The Epic Downfall Of The Casino That Was Supposed To Save Atlantic City

NOTE: This is an updated version of a feature originally authored in 2013 by Max Nisen, who no longer works for Business Insider.

Revel was supposed represent the future of Atlantic City.

However, this gleaming 57-story $US2.2 billion dollar casino has been a financial disaster.

After a nearly 6 year saga of construction halts, union protests, and government assistance, it opened to great fanfare in May 2012.

It was supposed to revitalize the city and provide a resort like alternative to smoky, windowless casinos.

But Thursday, it was forced to file for bankruptcy for the second time in two years. Management warned employees that it could be forced to shut down as early as this summer.

Former Business Insider reporter Simone Foxman was there to photograph the Revel as it started. Here’s a look at how things have gone downhill.

The $US2.2 billion dollar project started more than half a decade ago, when Morgan Stanley approached casino veteran Kevin DeSanctis, who is now Revel CEO.

The casino nearly didn't happen. Construction began in February of 2008, just a few months before the economy began to collapse.

Source: A 2012 interview with CEO Kevin DeSanctis

Casinos in particular were ravaged by the recession. From 2007 to 2011, gaming revenue declined by an average of 8.6%.

Source: UNLV

Morgan Stanley pulled out of the project in April 2010, accepting write-downs of $US1.2 billion.

Governor Chris Christie and the State of New Jersey came to the rescue, and with the help of a $US261 million dollar tax credit and new loans, the casino moved forward.

It was a central part of Christie's plan to revitalize the area. He called it 'a game-changer for Atlantic City.'

The idea behind the casino was to attract people looking to stay the night and do things other than gamble by fully taking advantage of the waterfront and beach.

Hundreds of windows meant natural light in every part of the casino.

Every room has an ocean view.

Backers hoped that extensive outdoor spaces would attract those looking for a resort experience, in addition to a gambling clientele.

They accounted for winter months with a heated indoor-outdoor pool, open 12 months a year. They hoped that overnight guests would make for a whole new business model.

Big time restaurants from Iron Chefs Marc Forgione and Jose Garces were supposed to add to the appeal.

They hoped to attract a larger convention business as well.

It was the first major non-smoking casino, which backers hoped would attract more families.

But there were already signs of trouble on the horizon. The company had a massive $US1.1 billion dollar debt load from the start.

Source: S&P

Even as it opened, Standard and Poor's rated the company's bonds as 'junk' or below investment grade.

Source: S&P

Analysts worried that the gaming market was already soft, that there was too much competition, and that owners were over optimistic about their hybrid resort/casino.

Still, the casino opened in April 2012 to massive fanfare, high hopes, and three concerts from Beyoncé.

Despite the excitement, the doubters turned out to be right.

Wall Street said it needed about $US30 million in gaming revenue a month just to sustain the massive operation.

At one point they were bringing in just $US17.5 million.

Things failed to improve. In January of 2013, Revel brought in $US8 million. That's the second worst total among Atlantic City's 12 major casinos.

Atlantic City's casinos and restaurants were relatively unhurt by Hurricane Sandy, but media gave the impression that it was much worse, and tourists have stayed away.

Source: NPR

The most expensive casino in New Jersey history has been at or near the bottom of gaming revenue every month since its opening.

Just to keep the 6.3 million square foot space running, they have had to amend their line of credit three times.

It wasn't enough. The casino announced that it would seek bankruptcy protection. It would have to do so again a year later...

In a managed bankruptcy, the casino won't shut down or cease operations, while investors will exchange a billion dollars in debt for equity.

It will need a certain amount of revenue to get any sort of financing, and will have to make a case that it sees growth coming in the future.

A growing economy will pick up some of the slack, but it doesn't deal with the fundamental issues.

Casinos have opened up and down the northern seaboard, including nearby Philadelphia, meaning Atlantic City isn't the destination it once was.

Its targeted clientele of well-off people looking for a destination resort is too narrow.

Revel tried a model of involving non-gambling activities that worked in Las Vegas, but alienated the existing gambling clientele.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.