“Hello Atlantic City!” Ten thousand fists punch the air as one. Even in $250 seats you can’t quite make out Madonna’s face, only the canyoned tendons of her mighty thighs. Like the show itself, they are both spectacular and grimly efficient.

But I am not here in the Boardwalk Hall just to see the 50-year-old Queen of Pop. I want to discover how another old girl updates her image: Atlantic City itself. It tends nowadays to be dismissed as the poor cousin of Las Vegas.

Yet it’s only a couple of hours from New York, where gambling is illegal, to this seaside casino town. Billions have recently been spent on redevelopment and – credit crunch permitting – billions more are promised, including a new express train service launching on Feb 6.

Unlike Vegas, the place has a rich history. Long before gambling was legalised in 1978, its luxury hotels were the stuff of legend. You’d see “Diamond Jim” Brady stepping out with Lillian Russell along the world’s first and longest boardwalk, jostled by a carnival of hucksters, freaks and escapologists.

The largest casino in the US

Our writer joins the tables at a giant casino run by descendants of the Pequot tribe - this time it's the Indians who are winning

BACKGROUND

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• Ian Fleming and... Las Vegas

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Atlantic City’s streets gave their names to the original version of Monopoly. Most celebrated of all, until the animal rights movement gained ground, were the diving horses of the Steel Pier. Three times a day, a girl in a bathing suit would ride right off a rickety wooden ramp into a tank of water 60 feet below.

The force of one dive detached her retinas, but you don’t let a little thing like that stop you in Atlantic City. She continued the stunt, blind, for another ten years.

After the war, with the spread of air conditioning and suburban swimming pools, the visitors stopped coming. The rich holidayed in Vegas, or flew to Miami. Atlantic City became a decaying, slum-ridden place, largely abandoned even by the Mafia for whom it had been a Prohibition playground.

Enter the casino boom of the last three decades. Even so, and despite a proportion of the profits being ploughed back into the community, Atlantic City has never quite caught up to Vegas. The lovely Boardwalk, still four miles long, is lined with tacky T-shirt shops and massage parlours, and many buildings are still boarded up.

Yet there is a new sense of optimism. Steve Wynne, the casino mogul who invented modern Vegas 20 years ago with the Mirage, opened the gleaming-gold Borgata here in 2003 (a snip at $1.1 billion). Last summer he added The Water Club, an 800-room tower with four pools.

At Harrah’s next door, the whole building turns into a spectacular light show by night, best witnessed from inside the tropical pool under a geodesic dome. The once eye-poppingly tacky Trump Taj Mahal has had a tasteful $100 million makeover, and added the $255 million Chairman Tower. Caesar’s has converted one of the old piers into a covered arcade of shops and restaurants stretching out over the waves.

Outside the casinos, too, things are changing. The newly refurbished Chelsea Hotel proves to be in exquisite taste, more like a trendy Hoxton private members’ club than a hotel. Its retro décor harks back to the city’s jazz-age past, but the saltwater spa, cosy fireside lounges and poolside cabanas cater to contemporary tastes. Add to that an ocean view as limitless as Vegas’s desert, and this is, to my surprise, one of the nicest hotels I’ve ever stayed in.

Atlantic City’s best fine dining restaurant is just round the corner. Again, the Knife and Fork is a canny mix of old and new that makes a welcome change from Vegas’s mix of, er, new and new. A one-time Prohibition-era Speakeasy that had every bottle in the bar broken in a police raid, it now boasts a 10,000-bottle wine cellar. The building is a sprawling old Flemish pile with pointy eaves, recently given a very sympathetic makeover.

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