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New name and strategy for AC's The Atlantic Club

Published: Tuesday, March 13 2012 1:05 p.m. MDT

25-cent and 50-cent gambling chips from The Atlantic Club in Atlantic City N.J. shown here on March 13, 2012, the day the casino changed its name from ACH. The casino, which also used to be called The Atlantic City Hilton Casino Resort, is using the lowest-denomination chips in the history of Atlantic City as part of its new value-price strategy.  (Wayne Parry, Associated Press) 25-cent and 50-cent gambling chips from The Atlantic Club in Atlantic City N.J. shown here on March 13, 2012, the day the casino changed its name from ACH. The casino, which also used to be called The Atlantic City Hilton Casino Resort, is using the lowest-denomination chips in the history of Atlantic City as part of its new value-price strategy. (Wayne Parry, Associated Press)

ATLANTIC CITY, N.J. — The casino at the end of Atlantic City's Boardwalk got its third name in less than a year on Tuesday.

But a new identity for The Atlantic Club Casino Hotel (nee ACH, a.k.a. The Atlantic City Hilton) is the easy part: The struggling casino, which came perilously close to closing last year, is going for the bottom of the market, with $19 hotel rooms, 25-cent gambling chips and a discount-every-day mentality.

It's literally at the opposite end of the Atlantic City universe from Revel, the $2.4 billion casino opening next month at the other end of the Boardwalk, and whose initial success could make it even harder for The Atlantic Club to survive.

Yet going down-market was the only option The Atlantic Club had in a market where the other two alternatives were either impossible (compete head-to-head with newer luxury resorts like the Borgata Hotel Casino & Spa and the soon-to-open Revel), or disastrous (close the doors, lay off nearly 1,900 people and take a multi-million-dollar loss.)

Michael Frawley, chief operating officer of The Atlantic Club, holds new 25-cent and 50-cent gambling chips on March 13, 2012, the day the Atlantic City N.J. casino changed its name from ACH. The casino that also used to be called The Atlantic City Hilton Casino resort is using the lowest denomination chips in the history of Atlantic City as part of its new value price strategy.  (Wayne Parry, Associated Press) Michael Frawley, chief operating officer of The Atlantic Club, holds new 25-cent and 50-cent gambling chips on March 13, 2012, the day the Atlantic City N.J. casino changed its name from ACH. The casino that also used to be called The Atlantic City Hilton Casino resort is using the lowest denomination chips in the history of Atlantic City as part of its new value price strategy. (Wayne Parry, Associated Press)

"We knew we were going to have to differentiate ourselves in some way," Michael Frawley, the casino's chief operating officer, told The Associated Press. "We had to have a very clear definition of what our position was in this market. Prior to 2008, just being a casino was enough. Now, we have to make a stand on who we want to be."

And that, Frawley said, is the casino "for the rest of us." The Atlantic Club is staking its very survival on winning the loyalty — and regular business — of people who want to have fun without spending a lot of money.

"People still want to go out and people still want to have a good time, but price point becomes a key consideration," he said. "We knew that competing in the high-limit tables games is for somebody else. We needed another reason for people to come, and that's letting them play without breaking the bank."

Michael Frawley, chief operating officer of The Atlantic Club in Atlantic City, N.J., discusses the casino's new value-price strategy on  March 13, 2012, the day it changed its name from ACH. Before that, the casino was known as The Atlantic City Hilton Casino Resort.  (Wayne Parry, Associated Press) Michael Frawley, chief operating officer of The Atlantic Club in Atlantic City, N.J., discusses the casino's new value-price strategy on March 13, 2012, the day it changed its name from ACH. Before that, the casino was known as The Atlantic City Hilton Casino Resort. (Wayne Parry, Associated Press)

On this point, The Atlantic Club is all in. It's renting some hotel rooms for as little as $19 a night — about one-tenth of what its upscale competitors get.

It recently got permission from New Jersey casino regulators to use 25-cent and 50-cent gambling chips — the lowest denominations ever offered in Atlantic City. On Friday, the casino's six restaurants will slash their prices by 40 to 50 percent. Beer will go for $2 ($3 for imports), and a martini AND a hamburger together will cost $10 during the two happy hours they have each day.

This is not a temporary promotion; this is what The Atlantic Club will be every day of the week. And that puts enormous pressure on management to drive more customers through the doors. The casino simply cannot survive without significantly increasing its customer base, something Frawley acknowledges.

"If you only come here once, then we have not succeeded," he said. "This is all predicated on repeat business."

Michael Frawley, chief operating officer of The Atlantic Club, discusses the Atlantic City N.J. casino's new free parking policy on Tuesday,  March 13, 2012, the day the casino changed its name from ACH. The casino, which also used to be known as The Atlantic City Hilton Casino Resort, is cutting its food prices, offering low-stakes table games, and offering free parking as part of its new value price strategy.  (Wayne Parry, Associated Press) Michael Frawley, chief operating officer of The Atlantic Club, discusses the Atlantic City N.J. casino's new free parking policy on Tuesday, March 13, 2012, the day the casino changed its name from ACH. The casino, which also used to be known as The Atlantic City Hilton Casino Resort, is cutting its food prices, offering low-stakes table games, and offering free parking as part of its new value price strategy. (Wayne Parry, Associated Press)

He said The Atlantic Club has to increase its customer traffic by at least 10 to 15 percent in order to meet projections.

Joan DeMaio, a senior citizen from Brooklyn, takes a bus junket to the casino every month. She likes the changes she saw on Tuesday.

"They had to do something with the new stuff coming online in New York, with Aqueduct," she said. "I've been coming here for 30 years, since it opened. It's good what they're doing."

Jean Murphy, another Brooklyn senior, was delighted The Atlantic Club no longer charges for parking.

"I hated that," she said. "I think it's great they're letting you park free."

The casino is eating the $3 state-mandated parking assessment on each car that enters its garage.

"We think our customers are worth it," Frawley said. "Quite honestly, it's a cost of doing business now for us. We had heard from a lot of our customers that the one thing they really didn't like was paying to park, and if you're going to be a value-priced casino, you have to walk the walk."

The casino very nearly shut down last year. It had been for sale for two years, but could not land a buyer. Its owners, Los Angeles hedge fund Colony Capital LLC, stopped paying its mortgage in 2009 because the money simply wasn't there.

In a deal reached last November. Colony agreed to pump $15 million into it to keep it afloat. In return, lenders foreclosed on and took ownership of two casinos in Mississippi that Colony owned, Bally's Tunica and Resorts Tunica, and wiped out the mortgage debt for what was then called ACH.

The deal also gave the casino an additional infusion of $9.3 million in cash from insurance proceeds from an August 2009 flooding claim. All told, it gave Colony $24.3 million in new funds to invest in the casino and help keep it running.

It slashed expenses, including laying off 150 employees the day after the rescue plan was approved by New Jersey casino regulators, giving it some more breathing room. Frawley said projections call for The Atlantic Club to break even by the fourth quarter of this year, and to turn a modest profit in 2013.

For the first two months of this year, The Atlantic Club has taken in just under $16.2 million. That's the worst total among Atlantic City's 11 casinos, and is down nearly 25 percent from the same period a year ago.

But Frawley said the casino is starting to see modest increases in food and beverage revenue and in hotel occupancy in recent weeks — an encouraging sign during one of the deadest portions of the calendar.

The casino is reducing the amount of slot machines from about 1,850 to 1,500, but it's installing the newest brands and titles — something that hasn't been done on a large scale for many years, Frawley said.

It also plans to heavily promote its restaurants and bars, many of whom look as elegant as those in the city's top casinos.

"This is not cut-price, low-quality," he said. "When people hear 25-cent gambling chips, they think Formica countertops. That's what I've got to dispel."

Wayne Parry can be reached at http://twitter.com/WayneParryAC

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