For the better part of the last two years, PlayNJ has been trying to bring balance to the faulty narrative that Atlantic City casinos are doing well financially.
Here’s the truth: The Atlantic City casino market is not healthy.
The industry’s most recent quarterly profit reports reinforce this fact and confirm what PlayNJ has been saying since 2021. While it’s true that inflation plays a part in the less-than-favorable 2023 numbers, the casinos’ financial woes go back further and are much deeper.
It is time to explain what is actually happening. Again.
Logic of AC casinos rarely makes sense
Understandably, it is counterintuitive for most people to grasp the concept that corporations reporting millions of dollars in annual profits are struggling.
But, just as some of us in the real world struggle to pay bills despite making a “good living,” casinos’ financials may look good on paper but, in actuality, there are plenty of red flags if you know what to look for.
We’ll share two pieces of wisdom that have been passed on to us during our years of reporting on the casino industry that may help explain the “how” and “why.”
Growth is casino business 101
The first is simply this: “If you’re not growing, you’re dying.”
This blunt assessment came from a universally respected casino boss, who has since found greener pastures. Growth is the only thing that really matters, this person said.
In the casino business, it is damn near impossible to be considered successful if tangible growth is not part of the equation.
For Atlantic City casinos, growth has been almost unattainable for the last several years.
The number of occupied hotel rooms (2,064,066 vs. 1,929,223) and the occupancy rate (77.1% vs. 69.8%) are down in 2023 compared to pre-pandemic levels. Despite fewer booked hotel rooms, the casinos are getting more for those rooms ($134.37 vs. $165.50) today than four years ago.
Gambling volumes, such as coin-in (money spent at slot machines) and table drop (money spent at casino table games) are both down. The most recent number of reported casino jobs is down more than 18% since the summer of 2019.
Those three green zeros on the wheel do not mean more money for you
In-person gambling revenue at AC casinos has been stagnant since the industry reopened following the pandemic-related closures in 2020. Only recently has the industry started to regain its footing here, posting single-digit percentage increases several times this year.
However, this is another topic where context matters. Gambling revenues are going up all over the US because of casinos rolling out games like triple-zero roulette, 6-to-5 blackjack and multi-denomination slots, all of which increase the house edge. Higher table minimums during off-peak times and days are also a contributing factor.
The games are worse for gamblers and better for the house, which doesn’t translate to any meaningful business improvement. It’s a sleight of hand that, on paper, makes the casinos’ financial picture look better than it actually is.
The monthly revenue figures are grossly misleading and lack context.
Revenue makes headlines, profit pays the bills
This segues perfectly into the second tidbit of gambling wisdom that rings in our heads every three months when quarterly profit numbers are released. A veteran AC casino executive told us years ago:
“Revenue is what you put on paper. Profit is what you take to the bank.”
Monthly revenue reports, especially in the gaming business, are an unreliable metric of financial health. Profits, on the other hand, get much closer to the truth.
Atlantic City casinos are profitable, in the strictest sense of the word. All nine of the city’s gambling parlors were in the black last quarter. However, the industry’s collective profits were down more than 20% for the three-month period compared to last year and down nearly 17% through the first half of the year compared to 2022.
For all but two casino operators profits are less so far in 2023 than they were in 2019. The only two AC casinos reporting a comparable increase are the properties that were barely making a dent in early 2019 because they had only recently opened their doors.
No tears are being shed for AC casinos
So, yes, Atlantic City casinos are still making money. Through July, land-based gambling has generated over $1.6 billion in revenue, just ahead of last year’s pace.
But the market is going the wrong way. It is shrinking.
It’s time to stop pretending otherwise.