Key facts to know:
- Atlantic City casinos’ gross operating profits, which are generally accepted as an accurate economic metric, were down for the second straight year in 2023
- Net revenue exceeded $3 billion for the third consecutive year and four of the last five years
- Labor costs for Atlantic City’s nine casinos increased more than 9% in 2023
- Business volumes are declining while inflationary costs are driving up prices for consumers and operators
- Atlantic City casinos’ gross operating profits, which are generally accepted as an accurate economic metric, were down for the second straight year in 2023
- Net revenue exceeded $3 billion for the third consecutive year and four of the last five years
- Labor costs for Atlantic City’s nine casinos increased more than 9% in 2023
- Business volumes are declining while inflationary costs are driving up prices for consumers and operators
For the second consecutive year, gross operating profits (GOP) for the Atlantic City casino industry are down while net revenues are up. It is an apparent contradiction that makes perfect sense when considering what has happened at the Jersey Shore over the last several years.
A combination of national economic headwinds, the depreciating perception of Atlantic City as a destination and the accelerated growth of online gambling in New Jersey have resulted in a shrinking regional gaming market.
Mix in a massive new contract with the industry’s largest labor union and the rising costs associated with inflation, and suddenly, the economic challenges facing Atlantic City casinos start to come into focus.
What’s worse is that there does not seem to be any relief in sight. On top of what economists are characterizing as “sticky inflation,” New York City’s incoming casino resorts and shifting customer behaviors toward digital gambling will further complicate matters in Atlantic City in the coming years.
Atlantic City casino profits, by the numbers
Data released last week by the NJ Division of Division Gaming Enforcement shows Atlantic City’s nine casinos and two online-only licensees collectively reported operating profits of nearly $780.7 million in 2023, a year-over-year decline of 4.1%. This comes on the heels of a 5% YoY drop in GOP in 2022.
For the final three months of 2023, year-over-year GOP generated by the 11 licensees declined by 3.6%.
Just looking at how the nine casinos in Atlantic City performed in 2023, year-over-year GOP dipped for six properties while the market’s collective operating profits declined by 1.6%. Bally’s Atlantic City ($11.1M, +689%), Borgata Hotel Casino & Spa ($226.1M, +1.3%) and Ocean Casino Resort ($117.3M, +21.8%) were the only properties to see GOP go up last year.
On the plus side, the casinos posted a 2.6% increase in GOP during the fourth quarter of 2023, breaking a streak of five consecutive quarters of brick-and-mortar profit losses.
Net revenues generated by Atlantic City casinos exceeded $3 billion for the third straight year. Last year’s net revenue ($3.23B) was up 2.6% over 2022 ($3.15B) for the nine AC casinos.
Remember: Revenue and profit are not interchangeable terms
But there should be no confusion about why revenue is increasing while profits are not.
Revenue is up because everything at AC casinos – from hotel room prices to meals and drinks to parking fees to table game minimums – costs more for the customer than pre-COVID. Naturally, that will result in an uptick in revenue, even if business volumes slightly decline (which they have).
To illustrate this point, just look at the average hotel room cost at an Atlantic City casino and the occupancy rate.
In 2022, the average night stay cost $177.89, while the annual occupancy rate for all nine hotels was 73.4%. Last year, the room cost increased to $180.67 while the occupancy rate fell to 73%.
Casinos have to pay for things, too
On the other hand, profits are down because casinos are subject to the laws of economics, too.
Third-party vendors that supply casinos with everything from food and beverage to linens and cleaning supplies are charging more. In-house costs, such as advertising/marketing and gambler comps, are also taking a bigger chunk of casino profits today.
However, the most significant expense for any employer is labor.
In summer 2022, AC casinos and UNITE HERE Local 54 agreed on a new contract. The union, representing nearly 10,000 AC casino workers, described the new terms as “the best contract we’ve ever had” after signing it in 2022.
According to DGE documents, AC casinos paid over $720.7 million to employees in 2023, up more than 9.4% from the $658.7 million paid out the year before.
Online gambling success does not equal AC casino wins
All of this is occurring while online gambling — whether it be digital casinos or mobile sportsbooks — continues to grow. And, based on data, 2024 is shaping up to be a pivotal year for NJ gambling.
Through February, online gambling revenue is responsible for a larger percentage of total gambling revenue — the sum of brick-and-mortar casino, online casino and sports betting — reported by Atlantic City casino licensees than all types of land-based gambling combined.
At this point, it’s probably important to note that a majority of revenue derived from online gambling does not make its way back to Atlantic City casinos.
Of the $872.2 million in total gaming revenue year-to-date, more than 52.3% ($456.2 million) was generated by NJ online casinos and online sportsbooks in NJ. By contrast, AC’s nine casinos have won roughly $413 million (47.7%) from in-person gamblers.
Retail sportsbooks inside the casinos have actually lost money (-$261,860) in 2024, a result largely due to favorable Super Bowl betting results for the public.
