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Comped Rooms at Atlantic City Casino Hotels Estimated
 at 68% of the City's Total in 2004; Some Question
 Long-standing Practice
By Suzette Parmley, The Philadelphia Inquirer
Knight Ridder/Tribune Business News

Jul. 3, 2005 - ATLANTIC CITY -- Getting a hotel room anywhere at the Jersey Shore on summer weekends is never easy, but in a city where seven out of 10 rooms are given away, or "comped," to loyal gamblers, it's virtually impossible.

Charles Davis and Diane Cisse of New York found that out on a recent Saturday.

"We're all sold out," a Trump Taj Mahal hotel sales agent, Nilay Jain, said as he handed Cisse a list of hotels and motels within a half hour of Atlantic City. The Taj Mahal and every other casino hotel was booked.

Comping rooms is a way for casinos to reward their best customers, on the theory that casinos can make up for the giveaways as customers spend big bucks on gambling. But there is a growing divide in the industry on whether Atlantic City should continue its long-standing practice of comping rooms, or should sell more rooms to attract customers who do more than gamble such as shop in town.

Some argue that by giving away so many rooms to loyal gamblers, casinos are missing a chance to cultivate new patrons and are shutting out the type of customer the city needs to make the transition from daytripper resort to overnight destination.

At least three casinos -- Harrah's, the Borgata, and Trump Taj Mahal -- plan to break ground on hotel towers this year, which would add at least 3,000 rooms to the market. But industry executives and tourism and convention officials say the resort city, which has 15,152 rooms now, could easily absorb 10,000 more.

Unlike Las Vegas, Atlantic City has too few hotel rooms to attract major conventions. Tourism promoters say the room shortage is a factor in why Atlantic City International Airport lacks major commercial air service.

Rooms are available during the workweek, but that's not when most visitors want them. Demand is high on Fridays and weekends all year, but can be so soft midweek that casinos and convention officials scramble to fill rooms.

The fluctuations are consistent year after year. Occupancy peaked at 98 percent last summer, but hit a low of 83 percent last winter.

Jeffrey Vasser, executive director of the Atlantic City Convention & Visitors Authority, said he sought out meeting planners willing to stage shows in the off-season and during the week.

"It gets tricky if they want to stay over the weekend," Vasser said.

Free rooms were not always so widespread. About 32 percent of Atlantic City's casino hotel rooms were comped in 1988. That number had reached 54 percent in 1995 and escalated to 64 percent in 2000. Last year, 68 percent of the city's rooms were given away free. Most of the increase was attributed to the dramatic spike in the percentage of rooms comped by Showboat and Harrah's Atlantic City casinos, after Harrah's Entertainment Inc. acquired Showboat in 1998. By 2004, their combined comp rate was 85.5 percent.

As Davis and Cisse were being turned away at the Trump Taj Mahal, not much farther down the Boardwalk, Christine Himmler-Corker, 65, and Michael Corker, 59, were settling in at the Trump Plaza.

"This is our home away from home," Himmler-Corker said as she sat in front of her favorite slot machine, Cleopatra, on the cavernous casino floor.

The Corkers have been a fixture at Trump Plaza for 12 years. Besides a free room, meals and beverages every weekend, the casino showers them with appliances, jewelry and other gifts.

"It's a business decision to hold those rooms or save them for our better customers," said Steve Calabro, senior vice president of marketing at Trump Plaza. "All businesses do it in some form."

Providing a free room can also entice a customer to return to his or her "home" casino after an absence.

"They really work. I love them," Shirley Lambert, 39, of Southwest Philadelphia, said, as she checked into a comped room at the Showboat Casino Hotel on a recent Friday night with her husband and mother. The Mardi Gras-themed casino had the highest comp rate in Atlantic City, 86 percent, last year. Lambert has been a regular at Showboat for five years and gambles about $200 on slots every two weeks there.

Harrah's -- which now owns the city's Showboat, Caesars, Bally's and Harrah's casinos after acquiring Caesars Entertainment Inc. last month -- has aggressively promoted its customer loyalty program, called Total Rewards, since 1999. Players receive comp rooms based on their slots or table game play, which is tracked by computer.

"We just have tremendous demand from our database because of a gaming-centric philosophy," said Harrah's regional president Dave Jonas. "Our rooms first go to database customers who are loyal to us and have shown a propensity to come back to us over and over again."

The Tropicana Casino Resort and the two-year-old Borgata Hotel Casino & Spa, which spent heavily to include non-gambling attractions, still sell many of their rooms.

When the Tropicana's $285 million Quarter -- a retail, dining and entertainment complex -- opened last November, it included a new hotel tower with 502 rooms. Tropicana had the lowest comp rate, 48 percent, among the city's 12 casinos last year. On any given month, about half its rooms are sold.

"We feel Atlantic City cannot grow if we do not go after new markets," said Tropicana president and general manager Pam Popielarski. "Cash customers are your future gamblers."

To go after them, Tropicana has gone against convention and put rooms on sale during holidays and Saturday nights for the last five years. For Fourth of July weekend, the casino made available rooms ranging in price from $399 to $459 on Saturday or Sunday, and $299 to $349 on Monday.

"You have to have a balance," Popielarski said. "If we did none of this, we won't grow the market. We'll go after the same customer over and over again."

Part of the Borgata's business strategy since opening in July 2003 was to sell rooms to help generate other revenue. The Las Vegas-style mega-casino's 2,002-room luxury hotel charged the most -- an average of $126.44 per night for a room last year -- and still had the fourth-highest occupancy rate, 92.3 percent. It had a 60 percent comp rate, the third lowest.

"Everybody has the same challenge midweek because there's excess capacity," said chief operating officer Larry Mullin. "Operators will have to learn to do other things to occupy those rooms. They can't just keep giving them away."

The casinos have added 4,000 rooms in the last three years as part of Atlantic City's building boom. Several casinos, including Bally's and Sands, are spending millions to renovate their rooms. Others, such as Harrah's, are rethinking how to best market new ones. Harrah's plans to break ground after Labor Day on a $458 million hotel tower with 800 rooms.

As more states offer gambling, including Pennsylvania, Atlantic City has to change, Popielarski said.

"What you're doing is bringing in a new customer to Atlantic City that couldn't get into Atlantic City before and allowing him in," she said. "You're becoming a destination resort, which we need to become, and not just a gambling resort."

Davis and Cisse, the New York couple who came down for dinner, a stroll on the Boardwalk, and a little gambling, were able to spend Saturday night at a $200 room at a Best Western near the Boardwalk. But they had to dash their plans to stay another night when all they could find was a package deal for both nights at the Sheraton Convention Center Hotel for $495.

"No way," Cisse said. "That's rent money."


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