The third quarter results from the New Jersey Department of Gaming Enforcement have revealed that whilst two new market entrants obviously boosted year-on-year revenues the underlying strength of the market is not in the best of shape.
It was supposed to be so easy. The Atlantic City market was on the up and two new market entrants were about to come in and restore the east coast gaming haven to former glories. However the best-laid plans often go awry and recently released third-quarter results have raised as many questions about the market’s feasibility as provided answers.
There are a number of headline results including a 17.8 percent rise in net revenue – up to $919m in the period. However gross operating profits were down 15.3 percent to $213m and if the new market entrants are taken out of the equation – the market assessed like for like – quarterly revenues were in fact down by almost $20m.
The recently opened properties of Hard Rock and Ocean Resort continued to languish at eighth and ninth in terms of gross operating profit respectively despite early promise.
Initial revenue projections submitted as part of the licence application process have with hindsight appeared optimistic at best but those involved in the projects are more than aware of the task at hand.
“We’ve had very good fortune when it comes to groups coming to the property for meetings and conventions,” commented Bruce Deifik, owner and chairman of Ocean Resort. “And that’s very important for our property. But, until (Atlantic City adopts a non-gaming centric leisure offering akin to that in Vegas), we’re going to struggle.”
Whilst such should patently raise concerns it is important to remember that the market on the whole is on the up. The new properties have indeed brought new money into the town and an almost 20 percent rise in net revenues is little to be scoffed at.
“The opening of two new casinos in late June plus the advent of sports betting at the same time explains the surge in net revenues in the third quarter and increase in total industry gross gaming win through October,” said Tony Marino, a New Jersey-based analyst. “The publicity and media interest accompanying the new casinos and the long-anticipated legalization of sports betting was intense and came at the perfect time – the beginning of Atlantic City’s historically robust summer season. In other words, the timing could not have been better.”
However, he added that those in the market would do well to keep recent history at the forefront of their minds.
“If Atlantic City’s past his- tory has taught us to be realistic, we should anticipate that total year round demand may not be sufficient to keep all nine casinos profitable by 2020 and beyond,” he said. “Without major infrastructure changes and effective marketing programs, another round of right-sizing the casino industry is likely in Atlantic City’s future.”