By Donald Wittkowski
Hurricane Sandy is expected to cost the Atlantic City casinos about $5 million per day in lost gambling revenue, a huge blow for an industry already mired in a six-year economic slump.
“It’s a very big hit on everybody,” said Tony Rodio, president of the Casino Association of New Jersey, an industry trade group.
Rodio, who also serves as chief executive officer of Tropicana Casino and Resort, estimated all 12 casinos will collectively lose about $4.5 million to $5 million per day in slot machine and table game revenue.
Rodio believes the casino shutdown may continue through Wednesday and could be even longer depending on the extent of the damage and how long it takes the industry to ramp up operations in the hurricane’s aftermath.
“I can’t imagine reopening (Tuesday),” he said. “I would say Wednesday is the best-case scenario.”
The New Jersey Division of Gaming Enforcement, which regulates the gambling industry, said Monday it is not yet clear when the shutdown will end. Regulators plan to meet with the Governor’s Office, the Atlantic City Police Department and other state and local officials in hopes of reopening the casinos “as soon as it is safe to do so,” division spokeswoman Lisa Spengler said.
“We understand the importance of getting the casinos operational as soon as possible,” she said.
Casinos have been closed since Sunday as part of Gov. Chris Christie’s mandatory evacuation order for the New Jersey coast. The shutdown is only the fourth 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 caused the casinos to temporarily close.
Hurricane Sandy adds to the industry’s difficulties, including six straight years of revenue declines caused by fierce competition from casinos in surrounding states and the fragile economy.
“Some of that revenue will never be made up,” Michael Pollock, a casino analyst and managing director of Spectrum Gaming Group, said of the financial losses from Hurricane Sandy.
Despite millions in lost revenue, Rodio said the storm’s financial consequences should be viewed as only a short-term setback, not in catastrophic terms.
“This is a one-time occurrence,” he said. “Wall Street won’t say, ‘Oh, my God.’ You have to take this one-time occurrence and put it in perspective. I don’t see this as having a long-term effect on the industry one way or another.”
Hurricane Irene, which caused the casinos to shut down for three days during the last weekend in August 2011, resulted in an estimated $40 million to $45 million loss in gambling revenue.
Irene wiped out a prime, moneymaking summer weekend. In contrast, Hurricane Sandy has disrupted weekday business during the normally slow off-season. For that reason, Sandy may not be nearly as bad as Irene from a financial standpoint, Rodio said.
However, Rodio cautioned that business for most of the week may be washed out, depending on how long it takes casinos to ramp back up to normal operations and for customers to trickle back into town.
“The same thing happened with Irene. We reopened on a Monday and I think it was Wednesday or Thursday before things began to return to normal,” Rodio said. “I think it would be a similar ramp-up now.”
Pollock said much will depend on the extent of damage. Moreover, some casinos may be more severely damaged than others and will not be able to recover as quickly, he noted.
“There probably will be significant damage, which could lengthen the time period to get back up to normal,” he said.
Pollock also said the casinos must hope there is a great deal of pent-up demand in the storm’s aftermath and that customers who do return will spend enough to largely make up for the losses.
“You hope you can recover in the sense that some of it may be recouped from people who are putting their trips to Atlantic City in abeyance,” he said. “Maybe there is a cabin fever phenomenon in which people are simply staying at home during the storm and will just put off their discretionary spending for a later day.”
While Atlantic City’s casinos remain closed down, most, if not all, of their rivals in Pennsylvania were expected to continue operating through the storm. Richard McGarvey, a spokesman for the Pennsylvania Gaming Control Board said that as of Monday afternoon none of the 11 Pennsylvania casinos had planned to close.
“Apparently, they’re going to stay open,” McGarvey said. “I suspect that at the very least, they will have to scale back.”
Rodio stressed that Atlantic City’s casino industry fully supported the governor’s shutdown order. He said the risks of staying open during the hurricane were simply too grave.
“The last thing anyone would want is for any of the customers or employees to be put in harm’s way,” he said.
For the time being, the casinos are being maintained and protected by small groups of employees as well as investigators from the Division of Gaming Enforcement, State Police troopers and Atlantic City police officers.