Atlantic City

Hard Rock Hotel & Casino Atlantic City, left, and Ocean Casino Resort, right, opened June 27, 2018.

ATLANTIC CITY — As the Boardwalk’s two newest casinos prepare to celebrate one-year anniversaries later this week, the impact those properties have had on the Atlantic City market has started to take shape.

Prior to the June 27, 2018, openings of Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort, experts and executives questioned, both publicly and privately, whether the city could sustain nine casinos after a decade of declining revenues and the closing of five gambling halls in a two-year span.

To date, the results have been mixed.

Total gaming revenue for the entire market has increased for 12 consecutive months, but some of that growth has come at the expense of the existing operators. Increased revenue from internet gaming and sports betting have helped offset loses for a handful of properties.

The infusion of additional gaming options to a market that had been relatively flat for two years was bound to impact the other properties, industry experts say.

“Obviously, if you keep adding casinos, you’re going to diminish the overall performance of the existing ones,” said Brian McGill, managing director and senior research analyst for Telsey Advisory Group, while speaking at a recent gaming conference in Atlantic City.

Across the entire Atlantic City market, total gaming revenue has increased each month since June 2018. With the addition of Hard Rock and Ocean, as well as legalized sports betting, the market increased total gaming revenue by 7.5% in 2018 and more than 21% through the first five months of 2019.

Since June of last year through May of this year, Hard Rock has reported nearly $288.5 million in total gaming revenue. Over the same period, Ocean has reported more than $181.6 million, according to data from the state Division of Gaming Enforcement.

Both Hard Rock and Ocean generate less revenue from online gaming than every other operator in the market, which can be attributed to their recent arrival. Additionally, both properties began casino hotel operations last year without customer databases to build on.

Joe Lupo, president of Hard Rock Atlantic City, noted his property’s table game revenue was second in the market in May and fourth in slot revenue, which he deemed a “home run.”

“Our goal wasn’t to make money for 10 months,” Lupo said. “Our goal was to make money the next 10 years. We’re here for the long run.”

Ocean went through an ownership change at the end of last year, and the new operators shifted the property’s focus to concentrate more on the casino itself, said Mike Donovan, chief marketing officer and vice president.

“We’ve corrected a lot of the core, fundamental issues, and we’ve increased business to the property at the same time,” he said. “I think ownership is happy with the change that we’ve been able to make in a very short period of time. I think that we’ve largely eliminated the losses associated with the property.”

The change in philosophy is paying dividends. Donovan said May’s slot revenues of nearly $13.5 million were the highest in the property’s history. He also said June’s total gaming revenue figures, which include tables, slots, sports betting and online gaming, would set a property record.

“As long as we focus on having a successful casino, the property as a whole will be successful and we’ll be here for a long time,” Donovan said.

Gross operating profits, a widely accepted measure of profitability in the Atlantic City casino industry, have been in the red for the two properties since they opened. Hard Rock reported a loss in gross operating profits of more than $9 million in 2018 and $6.1 million in the first three months of 2019. Ocean reported even larger loses of $17.87 million in 2018 and $10.3 million in the first quarter of this year.

Given the financial investment required to open a casino, including attracting new players, hiring and training staff, purchasing equipment and capital improvements, coupled with the challenges of entering the ultra-competitive Atlantic City market, it is not an anomaly that neither has reported an overall gross operating profit.

“Going through the winter, after only (being) open a few months, if somebody had an expectation of us making a lot of profitability, then that person really doesn’t know the market or understand opening a casino in Atlantic City,” Lupo said.

“We intend to be profitable moving forward,” Donovan said. “We don’t take anything for granted. We know how hard it is to build a property from scratch and how hard it is to get players to change their habits of going to the other places and get them to come to your property.”

The dual openings caused the existing properties to ramp up promotional expenses and capital investments, which put a strain on their bottom lines.

“Since the two new properties opened in June of last year, there’s been an unprecedented capacity added to the market,” said Mark Giannantonio, president and CEO of Resorts Casino Hotel, during the recent East Coast Gaming Congress. “But it’s very predictable, and it’s very typical of the Atlantic City market to try and defend your market share.”

Bob Ambrose, an adjunct professor of casino management at Fairleigh Dickinson University, said the two properties have created a more competitive market balance in both gaming and nongaming amenities.

“Their investments have helped to infuse more confidence in the entire Atlantic City market,” Ambrose said. “This is positive news which helps to create investor interest and partnerships.”

Overall, the addition of Hard Rock and Ocean has been a net positive for Atlantic City, said Matt Doherty, executive director of the Casino Reinvestment Development Authority, during the ECGC.

“It’s nice to have real diversity (in the market),” he said.

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