantic City Aiming Higher As Casinos Slip,” New York Times, March 19, 2007.
3.
Harold L. Vogel, Entertainment Industry Economics: A Guide for Financial Analysis, 8th ed. (Cambridge, UK: Cambridge University Press, 2011). See also Rivlin, “Atlantic City Aiming Higher.”
4.
Christopher Palmeri, “Casinos Know When to Fold ’Em,” Bloomberg Businessweek, April 7-13, 2014, 25-26.
5.
Brian J. Tyrrell and Jeffrey Vasser, “Marketing Atlantic City as a Destination,” in Tyrrell and Posner, Casino Gaming in Atlantic City, 174-92.
6.
See Jim Landers, “What’s the Potential Impact of Casino Tax Increases on Wagering Handle: Estimates of the Price Elasticity of Demand for Casino Gaming,” Economics Bulletin 8, no. 6 (2008): 1-15.
7.
American Gaming Association, U.S. Commercial Casino Industry: Facts at Your Fingertips (Washington, DC: AGA, 2009).
8.
Naomi Klein, No Logo: Taking Aim at the Brand Bullies (New York: Picador, 2002).
9.
Robert H. Frank, Luxury Fever: Money and Happiness in an Era of Excess (Princeton, NJ: Princeton University Press, 1999).
10.
The declining emphasis on bus patrons and focus on upscale customers is described by Press of Atlantic City reporter Donald Wittkowski in a May 16, 2010, article entitled “Atlantic City Casinos Relying Less on Bus Patrons, More on Overnight Stays.”
11.
For an analysis of increased pressures on management by financial markets, see David Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It (Cambridge, MA: Harvard University Press, 2014), 44-45.
12.
Similarly, Jeffrey Sallaz’s study of a Nevada casino notes that “over the past decade, corporate management has cut employee wages and benefits, often through forcing out full-time, veteran dealers and replacing them with young, usually immigrant, women.” See Jeffrey J. Sallaz, “The House Rules: Autonomy and Interests Among Service Workers in the Contemporary Casino Industry,” Work and Occupations 29, no. 4 (2002): 404.
13.
Dean Baker, Taking Economics Seriously (Cambridge, MA: MIT Press, 2010), 2-3.
14.
David M. Gordon, Fat and Mean: The Corporate Squeeze of Working Americans and the Myth of Managerial Downsizing (New York: Free Press, 1996), 144.
15.
Donald Wittkowski, “Borgata Stands Out 10 Years On,” Press of Atlantic City, July 1, 2013.
16.
Donald Wittkowski, “MGM to Delay Start of Atlantic City Casino Project until 2009,” Press of Atlantic City, August 30, 2008.
17.
UNLV Center for Gaming Research, Caesars Entertainment Corporation Company Profile, accessed July 30, 2013, http://gaming.unlv.edu/abstract/fin_het.html.
18.
Michael Clark, “Atlantic City Council May Impose Construction Deadlines in Light of Pinnacle Delays,” Press of Atlantic City, September 15, 2008.
19.
The private equity firms that own Caesars Entertainment (TPG Capital and Apollo Global Management) both describe a wide range of investments on their web sites, from financial services to media, from chemicals to health care, and from retail to technology. Landry’s, which recently acquired the property rechristened as the Golden Nugget, is concentrated in seafood restaurant chains. But it also owns the Downtown Aquarium in Houston, an entertainment complex with amusement rides and midway games. In contrast, Boyd Gaming, owner of the successful Borgata, operates casinos in Las Vegas, Illinois, Indiana, Iowa, Kansas, Louisiana, and Mississippi, as well as New Jersey.
20.
Eileen Appelbaum and Rosemary Batt, Private Equity at Work: When Wall Street Manages Main Street (New York: Russell Sage Foundation, 2014), 81, 98, and 266.
21.
This is confirmed by two key industry profiles by a private consulting firm, Datamonitor. See Casinos & Gaming in the United States and Global Casinos & Gaming.
22.
Timothy Noah, The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It (New York: Bloomsbury, 2012), 3.
23.
According to the Congressional Budget Office, the threshold for being in the top 1 percent of households was a pre-tax annual income of $347,421 in 2007. See Congressional Budget Office, Trends in the Distribution of Household Income Between 1979 and 2007 (Washington, DC: CBO, October 2011), 3.
24.
Noah, The Great Divergence, 23-25; emphasis in original.
25.
For an overview of these trends, see Arthur MacEwan and John Miller, Economic Collapse, Economic Change: Getting to the Roots of the Crisis (Armonk, NY: Sharpe, 2011) and Paul Krugman, The Conscience of a Liberal:Reclaiming America from the Right (New York: Norton, 2009).
26.
Frank, Luxury Fever, 18-19 and 33.
27.
Juliet Fletcher, “Nightclubs in Atlantic City Casinos Not Just Hot on Weekends,” Press of Atlantic City, August 16, 2009.
28.
See Donald Wittkowski, “New Ways to Play,” Press of Atlantic City, August 27, 2012.
29.
Rivlin, “Atlantic City Aiming Higher.” As of 2012, Atlantic City’s slogan is the equally suggestive “DO AC.”
30.
Dennis Hevesi, “Dennis Gomes, Operator of Casino in Atlantic City, Dies at 68,” New York Times, February 25, 2012.
31.
M. V. Lee Badgett, Money Myths, and Change: The Economic Lives of Lesbians and Gay Men (Chicago: University of Chicago Press, 2001).
32.
Jennifer Bogdan, “Margaritaville to be Only One for 200 Miles,” Press of Atlantic City, August 14, 2012.
33.
Quoted in Donald Wittkowski, “Theme Change Boon to Resorts,” Press of Atlantic City, September 16, 2013.
34.
Donald Wittkowski, “Atlantic City Casinos Look Closer to Home for New Customers,” Press of Atlantic City, April 11, 2010.
35.
Wittkowski, “Atlantic City Casinos Look Closer to Home.” The marketing vice president quoted in the article quickly added, “Obviously, all customers have value to us.”
Ken and Marlene’s Story
The contrasts between Ken’s and Marlene’s stories say a great deal about how the work lives of Atlantic City’s dealers have changed over time. Ken is a Day-Oner, meaning he started at one of the casinos when it first opened during the boom years. A white male from one of the suburban towns on the mainland near Atlantic City, being a dealer was always a full-time job with benefits for him, and he was able to work his way up into a supervisory position. Marlene, in contrast, is the daughter of Korean immigrants who started working as a dealer just before the recession hit in 2008. She and her husband both have part-time casino jobs; he has two of them and she has one in order make ends meet. Their casino jobs do not provide a sustainable livelihood.
Ken explains that he actually backed into his career in the gaming industry. Working for Caesars as a security guard while the casino was under construction in 1978 and 1979, he watched the old Howard Johnson’s hotel site being completely renovated and reconstructed from his security post. Fresh out of college, he daydreamed about a placement with the Federal Bureau of Investigation (FBI). For the FBI, he was told he needed two years’ work experience in a law enforcement agency first. He had an idea. With his baccalaureate degree in hand, he was eligible for a job with the Casino Control Commission (CCC), and the CCC counted as law enforcement. This would be his stepping-stone to the FBI, he thought. Sitting at the dining table of a mutual friend, he describes a lengthy written application and a series of interviews as if it were yesterday. Then Ken was suddenly informed that he could not be hired because of a conflict of interest. What?! “Oh, I was quite irked,” he affirms as he recalls the story. It turned out that there had to be a two-year lapse between what was termed a casino job at Caesars and a civil service position at the CCC, even though he was only doing security on a construction site. “It was a new business, and nobody really new all the rules and regulations… . If I had [known], I wouldn’t have taken the casino job.”
After a year on the job in security, Ken took the sergeant’s exam and passed it, but he was passed over for promotion. And he was bored. He spoke with his buddy, Eddie, who was on the job with him at Caesars, saying, “We’ve got to get out of here because this isn’t going nowhere.” Some of his friends had started working as dealers at Resorts when it opened the previous year. For $1,100 each at the time, Ken and Eddie decided to attend gaming school for thirteen weeks and apply for a craps license. School was a breeze for Ken. He tried for an in-house transfer to deal within Caesars but actually landed a job at an even newer casino in town, Claridge. Thirty-plus years later, Ken is still there, but now he is managing gaming pits in a dual rate position. During his tenure, Claridge was bought by Bally’s, became part of Caesars Entertainment, and then Caesars was bought by Harrah’s, which changed its corporate name to Caesars again. Riding through the changes, he was promoted, got married, had children, divorced his first wife, shared child custody, remarried, and sent children off to college. Three decades of working weekends, holidays, and unsocial hours has taken its toll on normal family life.
Ken remembers $4.50 per hour in base pay and about $8.00 per hour in tokes as a good wage in 1981. “You could survive on that.” Now it is much harder to live on dealer pay. According to the Bureau of Labor Statistics inflation calculator, $12.50 in 1981 would be equivalent to $32 in 2013. At less than $30 per hour with tokes, dealer pay—even for full-timers with seniority—has not kept pace with inflation, as measured by the Consumer Price Index (CPI), especially for new hires. That’s why Ken decided to go for promotion to floorperson, the next rung on the career ladder. A decade later, he would be promoted again to dual rate pit manager, the position he still holds today. Ken’s typical work day is spent roaming among different tables and different games, with the number of tables and games he is required to supervise creeping upward over the years.
The industry has changed during Ken’s tenure. Take the demographics of the labor force, for one. When he started, Ken frankly observes, it was a “majority white industry.” Now it is one of the most diverse labor markets within the United States. First blacks and Latinos/Latinas were hired. Then came workers from India. Then the rest of the Pacific Rim: Vietnamese, Thai, Cambodians, Koreans, and Chinese. There are dozens of languages spoken by casino workers. Ken expands on this, “So, when you are trying to deal with these people on a supervisor level, sometimes I had to get an interpreter to explain how to do something or explain what they are supposed to do because of the language barrier. And previously, when the business started, it wasn’t that way.” The casinos have responded by providing some customer service training and English as a Second Language (ESL) courses on site or through local colleges and institutes.
The workforce has changed markedly in other ways, too. “The full-time staff is shrinking,” Ken explains, “and it’s part-time that’s increasing because they don’t have to pay the benefits. So a lot of the—we have part-time dealers, we have seasonal dealers, we have part-time supervisors that only work two days. They pay them a little higher rate, but they pay them no benefits at all.” Benefits were cut for full-timers as well. Anything that could possibly be trimmed to pare costs was cut. Ken speculates that such actions by top management helped usher in an environment that was more hospitable for union organizing. And, in fact, dealers at his casino voted in favor of representation by the United Automobile Workers (UAW) in 2007.
Workplaces have their office politics as well. Casinos are no different and may even be worse. As Ken tells it, “Politics in the casino business is horrendous. It’s based basically if you’re in a clique or you’re not in a clique. You could be the best employee, but if so-and-so in charge doesn’t like you, you will go nowhere.” The drinking and sexual (mis)behavior tolerated among gamblers on the casino floor also seems to be leaching into the professional workplace. Women employees, in particular, would be urged to play along and sleep their way up the career ladder. Annual employment evaluations are based upon his job performance and his extracurricular activities: “‘Do you do anything more for the company, or do you just do what you have to do?’” Managers are expected to volunteer off the clock in their communities, like working in a soup kitchen or on a community service project. They are also expected to staff casino-sponsored events such as blood drives. He begrudges doing community service in order to polish the company’s image.
If they are called away inside the casino to attend mandatory training, that’s on the clock and they are paid for that. Ken welcomes being tapped out for assignments such as staff training away from the casino floor. One time, he was asked to help test fellow supervisors. Coworkers get jealous of these “cake jobs.” Naturally, they would, Ken admits: “You know, because I didn’t have to deal with the public, which sometimes, you know, it’s a nice break being so long working with the public that the last thing I want to do is see anybody. Because you’ve heard every story, you’ve seen everything—well, I can’t say because there’s always a surprise. You’ve seen some bizarre things that it’s just like sometimes it’s entertaining and sometimes it’s just so frustrating.” Like the second-hand smoke blown in your face, or customers, he says, who don’t take restroom breaks when they’re in the middle of gambling. A maintenance worker will ultimately have to come and replace the gaming chair/seat when this happens. He adds that the craps tables have a thin ledge just under the top surface, and guys have actually urinated into the ledge because they won’t leave a hot table. People can forget about normal rules of decorum when they are hooked on the gaming tables.
Even a medical emergency won’t stop some gamblers, Ken vented: “I saw somebody die on the casino floor, and he was a shift manager. He was also a friend of mine. And patrons around were acting—they still wanted to play on the games next to him while the EMTs were working on him, trying to get—he had a heart attack—trying to get his heart started. So people were looking by, and they’re like, ‘Oh, I can’t play that slot machine?’ Or, ‘I can’t play on this table?’ And you’re like—it’s just like, you’re sitting there staring, and it’s like gambling never stops. It’s like if we have a fire alarm, you have to pry these people out with a crowbar to get them out. And I’m just sitting there wondering, ‘How sick are these people that they’re just so focused on gambling that they lose sight of reality?’ There was like no humanity, I guess you want to call it.” Ken adds, “This is really such a really sick business. This is how I get my paycheck? This is what I’m into? This is my livelihood?”
Marlene is part of the immigrant wave that Ken describes moving into dealing over the past few decades. These new employees often do not have the same opportunities as the first wave of workers. Today’s employees on the casino floor are increasingly part-time or seasonal employees. Marlene, a thin, serious young woman with long black hair, has spent three years on the job as a part-time dealer. She went to dealer school to learn the games and started dealing when she was twenty-one years of age. Marlene’s mother, Joy, gambles regularly in Atlantic City. Joy pushed her daughter into dealing to earn decent money that she could apply toward a college education. The family is from South Korea, with a mix of Chinese ethnicity. Gambling was entertainment. Education was essential. So Marlene works ten to fifteen hours a week on a grave shift at the Trump Taj Mahal, and attends college in the daytime, squeezing in naps and homework as much as she can in the remaining daily hours.
Like other novice dealers, she started in blackjack. In her audition and interview, she also expressed an interest in dealing craps precisely because it was more difficult for women dealers to break into craps. Not only is Marlene ambitious, but she is a quick learner. Within a year, the casino moved her to baccarat. Marlene loves the pace of the work and the excitement of meeting new people—including her husband Chin, an older casino employee with about twenty years on the job. She chuckles, recalling sage words from her father: “My dad always used to tell me, if you were the manager at McDonald’s, who are you going to marry? You’re going to marry the manager at Burger King. And so, that’s pretty much what happened.” Marlene says that she and Chin are very happily married.
But, as with so many of the folks we interviewed, the patina of an exciting new job wore off after a while. Customers and hangers-on include pimps and prostitutes, not just her regulars looking for an evening’s entertainment from time to time. Even some high rollers “seemed miserable even though they had hundreds of thousands of dollars.” Marlene hated how one player in particular had two women on his arm. All three were playing with his bankroll, but he was grabbing at their assorted body parts and pulling their hair. And the customers who would win for the first time, say $1,000, and then “come back and come back and start losing and losing.” She adds, “I would see them coming back with their wives, like this one guy I remember coming back with his wife and, you know, just started losing everything and it’s, you know, there were a lot of times where I just want to be like, ‘Get out of here!’ you know, ‘Go and run, take your money and run! It’s not, you are not going to hold on to [luck and money]. It’s not going to stay with you.’”
Both Marlene and Chin witnessed the severe cost cutting in the 2000s and especially after the 2008 financial crisis. She mentions her employer being fined after a card-shuffling scandal, when the decks of supposedly pre-shuffled cards turned out not to be shuffled at all: “I think a year and a half ago or something like a new manager came and all he was worried about pleasing the, you know, and just having—he was just worried about how much everything costs. He cut back on everything. Everybody hated him. Even with the bac [baccarat] game, you are supposed to shuffle the cards, like washing them. He got rid of that because he said it took minutes away from dealing and so, you know, we all believed that that’s one of the reasons that happened.” Her base pay is frozen.
Luckily for Marlene, she is pursuing higher education. If the dealing job were full-time with good pay, circa $40,000-$50,000 per year, “good work for a provider,” she would recommend dealing as a career. She recognizes that those jobs are hard to find. When we met with her, she was concentrating on finishing up the last two courses to complete her undergraduate degree. And then she stopped dealing when she had a newborn baby. No more second-hand smoke. Her husband, Chin, still holds two thirty-hour-per-week jobs to support the family. That’s sixty hours in total. She wishes he could work one forty-hour-a-week job instead. While Chin and Ken seem to be stuck, Marlene is working on moving into real estate and looking into teaching as an alternative to going back to the casino. She is still cobbling together part-time employment, but now it is outside the casino economy.