Atlantic City’s casino industry, pummeled by Hurricane Sandy and competition from surrounding states, saw gambling revenue fall in 2012 to its lowest level since the early 1990s.
For December, combined revenue from slot machines and table games was down 9 percent, to $223.5 million, compared to the same month in 2011. Total revenue declined 8 percent in 2012 to $3 billion, according to year-end figures released Thursday by the New Jersey Division of Gaming Enforcement.
Including 2012, Atlantic City has suffered six straight years of revenue declines, off 42 percent from its 2006 peak of $5.2 billion. December’s weak performance almost allowed the city to slip below $3 billion in annual revenue for the first time since 1991. At that time, casino revenue was $2.99 billion.
The sluggish economy, gambling competition from neighboring states and a weeklong casino shutdown caused by Hurricane Sandy drove down revenue in 2012. Revenue fell 20 percent in October and plunged a record 28 percent in November in Sandy’s aftermath.
Sandy forced the city’s 12 casinos to shut down from five to eight days beginning Oct. 28. Prior to Sandy, casino revenue for the industry was down about 5 percent through September, the Division of Gaming Enforcement said.
John Kempf, a casino analyst for RBC Capital Markets, wrote in a note to investors that the lingering effects from Sandy “continue to suppress revenue growth.”
December’s rate of decline was significantly lower than the previous two months, suggesting that some post-hurricane recovery has begun in the local economy. However, one casino executive offered a glum assessment for all of 2012.
“I think it was disappointing,” said Tom Pohlman, general manager of Golden Nugget Atlantic City. “A lot of people put a focus on Sandy hitting us, but prior to Sandy hitting, the town was in bad shape and declining.”
Golden Nugget, the former Trump Marina Hotel Casino, spent $150 million to reinvigorate and rebrand what Pohlman described as a formerly depressed property. The investment paid off, giving Golden Nugget the distinction of being the only Atlantic City casino to post higher gambling revenue in 2012.
Golden Nugget’s combined slot and table games revenue jumped 67 percent in 2012. Houston-based Landry’s Inc. bought Trump Marina for $38 million in 2011 and completed its transformation last year.
“No. 1, we took over a property that we believe was very distressed,” Pohlman said. “We put $150 million into a property, and any time you do that, it’s a natural for you to increase business. The bar wasn’t set very high when we took over. The property before, Trump Marina, was very different. ... It was very depressed.”
All of the remaining 10 casinos that were open in 2011 suffered lower revenue in 2012, ranging from a 6 percent overall decline at Borgata Hotel Casino & Spa to a 25 percent plunge at Trump Plaza Hotel and Casino.
Tony Rodio, chief executive officer of Tropicana Casino and Resort, said he was more hopeful heading into 2012, but Sandy simply wiped out too much business to have a positive year.
“As 2011 came to a close, I remember saying that I was glad that year was over. Who knew that 2012 would have a bigger share of disasters than 2011?” Rodio said, alluding to a three-day casino shutdown in August 2011 caused by Hurricane Irene.
The industry’s revenue troubles continued in 2012 despite the opening last April of Revel, the $2.4 billion luxury megaresort. Revel, off to a disappointing start, continued to lag near the bottom of the pack in gambling revenue in December, grossing just $9.9 million.
Only Trump Plaza and Resorts Casino Hotel had lower revenue than Revel for the month. Trump Plaza was last at just under $6 million.
Revel issued a statement expressing confidence that its fortunes will be boosted this year by big-name entertainment, improvements in customer service, more dining options and a series of upgrades to the casino floor.
“We have an exciting year planned and we are confident that our guests will enjoy the positive changes taking place to make the Revel experience better than ever before,” said Kevin DeSanctis, Revel’s chief executive.
Revel said its emphasis on headliner entertainment will continue in the new year, including a Feb. 1 concert by singer-songwriter Don Henley of Eagles fame. The Eagles, pop songstress Beyonce, rock legends Aerosmith and hip-hop star Kanye West highlighted Revel’s concert series last year in the casino’s 5,000-seat Ovation Hall.
Along with DeSanctis, Pohlman and Rodio also believe that 2013 should generate better results for the casino industry. Pohlman cited new projects coming into the market, such as the $35 million Margaritaville-themed restaurant, bar and casino expansion at Resorts.
Rodio said the city’s post-Sandy results, though down, have not been as bad as the “very dire predictions” from Wall Street analysts. He argued that an 8 percent decline in December’s slots revenue — compared to a 10 percent drop at the table games — was an encouraging sign heading into the new year.
“There’s some positives as we go into 2013,” Rodio said. “I’m eager to see the market get back to the positive signs before Sandy, when we were moving the needle ahead with nongaming revenue. As we move into spring and summer, I think we’ll see some of the positive signs returning again.”
One casino analyst, Andrew Zarnett, of Deutsche Bank, is predicting further declines for 2013. He said consumers will cut back their spending on gambling trips in response to higher payroll and health-care taxes.
Zarnett also believes that many homeowners affected by Hurricane Sandy have spent their savings repairing their property and probably do not have money left over for casino gambling.
“Longer term, it is possible that an economic recovery from job creation from construction with Sandy-related repairs may help the Atlantic City market,” Zarnett added in an investment note.
Contact Donald Wittkowski: