Atlantic City’s Casino Industry Reports Gaming Revenue Growth but Operating Profit Decline
Since last summer, Atlantic City has been home to nine casinos rather than seven. The Ocean Casino Resort and the Hard Rock Atlantic City opened on the exact same day and have added to the overall casino options in the region. In Atlantic City, the casinos continue to report gaming revenue growth each month since the two new casinos came in to play but operating profits are still down. How is this possible?
The term operating profits is used to describe the profit a business earns before taxes and interest. So, in Atlantic City, despite the revenue numbers seeing an increase month after month, more is being spent on operations which is leading to a decrease in operating profits for those in the region.
Apparently, the operating profit decline is not unusual. The casinos are making money from the gaming offerings, such as slots, table games and online gaming. However, they are not seeing an increase in overall profits. The current market has an increase in competition thanks to the two new casinos which has led to operators investing more to be able to attract customers.
Operators are spending more to bring in customers and to keep them onsite. With two new venues, the casinos have to work harder to get people to come inside rather than lose out to competitors. It should also be considered that the revenue comparisons thus far for 2019 do not include the Ocean Casino Resort and the Hard Rock.
Since the casinos did not open until late June, we will not truly be able to see a comparison of profits and revenues until August when the July reports are released. Basically, January through June will include 7 operating casinos in 2018 and 9 for 2019. This will certainly show a jump in year over year earnings.
Operators also have another revenue source now with sports betting. The new industry adds to the overall spending costs as well as earnings.
The New Jersey Division of Gaming Enforcement has reported that revenue from gaming has increased by double digit percentages every month since the casinos opened and sports betting began. During the first quarter of this year, casino operating profits came in at $87 million. This was a drop of just over 29% from the same time frame in 2018.
The Ocean Casino and Hard Rock both reported a loss for the first quarter. The Hard Rock had the lowest loss at $6 million while the Ocean Casino was down over $10 million.
Despite the decrease in operating profits, total gaming revenue for the first three months increased by more than 20% when compared to 2018. It is important to note that the total gaming revenue reports do not count any promotional spending by the gaming venues to bring in customers.
Now, we look forward to the next few months. The reports by the Division of Gaming Enforcement from July to December will give us a clearer picture as to how the Hard Rock and Ocean Casino have affected the market. These will be the first full months that 2018 and 2019 can have a true comparison.
It will certainly be interesting to see what these reports reveal and how the two casinos have affected the gaming market of Atlantic City as a whole. Will decreases continue to show in the reports for profits and revenues continue to rise or will the market even out?