On the surface, Atlantic City casinos appear to be doing very well in 2021.
Casino executives are publicly expressing optimism at every opportunity and encouraging guests to return. Double-digit growth in first-quarter profits and a new monthly gambling revenue record lend credibility to the notion that Atlantic City casinos are winning big.
Expect similar results when July revenue and second-quarter industry profit reports are released later this month.
But take a closer look.
Labor levels and costs, promotional spending, and general operating expenses are all lower than two years ago. The amount of money being gambled, average customer spend per visit, non-casino revenue, and the number of occupied hotel rooms are all down.
So, why is there an unchallenged perception that Atlantic City casinos are performing as well as — or better than — they were before the pandemic?
Atlantic City casinos misrepresented
The answer, according to gambling industry experts, is nuanced.
In short, it can be summed up this way: The way Atlantic City casino data is presented and analyzed has not kept pace with how quickly and dramatically the market has changed.
The result is a misrepresentation of what is actually happening.
“Most media outlets continue to emphasize the positive Atlantic City casino monthly gross gaming revenue numbers while glossing over or downright ignoring the negative implications of other data,” said Anthony Marino, an Atlantic City analyst and retired South Jersey Transportation Authority executive.
Online, sports success overshadows land-based stumbles
Dan Heneghan, a longtime casino reporter for The Press of Atlantic City and retired spokesman for the NJ Casino Control Commission, said AC operators are still facing some serious financial challenges due to the coronavirus’ impact despite rhetoric to the contrary.
“I don’t think (Atlantic City) casinos are doing as well as they’re trying to make us believe,” said Heneghan, now a gambling industry consultant. “And I think that the success of online gaming and sports betting clouds what’s really going on, particularly with the brick and mortar properties.”
Less money gambled + fewer visitors = declining casino revenue
Two years ago, land-based table games and slot machines accounted for 83% of Atlantic City’s total gambling revenue. In 2021, that figure is down to 59%.
More to the point, land-based gambling revenue is down 12.1% citywide this year compared to 2019. The amount of money gambled is down $1.735 billion, or 16.5%, from two years ago
“That suggests that actual visitor volume in the resort, although certainly much larger than last year during the COVID shutdown, was still less than (in) 2019 through the spring and early summer of this year,” Marino noted.
What’s that saying about money? Easy come, easy go
Meanwhile, year-to-date online gambling (+191.6%) and sports betting revenues (+234.5%) continue to grow. Those triple-digit increases pushed total gambling revenue up 23.7% through June.
Sounds good, right?
Well, here’s the kicker: AC casinos are not keeping the bulk of online or sports betting revenue. Third-party operators who use Atlantic City casino licenses to offer online gambling or sports betting in New Jersey collect most of it.
Those devilish details
The financial arrangements between AC casinos and third-party gaming companies is proprietary information.
So, state gaming regulators assign all of the monthly reported revenue to the casino licensees regardless of how much actually goes to AC operators.
“The devil is in the details,” said Robert Ambrose, a former AC casino executive and current hospitality/casino management educator. “(Those are) all variables that go into the equation … and it’s a whole different ball game.”
Let’s use Resorts Atlantic City and Resorts Digital (its online gambling arm) as an example. Total gross gaming revenue year to date stands at $74.8 million. However, with Resorts Digital, just under $200 million. No doubt it’s a solid number.
Remember, DraftKings, Fox Bet, and Poker Stars are among the brands each getting a cut of the Resorts Digital pie.
The times, they are a-changing
Jane Bokunewicz, director of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University, said, “It is important to realize that the gaming market is changing,” when looking at the industry’s overall health in 2021.
“Revenue share across different gaming products (slots, table games, internet, sports) has substantially changed, and not just in the past year,” she told PlayNJ after June’s revenue numbers were released. “Brick and mortar casino gaming revenue may no longer be as strong an indicator of a property’s performance as it once was.”
‘Mixed messages’ and ‘misconceptions’
Brick-and-mortar gambling revenue from seven of the nine Atlantic City casinos has been down for more than three years.
The addition of Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort in June 2018 cannibalized market share from the existing operators.
Combined with the arrival of sports betting in 2018 and the explosive growth of online gambling in 2020, there are “misconceptions” and “mixed messages” about Atlantic City casinos, said Joe Lupo, president of Hard Rock AC.
“That’s where I struggle because I want all of Atlantic City to do better,” Lupo recently told PlayNJ. “It would be much easier for us to do better if the numbers were increasing for everybody. And, they’re not yet.”
As for how well the AC market is doing, Lupo said very bluntly: “Things are not back to normal.”
Atlantic City casinos ‘smarter’ about costs
Labor is one area where things are clearly not back to anything resembling normal.
Across all nine properties, labor costs fell 5.5% from 2019 to 2021. With COVID restrictions in place for much of the last 15 months, casinos were forced to scale back services and products, leading to fewer workers.
“Every operator realized how to operate a lot more efficiently,” Golden Nugget Atlantic City General Manager and Senior Vice President Tom Pohlman told PlayNJ. “So, I don’t anticipate going back to 2019 levels when it comes to operating and expenses. We’ve learned to be smarter about what we do.”
“Certainly, labor is one of the biggest expense items for any casino hotel operation,” said Heneghan. “It is a very, very large number, and it’s also one of the few variables that casinos can control somewhat as business goes down.”
Tell my out-of-work neighbors how good Atlantic City casinos are doing
According to data from the NJ Division of Gaming Enforcement, there were 6,170 fewer jobs in June 2021 than June 2019.
However, the NJDGE notes the reported figures also include “a significant number of individuals on furlough due to COVID-19” and “employees on a leave of absence.”
The number of people working in Atlantic City casinos is the lowest total since only seven properties were in town. Hard Rock and Ocean didn’t open until late June 2018.
The flip side of that coin is casinos cannot find enough people to work right now, said Melonie Johnson, president and chief operating officer of Borgata Hotel Casino & Spa.
“We are struggling, like all businesses, with staffing,” she said. “Many of our employees have chosen not to come back to work.”
Johnson said that leads to issues where the property has, for example, plenty of room inventory to accommodate more guests but not enough workers to keep them clean.
What about those profit increases?
All of this, of course, is the result of COVID-19 and ensuing business restrictions.
But, the casinos appeared to rebound rather quickly coming out of 2020 and at the start of this year. The Atlantic City market reported an 11% increase in gross operating profit in the first quarter of 2021 over 2019.
However, a closer look says most of the market is still feeling the lingering effects of COVID.
In the first three months of 2019, Hard Rock and Ocean were in the red. Hard Rock and Ocean posted losses of $6.1 million and $10.3 million, respectively. Along with two online licensees, the nine casinos posted $87 million in GOP.
In 2021, gross operating profits were less than 2019 levels for the other seven casinos. Bally’s finished the quarter with a $6.5 million operating loss.
A third online licensee in 2021 led the iGaming results. The other two posted profit increases. The online licensees are largely responsible for the market’s GOP increase.
The industry reported $95.5 million in gross profits through the first three months of 2021.
Two years away from normal
Ultimately, Atlantic City casinos are still very much in the early stages of a post-pandemic recovery. And, it’s going to be some time before Atlantic City casinos are healthy.
“It’s going to be at least another 24 months before we see a leveling off and things start looking normal again,” Ambrose said.