Atlantic City casino profits plummet 38% in 1Q

May 21, 2009 8:01 PM
Staff & Wire Reports |

The bad news continued for Atlantic City hotel/casinos as gross operating profits declined 38 percent in the first quarter to $151.2 million, compared with $243.8 million in the same period of 2008.

Net revenues for the quarter slipped 16.2 percent to $925.2 million, according to figures released Wednesday by the New Jersey Casino Control Commission.

The first quarter is usually the slowest time for casinos because of the harsh winter weather. Gaming revenue was down in January, February and March as the recession and competition from the Pennsylvania slot parlors continued to erode Atlantic City’s customer base.

Gross operating profits, which represent earnings before interest, taxes, depreciation and other charges, are considered the best measure of the industry’s overall financial condition. In the first quarter, operating profits sank at all 11 casinos.

While seven of the casinos remained in the black, losses were posted by the Atlantic City Hilton Casino Resort, Resorts Atlantic City, Trump Marina Hotel Casino and Trump Plaza Hotel and Casino.

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Borgata Hotel Casino & Spa led the industry with gross operating profits of $47 million, down 16.6 percent.

Another key indicator was the hotel occupancy rate. In the first quarter of 2008, the rate was 86.3 percent industry-wide, but the figure fell to 75.3 percent in the first three months of 2009. Resorts, Trump Marina and Harrah’s Resort all saw their occupancy rates drop into the 60 percent range, compared with the 80s for the same time last year.

One analyst told the Press of Atlantic City it appears many gamblers in Pennsylvania and New York went to nearby slot parlors in those markets instead of staying overnight in Atlantic City, even when the hotel rooms would have been comped.

"Customers are opting for convenient, daytrip options rather than perhaps redeeming a direct-mail room offer for Atlantic City," said Harvey Perkins, senior vice president with Spectrum Gaming Group, a casino consulting firm based in Linwood.

Competition for Atlantic City will become even more intense when the $743 million Sands Casino Resort opens Friday in Bethlehem, Pennsylvania. The casino is strategically located on the Interstate 78 corridor, a direct link to the feeder markets in northern New Jersey and New York.

"In our opinion, Sands will take market share from eastern Pennsylvania’s gaming facilities (Mount Airy, Mohegan Sun at Pocono Downs and Philadelphia Park) as well as Atlantic City properties," Dennis M. Farrell Jr., a casino analyst with Wachovia Capital Markets, wrote in an investor note Wednesday.

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