Atlantic City casinos have a colorful history. There is no denying that the Boardwalk of today is very different then it was a few short years ago.
In the past year, there has been much talk about market saturation, mergers, and let’s not forget the Wire Act. The new decade brings with it several stories that have the ability to impact the New Jersey gambling market for years to come.
1. NJ online casinos will grow at retail’s expense
A familiar headline throughout 2019 touted a new online casino revenue record.
As it happens, through November (December’s revenue report has yet to be released), seven out of the 11 months were record-setting months.
Looking at both retail and online total casino revenue, online casinos generated year-over-year increases of over 50% in every month of 2019 except one, where it came in at 44%.
One of the primary reasons for such massive growth is the popularity of online sports betting in New Jersey. In a highly competitive market such as online casino gambling, the cross-selling of online gambling products has successfully kept customers playing.
Retail, on the other hand, only produced a year-over-year increase of over 10% in four months. Additionally, it saw growth in every month but one.
In 2020, mobile casino gambling in New Jersey will continue to grow, but it will do so at retail’s expense. That doesn’t mean brick-and-mortar casinos are dying breed. On the contrary, in fact.
Retail figures still eclipse online’s by a hefty margin. In November, the casino win on the Boardwalk equaled $223 million, and the internet gambling win was $49 million.
Land-based casinos will still be the bread and butter
Gamblers still like rolling the dice, pulling the handle, and hearing the dropping of coins — even when it is sometimes manufactured — and that is not likely to change.
Those same gamblers, however, are more likely to sign on and play online slots instead of drive when their time is limited, an online progressive jackpot, like Divine Fortune grows, or the weather is bad.
Now, some would argue the bottom line is the bottom line. Regardless of where the money comes from, the company still benefits.
While that is true, watch as New Jersey casinos pay more attention to their online casino portfolios, invest in more live dealer games, and create rewards based on virtual play.
Make no mistake about it; this is a good thing for both the casinos and the players.
Through November 2019, the New Jersey casino market brought in over $3 billion in gaming revenue for the year. It hadn’t done that since 2012 when Atlantic City had 12 casinos with no online presence or legal sports betting.
Look for more revenue records to be set in 2020 and for that $3 billion figure to come earlier in the year.
2. Revenue growth and the diversification of income
It is reasonable to expect online casino revenue to continue its growth trajectory into 2020.
Much of the attention, when it comes to the health of the Atlantic City economy, is and will be on gambling-related revenue.
But the true test to the economic strength of Atlantic City is nongaming revenue.
In the third quarter of 2019 (fourth-quarter results are forthcoming), 47% of the total revenue comes from nongaming activities. That is up 3.5% from the same period in 2018.
Atlantic City has long strived to be more like Las Vegas, Nevada. Nongaming revenue in Las Vegas represents 65% of its total revenue. And while Atlantic City is far from that mark, it is inching its way closer.
Expect to see more investment in growing the number of conventions, renovations, and attractions targeting millennials.
Not only will growing nongaming revenue put Atlantic City on a solid economic footing, but it will also help the city get out from under state control.
3. The saturation of the AC casino market
In November, a study by Rutgers University stated the northeast regional casino market has reached saturation. It also said that new casinos would hurt Atlantic City.
Market saturation has been a hot topic in AC for years. The voices on the subject are getting louder as Atlantic City successfully navigates itself out of a several-year slump that included the shuttering of casinos and declining visitation.
Part of the resurgence of the AC casino market was attributed to the opening of two new hotels:
The first half of 2019 resulted in seven Atlantic City casinos reporting declines. You can probably guess which two didn’t: Hard Rock and Ocean Casino.
Many point to the fact that the two new casinos are cannibalizing the revenue of existing casinos as to the reasons why approving new casinos is a bad idea.
It is highly unlikely a new casino would want to come into a saturated market. That is, unless, it has a distinct advantage or the company is already doing business in Atlantic City.
That is the case for Showboat Atlantic City.
Some think the company’s request to divide its property is a way to get around a land deed preventing casino operations. Rumors that Showboat wants to become the 10th AC casino on the Boardwalk are just that.
And don’t forget the Atlantic Club. It was recently sold but the intentions for the property are still unknown.
But it again brings the discussion of market saturation to the forefront. It will continue to be a hot topic in 2020, and the new decade may include a debate by legislators about limiting new casinos.
Late last year, we made a case for why the limiting of casinos in AC is a bad idea. Our take boils down to the fact that competition is good, and survival of the fittest mentality will benefit gamblers.
4. The Ceasars-Eldorado merger
Caesars Entertainment and Eldorado Resorts are planning to create the country’s largest gaming company through a merger that will likely be finalized in 2020.
Should federal and state regulators give the green light, Eldorado will acquire Caesars in a $17.3 billion deal. The result will give the new company, which will operate under the Caesars brand, access to 18 states with more than 60 properties.
It remains to be seen how the New Jersey Division of Gaming Enforcement will view this merger.
Additionally, one wonders what regulatory hoops the two companies will have to jump through to make it happen. Eldorado has already sold three properties before the announcement of the merger to avoid “competitive issues.”
It’s hard not to think about competitive issues when looking at the makeup of the Boardwalk. The new Caesars will operate four of the nine casinos and hold deed restrictions on three other hotels, including the Showboat and the Atlantic Club, that prevents casino gambling.
It is hard to mention limiting the number of casinos due to market saturation without realizing which company stands to benefit the most from that stance.
Additionally, a merger of this size can have an impact on employment and vendor contracts as it consolidates its operations to become more efficient.
There are many details to come as the merger heads toward the finish line. Even so, it looks like the new decade will spawn the first gambling market mega-merger.
5. The Wire Act: The gift that keeps giving
You can’t talk about the headlines we’re watching without talking about the Wire Act. The 2011 Department of Justice’s Office of Legal Counsel (OLC) opinion regarding the 1961 Wire Act limits its reach to sports betting.
Sports betting, especially online sports betting, will continue to roll out in states across the country. And when they do, they are bound by the restrictions of the Wire Act. It requires all financial aspects of sports betting to take place within each state.
However, in 2018, the OLC attempted to expand the Wire Act to include online casino gambling.
Well, that didn’t go over well.
Soon officials in several states, including New Jersey, issued statements condemning the new interpretation, and the matter soon found its way to court.
In June, the New Hampshire District Court confirmed that the Wire Act applies to sports betting and not to online gambling, as the DOJ asserted.
Well, that didn’t go over well, either.
The government appealed the court’s ruling, and 2020 will likely bring the next steps in this saga.
If online casino gaming is required to adhere to the restrictions set forth in the Wire Act, it could impact progressive jackpots, such as Divine Fortune and lottery games, such as the Powerball and Mega Millions.
Will 2020 be good to AC online casinos?
At this time next year, when we take a look back on 2020, we will note more positive events to the AC gambling market than negatives.
Revenue will have grown, mergers will have been completed, and the idea of limiting casinos will likely still be floating around.
There will be more marketing partnerships, bigger portfolios of online casino games, and more revenue records.
New Jersey will still be used as a model for legal sports betting and online casino gambling as more states come online.
At the end of the year, there will certainly be more discussion around how more competition in the region is impacting the market.
For now, though, the new decade looks promising for New Jersey, Atlantic City, and its casinos.