A recent study from Temple University sheds light on a critical question for the gambling industry and economic observers alike: Why Do Casinos In Atlantic City Go Broke? The research, led by Professor Jonathan Lipson, focused on the performance of casinos owned by Donald Trump in Atlantic City, revealing a stark picture of financial underperformance and job losses compared to their competitors. This analysis offers valuable insights into the vulnerabilities of the Atlantic City casino market and the factors that can lead to financial ruin, even for seemingly high-profile ventures.
Lipson, an expert on bankruptcies at Temple University’s Beasley School of Law, analyzed data from New Jersey Casino Control Commission reports, court documents, and other public records to assess the financial health of Trump’s Atlantic City properties: the Trump Taj Mahal, Trump Plaza, and Trump Marina. His findings, covering the period from 1997 to 2010 when Trump held top executive or shareholder positions in these casinos, paint a concerning picture.
The study revealed that Trump’s casinos experienced a significant decline, shedding half of their employees and suffering a revenue drop of over 40 percent during the analyzed period. This downturn occurred during a time when many casinos in Atlantic City faced challenges, but Lipson’s research highlights that Trump’s casinos fared considerably worse. On average, they lost approximately 37 percent more employees and 33 percent more revenue than their Atlantic City counterparts.
Lipson concluded in his study, featured in The Wall Street Journal, that in a direct competitive environment, facing similar market pressures, Trump’s casinos underperformed in job sustainability compared to other Atlantic City casinos. He stated plainly, “His casinos were not the ‘best’ and not even average. They were the worst.” This raises serious questions about the factors contributing to the financial fragility of casinos in Atlantic City, and whether management and business strategies play a crucial role in their success or failure.
While the Trump presidential campaign disputed Lipson’s findings, arguing that they didn’t reflect negatively on Trump’s management skills, the data reveals a different narrative. Interestingly, even amidst these financial difficulties and bankruptcies, Trump himself profited substantially. His base salary increased from $1.5 million to $2 million after a 2004 bankruptcy, and as CEO between 2001 and 2005, he earned around $3.2 million annually. This income was strikingly disproportionate, being over 120 times higher than the average $26,000 annual salary of other Trump casino employees. This disparity further fuels the discussion about why casinos in Atlantic City struggle, particularly when leadership appears to benefit even during times of financial distress.
Lipson’s study, titled “Making America Worse: Jobs and Money at Trump Casinos, 1997–2010,” available on the Social Science Research Network and excerpted in publications like The Conversation and The Huffington Post, provides concrete evidence to evaluate claims made by political figures, especially concerning business acumen. It underscores the importance of examining tangible track records when assessing claims of economic success and job creation.
Furthermore, in an op-ed published in USA Today, Lipson connected Trump’s bankruptcy strategies to his political approach, suggesting a pattern of leveraging financial systems for personal gain even when businesses falter. He pointed out that Trump’s Atlantic City casinos went through four bankruptcies, a number exceeding any other major business, with most large businesses not exceeding three.
Trump defended these bankruptcies as a standard and effective method to restructure businesses and preserve jobs. While Chapter 11 bankruptcy can serve this purpose, Lipson argues that in Trump’s case, the process was potentially manipulated for personal benefit, while the casinos continued to lose jobs and revenue. This raises a critical aspect of why casinos in Atlantic City might fail: financial management strategies, including the use of bankruptcy laws, and their impact on long-term business sustainability and employee welfare.
Lipson’s motivation for the study stemmed from inquiries about Trump’s bankruptcies in The New York Times, indicating public and scholarly interest in understanding the financial performance of Trump’s casino ventures. While Lipson acknowledged that his findings might not change voters’ opinions, his hope was to bring greater focus to the issue of business track records and their implications, especially in high-stakes industries like casinos in Atlantic City. Ultimately, the study serves as a case study in why casinos in Atlantic City, even those bearing famous names, can succumb to financial difficulties, highlighting the complex interplay of market forces, management decisions, and economic conditions in the gambling industry.
