Atlantic City may soon get first boutique hotel

ATLANTIC CITY - This resort, known primarily as a gambler's mecca, may soon have its first upscale hotel.

The Tropicana Casino is negotiating with developers to build Atlantic City's first "boutique" hotel - a luxury hotel on a small scale - on a two-acre site next to the casino on the Boardwalk. The site is a parking lot between California and Belmont Avenues, just northeast of the Tropicana and separated from the casino by a condominium tower.

Tropicana's president and chief executive officer, Fred A. Buro, said this week that the proposed hotel would be linked to the casino by an enclosed connector bridge.

"We have several developers bidding on it," Buro said in an interview. "A developer will buy the site and select an operator."

Buro said Tropicana would build the connector bridge to the casino and its mega-entertainment, retail and dining complex called the Quarter.

Buro said Columbia Sussex Corp., the new parent company of the Tropicana, could not begin talks on developing the hotel until it completed its acquisition of Aztar Corp., which owned the Tropicana Casinos in Atlantic City and Las Vegas. The sale was completed about two weeks ago.

The proposed hotel could have as many as 500 rooms and give Tropicana, which leads the resort's 11 casinos in hotel rooms with 2,129, a boost as its archrival - the Borgata Hotel Casino & Spa - prepares to open a $400 million, 800-room hotel tower later this year.

Buro said that in addition to the two-acre parcel, there is also the potential to develop a site on the other side of the Tropicana, which is currently a Holiday Inn, into another hotel that would also be linked by connector bridge to the casino. He said Tropicana was also exploring adding a tower to the casino. Combined, the three projects could add 1,500 to 2,000 hotel rooms to Tropicana's inventory.

He said the Tropicana would not own the rooms in the two non-casino hotels, but would partner with the developers and negotiate for a block of rooms.

"It's about rooms," Buro said. "Atlantic City is rooms-constrained, and we recognize that."

After the Quarter opened in November 2005, the Tropicana regained the title of having the most hotel rooms in Atlantic City. It has about 15 percent of the resort's 14,513 hotel rooms.

By comparison, Las Vegas has more than 120,000 rooms.

Philadelphia, where two casinos are expected to be built along the Delaware River waterfront, has 10,124 hotel rooms in Center City.

Industry observers say the lack of hotel rooms continues to be an issue for Atlantic City as it tries to morph into an overnight destination.

"The Convention Center really needs 20,000 rooms to support it," said gambling analyst Larry Klatzkin of New York-based Jefferies & Co. Inc. "It's still not able to support it."

Buro said the Tropicana was in the midst of trying to expand as competitors around it were adding multimillion-dollar hotel towers.

The Borgata has 1,971 rooms, second to the Tropicana, but its new tower will give it the lead.

Harrah's and the Trump Taj Mahal will open towers next year that will add an additional 1,548 rooms to the market.

"What Tropicana is interested in is creating a critical mass of stuff on their end of the Boardwalk," said Chuck Bragitikos, president and cofounder of Vibrant Development Group, which was previously the strategic adviser for Aztar and now is for Columbia Sussex and for California Avenue Ventures L.L.C., which owns the two-acre parcel. "We're looking to catalyze the development of a boutique-size hotel and condo tower, which we see as missing in the market."

Bragitikos said the new hotel would also provide meeting rooms and additional parking near the Tropicana, which would aid the casino because parking lots are consistently full on Fridays and Saturdays.

"Our prospective is that there is really a void in the market for a high-touch, high-quality boutique hotel that really builds upon the market that Borgata proved exists - which is younger and more affluent," he said.

Bragitikos said major markets like New York, Los Angeles and San Francisco all have upscale boutique hotels.

"There are tons of boutique hotels out there in those cities, but nothing in Atlantic City," he said.

Bragitikos said their plan was to bring in the developer to put together the capital to build the hotel, and secure an operator or brand.

Mitchell Gurwicz, one of the principals of California Avenue Ventures, the landowner, said the site was among the "very few parcels left in Atlantic City that is slightly two acres or more that's vacant, from Boardwalk to Pacific Avenue" - known as the casino zone.

"It's the next logical expansion parcel for the Tropicana," he said. "It's a premier site that has the potential for a hotel tower that will give fantastic views of the ocean, and with the connector and proper design, you can actually maintain a retail and entertainment presence from the Boardwalk straight through the Quarter, which right now is split by the casino floor."