News Column

Luck is Finally on Casinos' Side

May 7, 2013

Donald Wittkowski

Most of the nation's casino markets have finally recovered from the recession, propelling revenue from slot machines and table games to near-record levels in 2012, according to a new report on the economic health of the gambling industry.

However, Atlantic City experienced the biggest revenue decline of any commercial casino market last year, as it continued to suffer from intense competition and the lingering effects of Hurricane Sandy, the American Gaming Association said Monday in its annual State of the States report.

Nationwide, gambling revenue rose 5 percent, to $37.34 billion, in 2012, the third straight year of growth in the improving economy. Gambling revenue reached its post-recession high point in 2012 and trails only the all-time record of $37.52 billion set in 2007.

"After three years of increasing growth and positive signs in all sectors of the industry, it's clear that we have weathered the recession," said Frank J. Fahrenkopf Jr., the AGA's president and chief executive officer.

Of the 23 states that have commercial casinos -- excluding Indian-owned casinos -- only seven had revenue declines last year. The increase in consumer spending also translated into higher casino taxes. Nationwide, states and local communities benefited from $8.6 billion in casino tax revenue, a nearly 9 percent increase over 2011. New Jersey's tax revenue from casino gambling fell 8 percent, to $254.8 million, because of Atlantic City's downturn.

The AGA also reported that the casino industry provided jobs for 332,000 workers nationwide last year, although that figure fell 1 percent from 2011.

"At a time when many industries are still feeling the lingering effects of the so-called Great Recession, gaming companies are going strong," Fahrenkopf said.

One notable exception is the Atlantic City economy. Nationwide, Atlantic City was the poorest-performing casino market last year, down 8 percent overall, to $3.05 billion in total gambling revenue.

Despite the grand opening of the $2.4 billion Revel megaresort, Atlantic City suffered its sixth straight year of declining revenue in 2012. Revel did not live up to expectations that it would lift the market. Saddled with suffocating debt and millions in losses, Revel filed for bankruptcy protection in March to overhaul its finances and ownership structure.

"I think it's wrong to look at it as a failure. It has taken steps to right itself financially," Fahrenkopf said of Revel.

Fahrenkopf noted that Pennsylvania chiefly benefited from Atlantic City's ongoing troubles. Pennsylvania took in $3.16 billion in gambling revenue in 2012, surging past New Jersey to become the nation's second-largest casino state behind Nevada, which had $10.86 billion.

"If you live in the Philadelphia area, you no longer have to drive an hour and 15 minutes to Atlantic City to play the slots and enjoy things," Fahrenkopf said, noting how Pennsylvania gamblers are now staying closer to home instead of making casino trips to Atlantic City.

Casinos in New York and Maryland also got stronger in 2012 to put even more competitive pressure on Atlantic City. Tiny Delaware also was hurt by increased competition in the Mid-Atlantic's saturated casino market. Delaware's three racetrack casinos saw their revenue fall by nearly 5 percent, the second-biggest market decline nationwide.

The AGA report also noted that Atlantic City has not yet fully rebounded from Sandy's wrath. The Oct. 29 hurricane forced a weeklong casino shutdown, costing the industry an estimated $5 million per day in gambling revenue.

Even when they reopened, the casinos struggled to get back into full operation. Tourism surveys showed that visitors were slow to return to Atlantic City, believing that the Boardwalk and other major attractions were destroyed by Sandy even though they were relatively unharmed.

"I think it's important to note that no other jurisdiction had to deal with the likes of Sandy," Tony Rodio, president and CEO of Tropicana Casino and Resort, said of the hurricane's huge impact on Atlantic City.

Still, Rodio believes that Atlantic City has been making progress lately by promoting itself as a broader-based tourism destination. Restaurants, shopping and nightlife are prominently featured in the city's $20 million advertising campaign, which urges visitors to "Do AC."

"I think we are moving in the right direction, as the market and businesses focus more on nongaming amenities. I think that is what will set us apart from the surrounding competitors," said Rodio, who also serves as president of the Casino Association of New Jersey, a trade group representing Atlantic City's gambling industry.

The AGA report emphasized the importance of nongambling attractions to complement the action on the casino floor. Polling results compiled by an AGA consultant showed that nearly 70 percent of casinogoers ate in a gourmet restaurant, 55 percent saw a show, concert or other form of live entertainment, and about half of them visited a bar or nightclub last year.

Fahrenkopf characterized those results as a strong sign that casinos are providing an array of entertainment options, "not just gambling."

Overall, more than 76 million Americans visited a casino last year. The single-biggest demographic group, representing 39 percent of all casino visitors, was the 21 to 35 age group. That shows that younger customers have become an increasingly important segment of the casino industry, Fahrenkopf said.

Casinos remain the nation's second-most popular form of gambling, behind the lottery, according to the AGA report.

"The state of the industry is good, and prospects for the future are solid," Fahrenkopf said.


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