As the longest casino shutdown in Atlantic City history stretched into its fifth day, gambling executives and analysts warned of more hardships ahead for an already ailing industry.
Gov. Chris Christie, meanwhile, said he is concerned about telling the casinos to open up when the rest of Atlantic City is without power.
The governor said he has been assured that power would be restored to the mainland areas of Atlantic County by today. Barrier island areas, including Atlantic City, should have power back by Saturday night.
Steve Callender, general manager of Tropicana Casino and Resort, one of the city’s biggest casino hotels, predicted that business levels will slowly ramp up once gambling operations resume. Callender noted that many people are still trying to recover from Hurricane Sandy’s fury and may postpone trips to casinos for some time to come.
“It could take a month. It could take two months,” Callender said of business returning to normal. “There are a lot of financial implications with this. A lot of discretionary dollars are at stake when people need to get their homes and cars fixed.”
In Tropicana’s case, Callender said the casino will start slowly, gradually opening up hotel rooms and nongambling amenities such as restaurants as customers begin to trickle through the doors.
“It’s not like the place is going to be packed when we open,” he said. “Lives have been shaken. They’re taking care of themselves.”
Exactly when the city’s 12 casinos will be given the go-ahead to reopen is unknown. They closed on Sunday as the hurricane churned up the coast. They remained closed Thursday in the storm-ravaged town. The New Jersey Division of Gaming Enforcement is still waiting for the governor to lift his mandatory evacuation order before the casinos can resume business.
“We have no estimate of when that will be,” said Keith Smith, president and chief executive officer of Boyd Gaming Corp., the parent company of Borgata Hotel Casino & Spa.
Casinos escaped the hurricane’s wrath with only minor damage, but the rest of the city was pummeled by flooding and power outages. Smith said the city’s travel ban cannot be lifted because street lights remain out, compromising safety.
Flooded roads and a strained transportation system likely will make it difficult for thousands of employees to get back to work once the casinos reopen. Casino executives have repeatedly said they fully support the governor’s shutdown order to protect the safety of employees and customers.
“Their safety and well-being are our primary concern,” Smith told casino analysts during a conference call Thursday.
Analysts asked Smith about the shutdown’s financial consequences. He responded that it is premature to say how serious the impact will be because no one knows how long the casinos will be closed.
Tropicana CEO Tony Rodio, who also serves as president of the Casino Association of New Jersey, an industry trade group, estimates the casinos are collectively losing about $5 million each day in gambling revenue.
The shutdown is costing them not only winnings from their casino operations, but also millions of dollars in revenue from nongambling sources such as hotel rooms, bars, restaurants and retail stores.
Some casinos are expected to submit claims with their insurance carriers. Casinos routinely carry “business interruption” insurance, but the deductibles usually are high.
Josh Hirsberg, chief financial officer for Boyd Gaming, said the deductible for his company’s business interruption insurance is $1 million. Boyd must wait out the casino shutdown before it decides whether to file a claim for Borgata and begin negotiations with its insurance carrier, company executives said.
“Overall, it’s not just straightforward,” Paul Chakmak, Boyd’s chief operating officer, said. “It is a long negotiation on lots and lots of points.”
Gary Loveman, chairman and CEO of Caesars Entertainment Corp., said there is a $25 million deductible for damage and business interruption insurance for his company’s casinos. He added that Caesars Entertain-ment’s four Atlantic City casinos — Bally’s, Caesars, Harrah’s Resort and Showboat — do not expect to exceed that deductible.
This is only the fourth shutdown in Atlantic City’s 34-year history of casino gambling. Hurricane Gloria in 1985, Hurricane Irene in 2011 and a state budget crisis in 2006 also forced the casinos to temporarily close. However, this is the first time a shutdown has dragged on longer than three days.
The shutdown has added to Atlantic City’s misery. The gambling haven is already mired in a six-year revenue slump caused by the fragile economy and competition from casinos in surrounding states.
Wall Street financial firm Moody’s Investors Service said an extended shutdown may lead to downgrades with the credit ratings of such companies as Caesars Entertainment and Revel. Borgata’s owner also may be vulnerable, Moody’s said.
Revel’s $2.4 billion megaresort is Atlantic City’s newest casino. So far, Revel has struggled with its gambling revenue, placing just eighth among the 12 casinos each month since its April 2 opening.
“The damage and financial ramifications from Hurricane Sandy could worsen Revel Atlantic City’s already weak liquidity if the property remains shut for an extended period and insurance proceeds do not arrive on time,” Moody’s said in a statement.
Earlier this year, Revel secured an extra $70 million in financing to help it cope with its operating costs through 2013. Revel CEO Kevin DeSanctis has said that the new funding has greatly strengthened the company’s financial condition.
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