Atlantic City’s casino industry saw a 13 percent decrease in gross operating profit during the second quarter of this year compared with the same quarter of 2011, according to figures released by the Division of Gaming Enforcement on Friday.
The decline largely reflected Revel’s performance. Without the Revel numbers the industry would have seen a 13 percent increase.
Atlantic City casinos posted $118 million in gross operating profits between April 1 and June 20, the division reported. Gross operating profit, which reflects earnings before interest, taxes, depreciation, amortization, affiliate charges and other items are considered, is typically seen as a measure of profitability in the casino world.
Based on financial information released by the division, that would mean nine casinos ended the quarter profitable while Revel closed out with a gross operating loss of $35 million; Atlantic Club took a loss of about $5 million, and Golden Nugget was in the red for about $4 million.
“There’s some encouraging things and obviously, there’s some challenges,” said Tony Rodio, head of the Casino Association of New Jersey and president of Tropicana Casino and Resort.
Gross operating profits, which include nongambling numbers, had been climbing during the past two quarters.
While Revel, which opened to the public in April but didn’t make its official premiere until Memorial Day weekend, has experienced increases to its monthly gambling revenue, it ended the quarter with net revenue of $55 million — not enough to make a profit.
Even if analysts were to add back the $17 million that Revel said it spent on start-up and other costs associated with the opening, gross operating profits still would be in the red for $18 million, said John Kempf, an analyst with RBC Capital Markets in New York City.
“I didn’t think it would be that big,” Kempf said of the loss.
Revel spokeswoman Maureen Siman said the company would have no comment on the quarterly figures.
Rodio said he saw encouraging trends in the figures for the industry overall. For instance, net nongambling revenues increased by 13 percent, including a nearly 2 percent improvement in net revenue from rooms, food and beverage, entertainment and other sources, according to the Division of Gaming Enforcement.
In addition, Tropicana saw its gross operating profit increase to nearly $10 million in the second quarter, which contrasts with when the resort was in the red for more than $1 million during the same period last year.
“I’m really proud and happy of what we have been able to do,” Rodio said. “We have improved our results pretty significantly.”
Rodio credited the improvement to The Quarter, a courtyard in the resort that attracts nightclub, bar, restaurant and other nongambling patrons.
“It’s a place where people naturally have fun, and it spills over to your gaming results,” he said.
Bally’s, Harrah’s, Resorts, Trump Plaza and Trump Taj Mahal also saw their gross operating profits increase compared with their performances during the same period last year. Some of those increases were attributed to real estate assessment appeals.
In contrast, Atlantic Club, Borgata, Caesars, Golden Nugget and Showboat experienced decreases year-over-year.
Borgata’s nearly 21 percent drop for the quarter and 2 percent decline year-to-date appeared to have prompted Standard & Poor to drop its credit rating of Marina District Development Co. to a “B” from “B+” on Friday.
“Atlantic City casino operator Marina District Development Co. LLC, which owns and operates Borgata, is performing weaker than we expected, and we believe a softening macroeconomic environment and increased competitive pressures will challenge second-half performance,” the rating agency said in a note announcing the credit drop.
Joe Lupo, Borgata’s senior vice president of operations, has said the casino lost $5 million to one player in July during a mini-Baccarat game that affected its bottom line. Lupo could not be reached for comment Friday.
Michael Frawley, chief operating officer at the Atlantic Club Casino Hotel, said his resort remains committed to its long-term strategy despite seeing its second-quarter gross operating profits further erode by 50 percent compared with the same period last year.
Formerly known as the Atlantic City Hilton Casino Hotel, the resort recently went through a name change and rebranding targeting budget-minded casino players and visitors. That effort, which includes “an aggressive promotional stance,” needs time before it can affect revenue and profitability, Frawley said.
“Our niche is the best deal in Atlantic City,” he said. “We’re still committed to that.”
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