The fourth quarter revenue report released earlier this month by the New Jersey Division of Gaming Enforcement shows both the benefits and challenges of the two new gaming properties that opened in 2018.
On one hand, Atlantic City casinos experienced a 13.7 percent ($709,327) increase in net revenue for the three months ended Dec. 31 and a 7.5 percent ($2,896,043) net revenue increase year-over-year. On the other hand, gross operating profits decreased year over year by 15.4 percent.
We should view increased revenue as a positive gain for the city, which prior to 2016 experienced a decade of year-over-year decline. Growth in lodging performance for casino hotels also provides compelling evidence of a positive trend for Atlantic City as a destination.
Despite the infusion of approximately 4,000 rooms into the market place, the occupancy rate has remained a strong 80.7 percent. Occupied room nights increased by 8.3 percent and average daily room rate increased from $108.35 to $137.03. An additional indication of market strength is that the REVPAR (revenue per available room) has gone from $94 in 2017 to $110 for 2018. While some of this may be attributed to the change in accounting methodology, it also speaks to market strength and resilience in the lodging sector.
The decrease in gross operating profit amid overall revenue increases can be attributed in part to increased competition both locally and regionally. This year’s increased competition necessitated greater investment in marketing and promotions to attract and retain casino clients. Additionally, a tightening labor market may also have contributed to general increases in operating expenses.
Gross operating profit measures the level of operational profitability of a business; it does not measure the degree of economic impact that business has on the region nor does it accurately reflect investment in future business development.
When considering the overall trajectory of Atlantic City as a destination, we must also take into account the following variables, each of which has shown growth in the 12 months ended Dec. 31. • Traffic through the Pleasantville Toll Plaza on the Atlantic City Expressway has increased by 4 percent year-over-year, according to the South Jersey Transportation Authority. • Collected casino parking fees increased 12.6 percent from the calendar year ended Dec. 31, 2017 ($19.8 million) to the calendar year ended Dec.31, 2018 ($22.3 million), according to the New Jersey Casino Control Commission. • Meet AC recorded its fourth year of consecutive growth in convention and meeting bookings. The 238 conventions booked in 2018 will fill 371,996 hotel rooms in the resort until 2022, according to the Meet AC 2018 Annual Report. • Atlantic County’s contribution to the state lodging fee, of which Atlantic City’s casinos represent a significant part, increased 8.78 percent year-over-year, according to data from the New Jersey Department of Treasury, Division of Taxation. • Atlantic City Casinos contributed $358.9 million in total gaming and Atlantic City taxes and fees in 2018, a 13.3 percent increase over 2017 ($316.8 million), according to the New Jersey Division of Gaming Enforcement’s Atlantic City Gaming Industry Summary of Gaming and Atlantic City Taxes and Fees.
Atlantic City is a complex and multifaceted destination with countless variables, most pointing toward overall growth and positive change. Revenues and gross operating profit in 2019 will be instrumental in providing a clearer understanding of the trajectory and success for the city and its casino hotels.
Rummy Pandit, of Galloway Township, is executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at Stockton University.