Spending on hotel rooms, meals, concerts and nightclubs has increased even as the gambling take has dropped for Atlantic City's 11 casinos, where the number of total visitors fell from 34,534,000 in 2006 to 30,381,000 last year.
The amount of money gamblers have lost at slot machines and card and roulette tables is down 23 percent since 2007, according to a study by Gaming Industry Observer, a publication by Spectrum Gaming Group, an Atlantic City-area casino consulting firm. But gamblers' spending on hotel rooms is up 21 percent and food and drink is up 6 percent.
Herney Nisimblat, a Darien, Conn., retiree, said a promotion linked to the HBO series "Boardwalk Empire" drew him to Resorts Atlantic City for a $19.20 straight-razor shave, just like the ones that real-life Prohibition-era political and rackets boss Enoch "Nucky" Johnson used to get.
"To me, it brought back nostalgia," said Nisimblat. "I come from Colombia, and my father used to get that when I was a kid. I remember watching him get a shave. It was like a dream to get one myself. I wish I could do it every day."
A former marketing director with Colgate-Palmolive, the 69-year-old Nisimblat comes to Atlantic City every other month, and not just to gamble.
"I'm retired, so now is the time to spend the money I've been saving my whole life," he said. "I love to go out and have a good time. I love the Boardwalk, I love to go shopping, to go to a nice restaurant, and to the casinos. Whatever they're offering, I'll do."
People like Nisimblat are a silver lining in an otherwise dark, cloudy sky in Atlantic City. They're making some casinos rethink their entire way of measuring success, with the bottom line no longer solely relying on slot machines and table games.
Atlantic City has been saying for years that it needs to focus less on day-tripping senior citizens who come to play slots for a few hours, cash in their free buffet coupons, then ride the bus back home. Instead, casino executives say, the city needs to become a destination resort where top concerts, gourmet restaurants, shopping and spas attract more upscale customers willing to pay cash for their fun.
The change in thinking started around 2007, a few months after the Philadelphia suburbs got their first slots parlor. There are now 10 in Pennsylvania, and the beating they have put on Atlantic City by stealing many of the resort's best customers is profound.
That competition ramped up just as the economy tanked: a devastating one-two punch for a resort that for decades had most of the eastern United States to itself in terms of gambling customers.
Atlantic City feels it still has a big advantage in that most of its neighboring competitors lack hotel rooms, fancy restaurants and entertainment.
"We're still the second-biggest gaming market in the country, but when you lose a billion dollars of revenue that's not coming back, you have to change your business model," said Don Marrandino, eastern division president of Harrah's Entertainment Inc., which owns four casinos here. "That's what we're doing."
His company is doing particularly well in phasing out comps - the Holy Grail for some gamblers who make their decisions on where to play based solely on who's offering a free room, an on-the-house dinner or show tickets. At Harrah's, comped hotel rooms as part of overall room revenue went from 86 percent in 2007 to 59 percent this spring.
For the entire city, comped rooms fell from 65 percent to 60 percent during that four-year span.
Surprisingly, even some of the most struggling hotels did better in attracting more cash customers. The Atlantic City Hilton, which hasn't made mortgage payments for a year and a half, is the subject of a court battle over whether it should be taken over by a receiver.
Its gambling revenues the past four years are down 44 percent, but its hotel revenue is up 24 percent. Similarly troubled Resorts Atlantic City, which last year handed over the keys to its lenders after it, too, stopped making mortgage payments, saw its gambling revenue plunge by 39 percent. But its hotel revenue was up 4 percent.
The pace is picking up so far this year, according to the Spectrum study. In the second quarter of 2010, hotel revenue in Atlantic City was up 25 percent from the second quarter of 2009, to $54 million. Individual casinos posted even better numbers: Harrah's Resort Atlantic City was up 57 percent, the Showboat Casino Hotel up 56 percent, and the Hilton, up 51 percent.
Non-gambling revenue accounts for just over half of Las Vegas' take. From July 2007 to 2009, it fell about 1 percent on total revenue of about $22 billion.
In Connecticut, the Mohegan Tribal Gaming Authority, which operates the Mohegan Sun casino hotel, reported that hotel revenue last year was $39.6 million, down from $47.3 million in 2007. Food and drink brought in $93.1 million last year, down from $102 million in 2007. Retail and entertainment revenues were $122.7 million last year, down from $133.1 million in 2007.
According to the old saying, there's no such thing as a free lunch, and that's becoming more true at Atlantic City casinos, where free meals are down 29 percent and free drinks are down 16 percent since 2007.
Yet people line up in the hallways to pay $20 apiece to party at what was once the most unlikely place: an indoor swimming pool at Harrah's. Since it opened in 2007, The Pool at Harrah's has become one of the hottest nightspots on the East Coast.
The average pool customer spends an extra $50 aside from the cover charge, Marrandino said. Bottle service runs from $300 to well over $1,000.
"The pool is an incredible success; 99 percent of the business there is cash," Marrandino said. "The clubs, pools, spas are cash cows, worth millions of dollars."
He says these non-gambling revenues must be looked at along with the money casinos take in from gamblers to get a more accurate perception of a casino's true health.
Eight of Atlantic City's 11 casinos turned an operating profit in the first half of this year, even though most saw that profit level decrease. As a whole, the 11 casinos saw their gross operating profit fall by 23 percent to $262.7 million, as net revenues fell 6.7 percent to $1.77 billion, compared with the first half of 2009.