Speaking at The East Coast Gaming Congress on Wednesday, a panel of Wall Street analysts said the investment community views Internet gambling as a way to finally end the city's seven-year losing streak. The state plans to offer online bets by the end of the year.
"I'm probably one of the more bullish people on this," said David Berman, senior managing director of Macquarie Capital. "It's a big boon for Atlantic City and New Jersey."
Online games will mark the biggest expansion of gambling in New Jersey since the state's first casino opened in 1978.
"That's where the big savior can come from," added Robert Heller, president of Spectrum Gaming Capital.
New Jersey is one of three states to legalize Internet gambling, along with Nevada and Delaware. New Jersey last week issued regulations on how the online games are to be carried out.
John Kempf, managing director of RBC Capital Markets, estimated Internet gambling could be a $500-million-to-$600-million-a-year market for New Jersey.
But several of the panelists also cautioned that no one yet knows how letting people gamble online instead of requiring them to physically visit casinos will impact the gambling halls' bottom line.
Keith Smith, president of Boyd Gaming, which owns half the city's top casino, the Borgata Hotel Casino & Spa, said he expects Internet gambling to help his brick-and-mortar casino.
"I am confident it will stimulate growth and visitation for our casino itself," he said.
Smith said young adults are expected to be an important new audience the casinos expect to reach by putting their games online. He said casino patrons aged 21 to 35 spent 25 hours a week using social media.
"It is a way to bring a new customer here - a customer who has not made Atlantic City their destination of choice for entertainment."
Berman said the main benefit of Internet gambling is providing a new means of getting the casinos' product to new markets.
"The pie can end up in some relatively thin pieces, but this is a significant opportunity for casino operators in New Jersey," Berman said. "The most exciting thing I see is the prospect of Internet gambling and sports betting that will create a new distribution channel."
Adam Rosenberg, global head of Goldman Sachs' Gaming Group, said Internet betting will help casinos, but he also said some degree of cannibalization is probably inevitable.
The analysts agreed New Jersey has several big advantages for its online gambling, because it will offer all the games that are currently offered at its 12 casinos. Nevada, by contrast, offers only poker.
New Jersey also is the nation's most densely populated state, and is right next door to the population center of New York. New Jersey will require that gamblers physically be present within the state's borders in order to gamble online.
The rules also allow New Jersey to make agreements with other states or countries to offer Internet gambling as long as it is legal in both places.
The analysts also said that despite its continuing revenue decline, the Atlantic City market appears to be stabilizing. One big factor in its favor is the fact that no major new casino in Philadelphia or New York will open this year, allowing Atlantic City a chance to regain some equilibrium.
They added that smaller projects like the $35 million Margaritaville expansion opening this weekend at Resorts casino Hotel should help restore Wall Street's confidence in financing Atlantic City projects following the disappointing performance of Revel, which filed for Chapter 11 bankruptcy protection less than a year after it opened. The $2.4 billion casino resort emerged from bankruptcy on Tuesday.
The analysts also said approving casino gambling in the Meadowlands will be difficult given strong political opposition from southern New Jersey elected officials looking to protect the Atlantic City casinos. But Rosenberg said casinos at the Meadowlands are probably inevitable at some point.