ATLANTIC CITY — The state of the resort’s casino industry is healthy, experts say, despite two seemingly contradictory reports released last week from state regulators.
These reports showed monthly gaming revenue continued to increase significantly while annual gross operating profits declined.
However, those same experts are expressing cautious optimism for what the future of the industry may hold. Competition between the resort’s nine casinos properties has led to increased spending on the amenities, such as sports books and increased hires, as a way to attract people to their property, experts said.
Anthony Marino, a local analyst who has been studying the market for several decades, said Atlantic City is healthy, for the moment.
“But, the numbers indicate it will be increasingly challenged by fierce internal competition and from the increasing competition that will be more and more apparent from (neighboring gaming jurisdictions),” he said.
In addition to higher gaming revenue, the resort’s casinos also reported growth in areas of hotel occupancy, average room rates, third-party business sales, food and beverage, entertainment and taxes collected in 2018.
But the increased expenses required to compete in an expanded market resulted in an overall decrease of industry profitability.
“Atlantic City is a complex and multifaceted destination with countless variables, most pointing toward overall growth and positive change,” said Rummy Pandit, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University. “2019 revenues and (gross operating profit) will be instrumental in providing a clearer understanding of trajectory and success for the destination.”
The introduction of two new properties — Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort — last summer contributed to expected growth in total gaming revenue in March, as it has done every month since June.
At the same time, the competition among the resort’s nine properties to attract customers chipped away at the industry’s bottom line.
According to the monthly report released by the state Division of Gaming Enforcement, total gaming revenue was up 25.3% in March compared with the same time last year. Gross operating profit, widely considered a measure of profitability for the industry, was down 15.4% for 2018 compared with the prior year.
Marino said the apparent contradiction actually makes sense when the entirety of the market is considered.
Gaming revenue should be up, he said, because the monthly figures are presently comparing a market with nine casinos and sports betting to a time last year when only seven properties were open sans the additional gaming amenity.
The expectation is that the trend will continue until July, when apples-to-apples comparisons can be made.
Meanwhile, the supply of everything from casino games to restaurants to hotel rooms all increased when Hard Rock and Ocean opened. But the demand “didn’t increase nearly enough to compensate for the increase in supply,” Marino said.
“Consequently, profits were squeezed as the two new casinos tried to establish themselves by spending a lot of money on marketing and giveaways, while many of the seven preexisting casinos did the same thing,” he said.
Bob Ambrose, an industry consultant and adjunct professor of casino management at Fairleigh Dickinson University, said there are more positive signs than not nearly one year into an expanded Atlantic City gaming market.
“We are showing some stabilization and consistency in the growth,” he said. “It’s not going to change overnight. ... I’d rather see slow, steady growth like we’ve had this past year than spiking up and down, because that shows an unstable market.”