United States -  Atlantic City

Overview:

Atlantic City’s economy has been dominated by gaming for a few decades, and the city's top employers represent casino hotel properties. The government sector also plays an important role; notable government entities, including the Federal Aviation Administration, New Jersey Air National Guard, U.S. Coast Guard, and the Federal Air Marshal Service, among others, continue to play a vital role in the local economy. Furthermore, retail is a key economic factor for the city; the two primary malls in the area are The Pier Shops at Caesars and The Walk outlet mall. While industry sectors such as government and healthcare remain stable, the leisure/tourism industry was significantly affected by the most recent recession, which was exasperated by the effects of Superstorm Sandy in 2012. Despite rebuilding efforts after the storm and the return of some gaming activity, the increase in casinos in neighboring states has negatively affected the local economy. Four casinos closed in 2014, leaving eight casinos remaining in Atlantic City. According to research, gaming revenue peaked in 2006 at $5.21 billion and has since declined year-over-year to $2.23 billion in 2015. Despite this downward trend in gaming, revitalization efforts have been underway throughout the city, with developments such as new retail venues off the boardwalk and the redevelopment of the shuttered casinos, notably Stockton University’s purchase of the Showboat casino as part of its plans to convert the former gaming facility to a new Stockton-Island campus.

As a result of softening gaming activity in Atlantic City, the market is expected to experience a slight decline in supply in the near term. Nonetheless, local officials have been working hard to increase activity and bolster demand by diversifying the economic base over the last several years; thus, occupancy levels should remain relatively stable in the near term. Given the price sensitivities in the market due to a strong leisure customer base, the abundance of economy-oriented hotels, and the resulting low occupancy levels, average rate growth is anticipated to remain modest throughout our forecast. We note that RevPAR declined in 2015, and we expect only a marginal increase beginning in 2016 and going forward, well below that of the national forecast. Limited sales volume occurred in Atlantic City in the last several years, with three hotel sales recorded at a sales price averaging just under $20,000 per room.

* The HVI is an index, a statistical concept reflecting a measure of the difference in the magnitude of a group of related variables compared with a base period. As such, it is a measure of broad market trends, rather than a conclusion as to the specific value of any asset, and cannot be applied to an individual asset. A good comparison is the Consumer Price Index. While this index provides a reliable measure of the overall rate of inflation in a region, it does not indicate how the price of milk has changed at your grocery store. So how can the HVI be of use to an individual investor? Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent big picture data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Valuation Trends and Predictions:

Atlantic City United States
Previous Year -4% (69 of 71) +1% (49 of 71)
Growth in 2017 +1% (50 of 71) +2% (36 of 71)
Growth in next 3 years +9% (44 of 71) +10% (36 of 71)

Change In Value For Market:

Atlantic City RevPar % Change

For more information, please contact:

Jerod Byrd, MAI
jbyrd@hvs.com
  • +1 901 481-3058 (w)