Eldorado Resorts is now in control of Tropicana Atlantic City, and the casino’s new ownership made that very apparent within its first 24 hours.
Eldorado, Tropicana AC, and NJ online casinos
Though months in the making, dating back to April, Eldorado closed its transaction of Tropicana Entertainment on Monday. At the time of the announcement, Eldorado Chairman and CEO Gary Carno made what seemed like an innocuous statement. Though now it appears ominous.
“We intend to reduce the initial purchase price multiple of the Tropicana transaction as we implement a range of operating disciplines designed to enhance margins by further improving customer service and the customer experience while focusing on promotion and other spending in all areas of the newly-acquired properties.”
Carno closed his thought with hindsight-irony:
“We look forward to welcoming Tropicana’s team members to the Eldorado Resorts family.”
Sources told OPR these personnel decisions indicate that the new owner has no interest or confidence in the Tropicana online casino operation.
What happens now with Tropicana?
The online casinos under the Tropicana licenses regularly hovered around $3.5 million each month since 2016.
As such, while its future appears murky with these firings, it would seem the NJ online casino should remain. This would be even more likely considering its standing as a strong revenue generator. Perhaps Gamesys, which operates the Trop’s platform, could run the site without an in-house staff.
As for the reasoning behind this move, as Carno hinted at in his statement above, cutting this staff could be part of the “range of operating disciplines designed to enhance margins.”
Basically, less is more.
Bucking the rumors
Since the beginning of Eldorado’s acquisition process, company higher-ups lauded the opportunity to cash in with NJ online gambling and, potentially, sports betting.
In Monday’s press release announcing the finalization of Eldorado’s transaction, Carno essentially said as much:
“Our acquisition of Tropicana marks a continuation of Eldorado’s successful history of rapid growth through strategic, accretive acquisitions. Through this combination, we have significantly expanded the scale of our gaming operations, further diversified our geographic reach into new markets — some of which have already adopted sports wagering legislation — and minimized market-specific risk.”
Many in the industry assumed Eldorado, particularly once in the Garden State, would embrace and encourage the online casino industry of its new Atlantic City casino.
Obviously, this sweeping range of firings says otherwise. Or at least leads outsiders to shake their heads and wonder what happens now.
But NJ sports betting is still alive?
In early September, Eldorado expanded its partnership with British bookmaker William Hill. The next day, as Eldorado’s acquisition of the AC property hit the home stretch, Tropicana AC officially teamed with William Hill US.
At the time, Tropicana general manager Steve Callendar alluded to a future sportsbook at the AC casino.
“A brand new venue is being created to host sports betting in the North Tower Casino, with kiosks located throughout the property. … We are excited to share more details about Tropicana Atlantic City’s sportsbook in the coming weeks.”
If we continue to use hindsight to infer from Eldorado statements made Monday, one by company president and CFO Tom Reeg makes it seem like regulated wagering could still be on the way to the Trop.
“Eldorado enters … new gaming jurisdictions and adds financial and geographic diversity to our operating base. We have identified $40 million of synergies that we expect to realize over the next year. We believe the financing structure for the transaction … allows us to maintain financial flexibility for leverage reduction and continued transactional growth as we continue to own the majority of the underlying real estate across our remaining property portfolio.”
Perhaps Eldorado is banking on sports betting to make up for potential lost revenue in the online casino market. After all, the NJ sports betting industry is booming, with $9.2 million in revenue reported in August.
Tropicana is one of three AC casinos without a sportsbook, while six in the area feature retail locations.