New Jersey casinos losses continue to mount

Aug 20, 2008 6:48 PM

Staff & Wire Reports | Atlantic City casinos continue to suffer amid increased competition and rising gas prices.

The city’s 11 gambling halls lost $39.4 million in the second quarter, compared to a profit of $34.8 million in the 2007 second quarter. It was the third consecutive quarterly loss for the casinos.

The balance sheets were not much better when measuring gross operating profit, which is considered a better comparison between casino properties. It excludes interest, taxes, depreciation and other charges.

Gross operating profit for the quarter ending June 30 fell 16.5 percent to $247.3 million from the same period a year earlier, according to figures released Tuesday by the state Casino Control Commission. It was the sixth consecutive quarter in which gross operating profit declined. Quarterly net revenue dropped 3.3 percent to $1.15 billion.

"I think what’s going to happen is it’s going to be survival of the fittest, near-term," said casino analyst Dennis M. Farrell Jr. of Wachovia Capital Markets. "Competition for patrons is going to be more aggressive than it has in the past."

Only one casino, Harrah’s Resort Atlantic City, recorded a gain in quarterly gross operating profit, as it finished a waterfront expansion that added 960 hotel rooms and casino space, along with new restaurants and stores.

Gross operating profit at Harrah’s rose 18.7 percent to $43.3 million from the 2007 second quarter. "But the rest of the market continues to struggle with the high fixed cost of operating the business," Farrell said.

The New Jersey casino industry is heading toward its second consecutive year of declining revenue as the seaside gambling halls have been hurt by new slot parlors in New York and Pennsylvania, rising gasoline prices, and a partial smoking ban that will be expanded this fall.

"I don’t think much of this was unexpected from the Wall Street community," Farrell said.

The largest drops in quarterly gross operating profits were recorded by the Atlantic City Hilton, down 51.3 percent to $4.2 million, and Tropicana Casino and Resort, which is searching for a buyer, down 47.6 percent to $16.1 million.

Quarterly gross operating profits at Resorts Atlantic City fell 39.3 percent to $3.6 million; dropped 30.8 percent to $20.4 million at Showboat Casino-Hotel; fell 25.8 percent to $6.7 million at Trump Marina Hotel Casino; dropped 22.7 percent to $36.1 million at Caesars Atlantic City Hotel Casino; fell 16.6 percent to $46.2 million at Borgata Hotel Casino & Spa; dropped 7.2 percent to $9.2 million at Trump Plaza Hotel & Casino; fell 5.2 percent to $35 million at Bally’s Atlantic City; and dropped 1.4 percent to $26.4 million at Trump Taj Mahal Casino Resort.

For the first six months of the year, gross operating profit for the city’s casinos declined 17.1 percent to $491.1 million, while net revenues fell 4 percent to $2.26 billion, compared to the first half of 2007.