The 50-story Prasada, a non-gaming hotel, is slated to open in 2010.

Once a leading resort destination on America’s Atlantic Coast, the city fell on hard times in the 1960s and turned to gaming as its savior. Now, with gaming abundant throughout the region and Atlantic City’s once-thriving casinos struggling to turn a profit, luxurious destination hotels are making a comeback. Two major non-gaming developments opened this summer in Atlantic City, and a third is on the way.

The flag-bearer of the new-old non-gaming Atlantic City is The Water Club, a US$400 million joint venture by, perhaps ironically, Boyd Gaming and MGM Mirage. The 800-key Water Club is positioned as a sister property to Borgata Hotel Casino & Spa, connected via breezeway but worlds apart in terms of atmosphere. Unlike Borgata, The Water Club is designed and marketed squarely at cash-paying customers seeking a more luxurious experience. Rates at The Water Club are about 25% higher than Borgata, says Borgata President and CEO Larry Mullin.

As its name implies, the common areas of the cosmopolitan Water Club are awash with water features, complemented by limestone columns and blown-glass chandeliers. The hotel’s lobby lounge, The Sunroom, offers views of an outdoor heated pool. The Water Club has 18,000 sq. ft. (1,672 sq. m) of meeting space, including five boardrooms.

Nearby, New York City-based Cape Advisors Inc. opened The Chelsea on the Atlantic City Boardwalk. Developer Curtis Bashaw bought two adjacent mid-scale hotels—Howard Johnson Atlantic City and Holiday Inn Atlantic City-Boardwalk—and renovated them into a single 331-key boutique property. The Chelsea remains something of a two-hotels-in-one concept, however, with the old Holiday Inn half known as “Chelsea Luxe” and the HoJo side dubbed “Chelsea Lite.” Rates range from US$250 at Chelsea Lite to US$500 at Chelsea Luxe.

The Chelsea merged a Holiday Inn and a Howard Johnson.

The Chelsea’s target market is “whoever wants to have a nicer room in Atlantic City and doesn’t want to be living with 1,000 slot machines,” Bashaw says. “We’re going for people who want to check out A.C., aren’t card-carrying gamblers but want to be proximate to that action.”

Officials at The Chelsea and The Water Club see their properties as more complementary than competitive. The Chelsea welcomes Water Club guests in search of beach access, while The Water Club accommodates Chelsea’s gamblers via its Borgata connections. But beyond that informal quid-pro-quo relationship, having The Chelsea and The Water Club come online at the same time helps reinforce the idea of Atlantic City as a vacation destination, Bashaw and Mullin say. “It’s competition in the short-run,” Mullin says, “but longer-run, the population base that surrounds us is definitely more than able to satisfy projects like The Chelsea and other projects that will probably come along.”

Another project already is coming along, in fact. Atlantic City’s third major non-gaming development, Prasada, was announced this summer by Philadelphia-based DiGeorge Atlantic Properties LLC. Touted as “Atlantic City’s first world-class boutique hotel and ultra-luxury condominium residences,” the 50-story Prasada is slated to open on the Boardwalk in 2010. The Water Club’s Mullin welcomes the challenge. “We don’t want to be the last new place in town,” he says.

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