A.C. looks for ways to boost hotel occupancy

Tucker Gumkowski (left), 21, of Montclair, N.J., and his friend Morgan Mullen, 22, from Canada - both juniors at Hobart College - wait to check in at the Borgata.
Tucker Gumkowski (left), 21, of Montclair, N.J., and his friend Morgan Mullen, 22, from Canada - both juniors at Hobart College - wait to check in at the Borgata. (CLEM MURRAY / Staff Photographer)
Posted: May 20, 2014

Tucker Gumkowski and Morgan Mullen did the math. They checked into the Borgata Hotel Casino & Spa last week for a three-day, two-night vacation that included gambling, dining, and checking out the nightlife.cr

"It will be too expensive in the summer," said Mullen, 22, a junior at Hobart College in New York. "I don't make enough money to come here more than once a year."

Mullen may be on point: Hotel rooms will be harder to come by this summer, say casino operators here. They cite a combination of factors, including the harsh winter and an array of entertainment options.

"We are feeling very positive about the summer," said Joe Lupo, senior vice president of operations at the market-leading Borgata. "After the cold winter, we saw a good April with much better weather . . . and much higher hotel room demand."

Hotel-occupancy rates here average 92 percent in the peak summer months but drop off to 67.3 percent after Labor Day.

Yet the city doesn't see a dime from putting heads in beds. Atlantic City and Wildwood are the only two municipalities in the state that get no portion of their hotel tax. That money is dedicated to paying off bonds on each city's convention center.

Atlantic City officials want to change that. But it presents a quandary at a time when the resort is trying to lure more conventions as gambling revenue dwindles.

"The city is still hoping that in some way, part of the existing hotel room tax, or a small addition to the existing rate, could be earmarked for the city's budget," said Michael P. Stinson, director of Atlantic City's Department of Revenue and Finance.

All 11 casinos - with the help of the Atlantic City Alliance, the nonprofit behind the multiyear DO AC campaign - began offering hotel packages this month to lure guests back under the promotion "Hello, Summer," which alludes to "Atlantic City kissing winter goodbye."

The pre-summer packages included rooms starting as low as $49 Sunday through Saturday at Showboat Atlantic City Hotel & Casino. Borgata had the highest starting rate at $169 Sunday through Thursday.

Atlantic City, in dire straits, is looking for new revenue. The casinos are the city's biggest property-tax payers. But as their gambling income has plunged since 2006 because of regional competition, so, too, have their values - encouraging all of them to appeal the amount they pay in property taxes to the city.

Many have won their appeals, resulting in more than $270 million in property-tax refunds, which Atlantic City is having to mostly borrow to pay off.

The city will find out in coming weeks whether it was approved for $20 million in "transitional aid" from the New Jersey Department of Community Affairs to help plug a $40 million shortfall in its proposed 2015 budget.

The aid "is called that because we are transitioning from a gaming town to a nongaming one with other things to offer," Mayor Don Guardian said.

Since taking office Jan. 1, Guardian has been eyeing the city's hotel, luxury, and parking taxes as alternative income sources to help offset shrinking property-tax revenue. Any such change would require state legislation.

"There's $29 million between the luxury, hotel, and parking tax, but all that money is being used to pay off bonds to pay off the [Atlantic City] Convention Center and the Walk" outlet mall, he said. "It's one of the potentials for the state to consider in terms of how we move Atlantic City forward."

The 14 percent hotel tax in Atlantic City is composed of a 4 percent state sales tax; a 1 percent state occupancy fee that funds a variety of state programs, including the New Jersey State Council on the Arts and the Historical Commission; and an additional 9 percent levy to pay the debt service on Boardwalk Hall and the $268 million Convention Center that opened in 1997.

"Obviously, we benefit from all the tourists coming and spending money here, but we get no direct benefit as a city budget from the hotel tax," Guardian said.

Brian Tyrrell, associate professor of hospitality and tourism-management studies at the Richard Stockton College of New Jersey, said Atlantic City was at a critical juncture and had not fully tapped the convention market.

The Atlantic City Alliance and the Casino Reinvestment Development Authority are pushing hard to increase conventions and meetings. The CRDA created a firm last month - Meet AC - focused exclusively on booking more of them.

"Putting the Convention Center in a difficult position is not a good idea," Tyrrell said of diverting or lessening the amount of the hotel tax that goes toward paying off the Convention Center debt.

There are signs, he said, that the city is "turning the corner on a piece of the nongaming puzzle." Tyrrell cited significant growth in nongaming metrics, in particular the luxury tax, which is levied on liquor and entertainment tickets, among other tourism-related items. Revenue from the luxury tax has increased 25 percent in the last three years, and revenue from rooms was up 13 percent in the fourth quarter of 2013 from the same period in 2012.

"You're looking at individuals who are staying the night and doing more than gambling, and that's good for the destination as a whole," he said.

Casino operators point with hope to promising signs for the summer.

The brutal winter, they say, encouraged people to book their summer getaways earlier than usual; supply is down by 809 rooms since the Atlantic Club Casino closed in mid-January, leaving 17,639 in the market; and the vast entertainment offerings, including a free beach concert in July by country star Blake Shelton, have visitors planning early.

Steve Callender, general manager of the Tropicana Casino Resort, jokes that he didn't know what a "polar vortex" was until now.

"The winter took its toll on people. They were stuck indoors and are ready to come out here," he said. "With people booking earlier and the higher demand, the hotels [here] are going to do very well."

Chris Tobin of Philadelphia said he was willing to ante up as much as $500 for a Friday- or Saturday-night stay this summer.

"We've been able to get a room at Borgata and Revel - where my wife and I usually stay - for $499," the 37-year-old information technology consultant said as he checked in at the Trump Taj Mahal last week for an overnight business trip. "That's reasonable for the summer."

Tobin said he planned to stay within his summer room budget with a little help from his mother.

"We don't bring the kids," he said with a grin. "They stay with Grandma."

sparmley@phillynews.com856-779-3928 @SuzParmley

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