- Associated Press - Sunday, June 5, 2011

ATLANTIC CITY, N.J. — Four years ago, some Atlantic City casino customers were shelling out $1,000 for a brownie sprinkled with edible gold dust in a Baccarat crystal they could take home.

Nowadays, some wait until 11 p.m. to eat so they can get a steak dinner for $2.99.

At the beginning of 2007, Atlantic City’s 11 casinos were at the top of a wave of prosperity. Starting with the 1978 opening of Resorts, the nation’s first casino outside Nevada, Atlantic City for years was the only place to play slots, cards, dice or roulette in the eastern half of the United States. The cash kept pouring in, the busloads of visitors kept coming and the revenue charts went one way: straight up.

And then, they didn’t. Now, battered by competition from casinos all around it, Atlantic City is in a fight for its very survival.

The resort is furiously trying to remake itself into a vacation destination that happens to have gambling, but with no guarantee it has a winning hand even as other threats loom, including the possible expansion of casinos to north Jersey racetracks and a growing push for online gambling.

Intoxicated by years of success, Atlantic City missed numerous opportunities to diversify its offerings, widen its customer base and fend off competition that clearly was on its way even 20 years ago.

“The atmosphere was a total irrational exuberance; it truly was,” said Robert Griffin, CEO of Trump Entertainment Resorts, who worked at Trump properties here in the 1980s and 1990s. “There was a feeling that there was no end to the good times and that the money would never end.”

Then, disaster struck the nation’s second-largest gambling market. A perfect storm of competition right on its doorstep in Pennsylvania, New York and Delaware, coupled with the recession, pummeled Atlantic City worse than any other casino market. In four years, a billion and a half dollars vanished, along with thousands of jobs and tourists. Pennsylvania, with its 10 casinos, is poised to knock Atlantic City into third place at some point next year.

How did things go so wrong so fast?

Cars streamed into Atlantic City on May 26, 1978, and people lined the Boardwalk for blocks, waiting to get inside Resorts on the first day it was legal to gamble there.

People bought tickets for buffets they had no intention of eating, just to sneak inside the casino earlier than the rest. Men relieved themselves into plastic coin cups to avoid losing their spot at the tables by going to restrooms. And cash — more than anyone had ever seen and more than management could imagine — flooded into the counting room, to the point that it took nearly an entire day to count it.

“It was euphoria,” said Steve Norton, who was Resorts‘ executive vice president when it opened and now runs a casino consulting firm in Indiana. “I mean, it was an unbelievable time.”

One after another in the 1980s, casinos kept coming. Revenues reached a high point of $5.2 billion in 2006.

And then the Pocono Downs harness racing track in Luzerne County, Pa., added slot machines and opened them to the public on Nov. 14, 2006. Suddenly, people in the heart of one of Atlantic City’s key feeder markets could drive 10 or 20 minutes to play the slots instead of making a three-hour round trip to Atlantic City. In less than four years, there would be 10 casinos in Pennsylvania, all of which now offer table games, too.

They took in nearly $2.5 billion last year, approaching Atlantic City’s $3.6 billion. So far this year, they are running neck-and-neck: $996 million for Pennsylvania, and $1.1 billion for Atlantic City.

“If you didn’t anticipate this competition coming, you were asleep at the wheel,” said Israel Posner, executive director of the Lloyd Levenson Institute of Gaming at Richard Stockton College of New Jersey.

David Schwartz, director of the University of Nevada-Las Vegas Center for Gaming Research, said Atlantic City can be successful again, “but it’s going to require a reinvention.”

“Basically, the city needs to stop looking backward and start looking ahead,” he said.

A look back reveals many missteps and lost opportunities. The most obvious: A failure to reinvent the resort as a place to go for more than gambling. Atlantic City belatedly jumped on the bandwagon, adding non-gambling amenities over the past eight years like celebrity restaurants, spas, shopping and top-name entertainment. The Borgata built a stand-alone luxury hotel called the Water Club, and Harrah’s indoor pool has become a cash cow, doubling as one of the city’s hottest nightspots.

But back then, anything customers couldn’t bet on was seen as a waste of money.

“Nobody wanted to build anything other than casinos,” Mr. Norton said. “The property values shot up so high, it didn’t make sense to build anything else.”

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