Casino revenue and profits will plunge in the months ahead amid the lingering impacts of Hurricane Sandy on the Atlantic City gambling market, according to a report Tuesday by a Wall Street credit ratings firm.
Moody’s Investors Service predicts casino revenues will decline by 25 percent in both the fourth quarter of 2012 and the first quarter of 2013 and that profits may fall by as much as 50 percent during the same period.
“Hurricane Sandy’s impact on the gaming, lodging and cruise line industries is almost entirely centered on the already ailing Atlantic City market, where casinos were closed for several days after the storm,” Moody’s said.
Some of the casino companies whose holdings are concentrated in Atlantic City could be particularly vulnerable to the hurricane’s aftermath because they lack the geographic diversity to weather the storm, Moody’s stated.
Atlantic City’s 12 casinos are struggling to ramp up to normal business levels after closing last week as the hurricane threatened and then slammed into the coast. Most of them reopened on Friday after a five-day shutdown, but Revel waited until Saturday to resume operations and the Atlantic Club Casino Hotel was closed until Monday.
Tony Rodio, president of the Casino Association of New Jersey, an industry trade group, said he is hopeful that Atlantic City will fully recover by New Year’s Eve. Unlike Atlantic City’s relatively quick comeback from a three-day casino shutdown in August 2011 for Hurricane Irene, this time there is far more devastation, he noted.
“Obviously, the hurricane is going to have a dramatic impact on our feeder markets for a long time,” said Rodio, who also serves as chief executive officer of Tropicana Casino and Resort.
Rodio, however, doubted that the financial hit will be as severe as Moody’s is predicting. He argued that it is simply too early to say with any certainty how seriously revenue and profits will be hurt.
“It seems to be too dire a prediction for me,” Rodio said of the Moody’s report. “But keep in mind there are a lot of communities and people who really were hit hard.”
John Kempf, an analyst for RBC Capital Markets, said some casino losses could be offset by insurance coverage. Casinos usually carry business interruption insurance, but negotiations with insurance carriers can be lengthy before claims are paid, he added.
“We believe the larger impact will be the lost visitation by customers in feeder markets that have been significantly damaged by this storm,” Kempf wrote in a note to investors.
New York and parts of North Jersey, two key feeder markets for Atlantic City casino customers, were among the storm-ravaged areas.
Other casino markets will not suffer nearly as much as Atlantic City, Moody’s said. Casino companies in metropolitan New York, eastern Pennsylvania and Maryland benefit from their location in stronger markets and also have enough geographic diversity to withstand a short-term blow to their profits, Moody’s concluded.
Moody’s also believes the Connecticut casinos could see some short-term benefits from the hurricane. Connecticut’s hotel occupancy should rise as long as access to the New York and Atlantic City markets is limited by storm damage, Moody’s said.
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