Taj Mahal and Competition

Trump Taj Mahal Casino has been acquired by STHM Management. However, for STHM to be successful where the former owners were unsuccessful requires them to understand the competitive environment, the past performance of the firm, and understand why the past failure occurred so they can avoid the same issues. This paper will address those three issues. Market Analysis of Local, Regional, and National Competition The Trump Taj Mahal Casino is located in Atlantic City, where there are currently 8 casinos, including the Taj Mahal (Atlantic City, 2016).

The size of the industry is large; in August 2016 total winnings were $229,787,082, with the largest competitor being Borgata where winnings totalled $65,566,500 (Playnj, 2016). However, while there is a high level of competition, the industry in the area has been suffering, with four casinos closed in 2014 and in 2015 total revenues were down by 48% compared to 2006, which was their best year (Johnson, 2015). There are many casinos in the U.S., in 2014 there were 510 casinos in the country.

There are few casinos in the same region, with Atlantic City being the only resort, with several casinos in Philadelphia, Baltimore and Washington (Anonymous, 2016). However, while these are open, they do not provide the same differentiated resort experience. The main resort competition is seen nationally from Las Vegas, where there is a more established leisure locations, with 25 casinos on and off the strip along with a highly supportive hospitality infrastructure, and better national and international transportation links.

This gives Las Vegas a competitive advantage over Atlantic City, with both the reputation and the higher level of hospitality services available (Barsky & Maier, 2015). Past Performance The Trump Taj Mahal Casino was once the highest performing casino in Atlantic City, but started to lose business when the Borgata opened in 2003 (Playnj, 2016). The company has seen falling revenues, in 2014 there were revenues of $216 million, this decreased to $180 million in 2015 (Playnj, 2016).

Issues which Caused Past Failure When the Trump Taj Mahal Casino opening in 1990 appeared highly successful, although even at that stage the casino had problems, the casino was built with a high level of debt, at high interest rates (Buettner & Bagli, 2016). The casino survived by Trump delaying payments on debts, and as the casino faced further financial challenges Trump took his casinos public, effectively shifting the risk from himself to the stockholders (Buettner & Bagli, 2016).

While the casinos struggled under the high debt levels, Trump still continued to take large amounts for himself using a compliant board of directors (Buettner & Bagli, 2016). When the Borgata opened in 2003 the company had competition with a new casino, which was more up-to-date and aggressively sought to attract customers. As the firm saw revenues falling there was less money for potential investment and the facilities started to show their age, such as frayed carpets (Nuzzi, 2014).

In any industry for a firm to be successful place that a source of competitive advantage, without the ability to have a cost advantage due to high debt repayments, this left the advantage of differentiation. New competition into the market with a new competitive advantage in terms of the experience that was offered, taking business from the Taj Mahal Casino. As it is the experience that is most important to attracting gamblers (Barsky & Maier, 2015), this was a significant loss.

Effectively, the company had high level of debt it could not sustain in the long-term without extremely high levels of business, failed to maintain its competitive advantage, develop new competitive advantage when competition emerged. It is also likely that the court case to remove Trump's name from the casino may have had an adverse impact. Following the announcement of the bankruptcy in 2014, the Trump Taj Mahal Casino suffered further when their internet/online gaming partner withdraw from their contract, citing non-payment.

This hurt the firm more, making it difficult to attract new customers (Playernj, 2016).