News Column

Atlantic City Casino Profits Drop 28 Percent for 2012

April 4, 2013

Donald Wittkowski, The Press of Atlantic City, Pleasantville, N.J.

Hurricane Sandy punished the Atlantic City casinos in the fourth quarter of 2012, leaving the industry with an $18.5 million operating loss compared with an $81.4 million profit in 2011.

Overall, annual casino operating profits plunged nearly 28 percent in 2012 as the sluggish economy, competition from surrounding states and Sandy made it more difficult for the gambling industry to make money.

The market posted a gross operating profit of $360.7 million in 2012, compared with $497.6 million in 2011, according to year-end figures released Wednesday by the New Jersey Division of Gaming Enforcement.

But while operating profits and gambling revenue were down, the industry posted sizeable annual increases in sales of hotel rooms, entertainment and other nongambling amenities. Altogether, nongambling revenue rose 3 percent to nearly $1.3 billion, according to the division.

Annually, room sales grew more than 2 percent, while entertainment and other sales increased by nearly 16 percent in 2012. Sales from businesses that lease space in casinos also spiked nearly 40 percent, the division reported.

An annual record of 5.2 million occupied room nights also was recorded -- an increase of nearly 3 percent over 2011.

At the same time, the growth in hotel room sales was less than expected, said Brian Tyrrell, a senior research fellow with the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at The Richard Stockton College of New Jersey.

The institute, which recently posted a study of annual tourism performance indicators, tracked hotel occupancy fees in Atlantic County and found the state collected 15 percent more in 2012 than the year before. The increase in the fourth quarter was even more, coming in at 23 percent, Tyrrell said.

While those figures were for the county rather than just for the city, the disparity between tax collection and sales suggests the casinos may have given the rooms away as comps to patrons -- requiring the tax to be paid but not netting the casinos any room sales.

"That's one of the things that stuck out to me," Tyrrell said.

Atlantic City continued to struggle with the weak economy and competition from casinos in neighboring states. Sandy added to the city's misery in the fourth quarter, forcing the casinos to shut down for a week. As a result, the industry lost money in the fourth quarter compared to making a profit in the same period in 2011.

"Subsequently, it took time for casinos to resume normal operations and open all of their amenities to the public," the Division of Gaming Enforcement said of Sandy's impact. "Additionally, there were numerous conventions, conferences, trade shows and fairs canceled as a result of the hurricane, along with the cancellation of many concerts and other entertainment functions."

Despite Sandy's challenges, eight of the 12 casinos posted operating profits for the year. Harrah's Resort topped the industry with $126.9 million in gross operating profit to topple the perennial front-running Borgata Hotel Casino & Spa. Borgata slipped to second place in gross operating profit in 2012, at $119.6 million, representing a 26 percent decline from 2011.

Revel, the Atlantic Club Casino Hotel, Golden Nugget Atlantic City and Resorts Casino Hotel all finished with operating losses last year.

Gross operating profit represents earnings before interest, taxes, depreciation, amortization and other charges. Also known as cash flow, it is considered the best measure of profitability in the casino industry.

Revel, the $2.4 billion megaresort that filed for bankruptcy last month, suffered a gross operating loss of $110.6 million for the nine months it was open in 2012. Revel's operating loss in the fourth quarter was $38.5 million, figures show.

Jeffrey Hartmann, Revel's interim CEO, characterized Revel's start-up period as "a solid foundation for growing our business and attracting new guests to the property." He predicted the casino will emerge much stronger once it completes its bankruptcy restructuring, expected in May.

"Our current financial restructuring will enable us to right-size our balance sheet and offer Revel a strong financial foundation resulting in improved cash flow to better support our operations," Hartmann said. "Ultimately, this will not only position Revel for success but will be a positive step for Atlantic City as a whole."

Although Revel has struggled financially, the Division of Gaming Enforcement credited the city's newest casino with helping to boost the industry's hotel business to a record number of occupied room nights in 2012.

Staff Writer Hoa Nguyen contributed to this report.



Source: (c)2013 The Press of Atlantic City (Pleasantville, N.J.) Distributed by MCT Information Services


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters