New competition pressures Atlantic City casino profits
The debut of two new casinos factored into a third quarter profit dip for Atlantic City’s gambling industry.
Gross operating profits for the months of July, August and September at Atlantic City’s nine casinos dropped 15.3% compared to the 2017 third quarter at $213.7 million, according to figures released last week by New Jersey’s Division of Gaming Enforcement. The cash-strapped gambling destination gained two new casinos in late June with the opening of Hard Rock Hotel & Casino and Ocean Resort Casino.
“Industry profits were down in light of the new competition that entered the market,” James Plouis, chairman of the state’s Casino Control Commission, said in a statement.
Tropicana Atlantic City experienced the biggest third quarter profit drop at 31.1% below the year-earlier period to $31.8 million. Borgata Hotel Casino & Spa had the second biggest fall with a 21.7% dip to $63.2 million followed by Resorts Casino at 14.7% down to $9.2 million. The Golden Nugget and Bally’s Atlantic City were the only two casinos with profit increases with jumps of 6.6% and 0.5%, respectively.
Plouis noted that while profits were off, the new casinos have contributed to over 6,300 more people working in the casino industry compared to last year with nearly 5,400 more full-time jobs. The newly released third quarter numbers also reflected increased spending at the city’s casino with net revenue 17.8% above the same three-month period in 2017. Total gambling taxes in the third quarter rose $11.6 million, or 7.2%, from a year ago with the city’s luxury taxes up 30% and sales tax revenue spiking 20%.
“Clearly the gaming industry’s growth has been beneficial for Atlantic City, the region, and the state,” said Plouis.
An improved casino industry was cited as one of the reasons Moody’s Investors Service upgraded Atlantic City general obligation bonds four notches on Nov. 1 to B2 from Caa3. The Moody's action occurred two weeks after S&P Global Ratings boosted Atlantic City debt two notches to B from CCC-plus after seeing fiscal improvements since the state took control of its finances in November 2016.
Moody’s analyst Douglas Goldmacher noted in his Nov. 1 report that the opening of Hard Rock and Ocean Resort creates long-term risks of cannibalizing revenues from other casinos if they fail to lure new visitors. He said New Jersey’s legalization of sports gambling in June should provide a boost to Atlantic City casinos who have set up betting lounges.
The DGE said on Nov. 15 that New Jersey casinos and racetracks took in $11.7 million of sports betting revenue in October, a 51% drop from September when $24 million was reported. Atlantic City casinos saw $6.9 million of October’s sports wagering revenue and have totaled $28.3 million since legalization took effect in June, according to the DGE data.