Revel Needs More Slot Revenue to Survive
Revel was given a second chance Wednesday from New Jersey casino regulators, and now it's seeking the same thing from customers.
In winning a reprieve, the bankrupt casino acknowledged several big mistakes, including preventing its guests from smoking; not paying enough attention to slots players; and booking too many hip acts at the expense of other forms of entertainment.
The state Casino Control Commission approved Revel's reorganization plan, which will eliminate $1.2 billion of its $1.5 billion in debt by giving lenders an 82 percent ownership stake. That plan was approved by a bankruptcy court judge on Monday, and Revel anticipates formally emerging from bankruptcy on Tuesday.
"Everybody deserves a second chance," said Jeffrey Hartmann, Revel's interim CEO. "We're looking for a second chance. We are trying to listen to and respond to customers. We probably didn't do a great job of that last year."
Regulators' approval did not come easily, as commissioners and a representative of the state Division of Gaming Enforcement expressed serious concerns about Revel's ability to turn itself around and save its 4,600 jobs.
"Absent a significant increase in slot revenues, Revel is still going to be in trouble," said Jack Adams, a deputy attorney general. "Revel will still struggle to survive in this market. Can there be this turnaround, and can it happen when Revel says it will?"
Revel posted a $149 million operating loss from its April 2, 2012, opening through the end of March 2013. It has ranked near the bottom of Atlantic City's 12 casinos in terms of the amount of money won from gamblers.
When it emerges from bankruptcy next week, Revel will carry $272 million in debt. Yet it still does not expect to turn a steady profit until the summer of 2014, said Dennis Stogsdill, Revel's chief restructuring officer.
"There is some agita about whether we have enough money," he said, using the Italian slang term for being anxious and potentially nauseous. "We always want more money. Where I sit today, I feel confident it's enough."
Matthew Levinson, the commission's chairman, called Revel's financial forecasts "aggressive," and said there are uncertainties surrounding them.
The casino predicts its net revenue will rise from $152 million last year to $256.4 million this year, $322.8 million in 2014 and $378.9 million in 2015. Revel also submitted documents predicting it will reduce last year's operating loss of $111 million to less than $43 million this year. But Revel already has lost more than $38 million in just the first three months of this year, meaning it must lose only $4.4 million in the following nine months to meet its own target.
The Gaming Enforcement Division cited many instances of Revel's financial projections being three or more times what their actual performance was. It said management's inability to accurately predict operating results remains a major issue, calling the projections "consistently unreliable."
Revel has secured $350 million in exit financing for when it leaves bankruptcy court, including a $75 million fund for working capital, and a $275 million term loan.
Revel officials also confirmed that the casino will begin to allow patrons to start smoking in as little as two or three weeks, once plans are submitted to state and city authorities and additional ventilation equipment is put in place. That marks a reversal from Revel's initial policy and a tacit admission that what it thought would be a selling point -- being the only smoke-free casino in Atlantic City -- has actually hurt business.
Questioned about Revel's finances once it emerges from bankruptcy, Stogsdill said the business has other options it can pursue if revenue doesn't meet projections. The casino recently laid off 83 employees, and Stogsdill said it is changing the way it schedules employees to save money.
"Fewer employees in the (teller) cage, using fewer dealers during slow times, reducing our utility costs," he said. "We're going to change out the light bulbs in our parking lot to LED lights for a savings of $400,000 a year."
Hartmann said Revel is even scrutinizing how it purchases water with an eye toward saving money.
He said the casino will refocus itself on gambling this year; when it opened last year, Revel repeatedly branded itself not as a casino resort, but as a resort that just happened to also have a casino. The difference has been big for many customers, who he acknowledged may have tried Revel once, didn't like it all that much and haven't returned.
"It starts with a sense of urgency," Hartmann said. "This is a critical summer for Revel. I can't tell you the sense of urgency I am stressing with our staff. Be ready with service. Be ready with attention. We're going to retain customers this year."
He also said Revel plans a much wider variety of acts in its 5,500-seat Ovation Hall concert facility, which was christened by Beyonce and hosted acts including Kanye West and AVICII last year. In 2013, country acts and comedians will be added to the mix, he said.
(Copyright 2013 by The Associated Press. All Rights Reserved.)