Revel is still looking for its first winning numbers

ATLANTIC CITY — Baseball fans might see a certain similarity between Revel's first few months of operation and Phillies pitcher Cliff Lee's record:

Waiting for that first victory can be painful.

Lee didn't get his first win until July 4; the season started April 5. Revel, meanwhile, is still looking to demonstrate that it can be the big draw city and New Jersey officials have hoped for; since its opening in April, the numbers have been disappointing.

The $2.4 billion megacasino's early struggles are particularly worrisome because Atlantic City is relying on Revel's pools, spa, retail mall, and celebrity-chef restaurants to lead its transformation into an overnight, nongaming destination like Las Vegas. Gov. Christie has a major stake, too, having kicked in $261 million in state tax credits last year for Revel's completion.

Revel's fancy offerings haven't yet translated into impressive gaming returns. June's casino-revenue numbers will come out Tuesday, and industry analysts are saying that if things don't turn around soon for Revel, it could mean real trouble ahead.

But the situation is being monitored in Trenton, and Christie spokesman Michael Drewniak suggested Thursday that the governor was optimistic.

"I don't think analysts or anyone else, for that matter, can read so deeply into Revel's early results," Drewniak said. "It's too early and not predictive of long-term success."

Not only must Revel improve profit margins quickly, in the view of gaming-industry observers, but it also must establish a clientele in an ever-shrinking market. The things that make it this resort's most innovative gambling palace — it's 100 percent nonsmoking, a first here, and has no buffet — may be working to its detriment, analysts and Atlantic City regulars say.

Revel ranked eighth among the dozen casinos here in total gambling revenue for both April ($13.4 million) and May ($13.9 million), about half of what was expected by Wall Street. That prompted one analyst to issue a June 22 warning that if things didn't pick up during July and August, Revel would have a difficult time paying off its debt.

A June 27 report by Moody's cautioned that casino firms with significant near-term maturities or highly leveraged capital structures — such as Revel's parent company, Revel Entertainment Group L.L.C. — faced the greatest risk in a weak economy with high unemployment and waning consumer confidence.

Another bad sign, the Moody's report said, is the difficulty some markets are having absorbing new gaming halls: "Newer casinos, such as Revel in Atlantic City, Resorts World in New York, and Rivers Casino in Illinois, do not appear to be boosting gaming demand in their markets."

Slot machines still pay the bills here: More than 70 percent of last year's total $3.3 billion in gambling revenue came from slots. But so far, the quintessential slots players — 55-year-old women — seem to have rejected Revel, the first entirely new casino to open in nine years (Borgata opened in 2003).

Generating business will be difficult, observers say, because Revel lacks a customer database and just started a slots-player club.

Gamblers tend to build up significant equity in their loyalty programs and are slow to move on to new casinos, analysts say. Swank Borgata, the city's top-grossing casino, did not become first in slots revenue until more than 40 months after it opened, even though it was first in every other category before that.

Patricia Larkin, 25, of Longport, is a Caesars Casino diehard. She said she has earned points on her Total Rewards card that she could use at any of the other three Caesars Entertainment casinos here to get cheaper rooms, drinks, and show tickets.

Plus, "parking is cheaper," she said while sitting at a slot machine at Caesars. "It's hard to switch."

Larkin said she has not been to Revel yet. "From what I've heard," she said, "it is very, very crowded and very expensive, and it takes all night just to experience it" because of its size.

Philadelphia native Sylvia Karpo, 85, who spends summers at her Boardwalk condo here and winters in Florida, said she had no plans to leave her favorite casino, Trump Plaza, anytime soon.

"This place treats me real well," Karpo said, while playing a quarter slot machine recently with her Trump One player card. "I'm very satisfied here and loyal as can be."

Revel, she said, was simply "too far" at the northern end of the Boardwalk, adding that she couldn't care less about the "trimmings."

Making things more difficult, analysts say, is that Revel opened amid unprecedented regional competition: Pennsylvania now has 11 casinos; New York has nine racetracks with slots; and Maryland just opened its third casino near Baltimore — rivals that Borgata did not have when it debuted.

"The timing of the Revel is challenged as the Atlantic City market, in terms of gross gaming revenues, continues to decline," said analyst Andrew Zarnett, of Deutsche Bank AG. "Building a new book of business takes time to find, and cultivating their customers and determining what the best offering is for those customers."

In May, Revel, with 2,450 slots and 160 table games, finished last in slots revenue and 10th in table-games revenue, ahead of Trump Plaza and the Atlantic Club.

In a June 12 statement, Revel CEO Kevin DeSanctis said: "Our business model is dependent on more than gaming revenue. However, gaming revenue is clearly an important component of our total revenues, and that is an area which we are intent on improving. … We recognize that we have a tremendous amount of work in front of us. …"

Morgan Stanley originally owned the property and invested $1.2 billion, starting in 2007. It sold the project, post-economic collapse, to the Revel group, led by DeSanctis, for essentially zero dollars and took a $1.2 billion loss. DeSanctis raised $1.2 billion early last year to finish it.

"Unless Revel can dramatically increase their gaming-revenue business, it will be hard for them to generate free cash flow," analyst Zarnett said. "The logical conclusion will be that it will be hard for them to make their debt service. …"

The 11 other casinos here have one-quarter of their gaming floors open to smoking. Noted John Kempf, of RBC Capital Markets, "Moving to 25 percent smoking would be helpful, but it's only part of the story for Revel in increasing slot play."

Revel didn't begin offering free slots-play coupons until the third week of May — seven weeks after it opened.

It boasts a 6.3-million-square-foot complex, the largest among the casinos here. But for Victor Corleone of Queens, N.Y., who sells meat and seafood, bigger does not mean better.

"They set the casino up in a very uncomfortable manner for the customer," said Corleone, 51, puffing on a cigar recently while playing poker at Trump Taj Mahal. "There's no smoking. They offered no [player] rewards for new members for joining.

"It's a very big place, and they opened their poker room in the wrong place," Corleone said. "It's a really long walk to get there."