NJ Officials: Net Bets Shore Up Boardwalk’s Bottom Line

Atlantic City crowd beach

A new report from the New Jersey Division of Gaming Enforcement is shedding even more light on the benefits legal online gambling has brought to the state, and particularly to casino operators in Atlantic City.

According to the report’s three main findings, Atlantic City’s casinos saw an increase in occupancy, revenue, and gross profits in 2014 – which happened to be New Jersey’s first full year of offering regulated online gambling.

The report states:

  1. Atlantic City casino hotels’ occupancy rate increased 2.8 percentage points to 80.2%
  2. Atlantic City casino industry’s gross operating profit increased 44.7%
  3. Current operators’ (as defined) total revenue increased 4.7%

The report indicates what many analysts have long suspected – twelve casinos were simply too many for the Atlantic City market.

The closure of Atlantic Club, Showboat, Trump Plaza, and Revel throughout the course of 2014 allowed the remaining casinos to finally have the chance to succeed, and succeed many of them did, particularly the ones heavily involved in the NJ online casino market.

Yes, total gaming revenue declined, a not unexpected outcome with the loss 25% of the city’s casino operators in a single year. But the remaining casinos are in a much stronger position than they were one, two, or even three years ago, as evidenced by increased occupancy and revenue at these properties, and gross operating profits for the entire Atlantic City casino industry up over 44%.

iGaming was a big help to a number of operators

As noted on OnlinePokerReport.com, iGaming revenue in New Jersey represented 4.5% of the state’s total gaming revenue in 2014, and despite the closure of four casinos and a fifth in the midst of Chapter 11 bankruptcy restructuring, Atlantic City saw its slowest rate of gaming revenue decline since 2006.

Without online gambling, 2014 would have been the city’s worst year (in terms of percentage decline) since 2010.

Furthermore, without iGaming revenue, both Caesars and the Borgata would have posted gross gaming revenue declines from 2013 to 2014. With their online gaming revenue included, both properties saw GGR increase year-over-year.

Who benefited from legal NJ online gambling

Online gambling seems to be such a demarcation point that the DGE separated the results of casinos with online gambling from the casinos that are not involved in the state’s regulated online gambling industry in their year-end report.

Borgata saw gross profits increase over 30% year-over-year.

Golden Nugget posted a 143% YOY increase in gross profits.

Tropicana also saw gross profits increase by more than 100%, tallying a 125% increase.

Another interesting data point is Golden Nugget, Borgata, and Tropicana (the three casinos with the largest YOY gross profit increase) are also the top three casinos when it comes to the percentage of their GGR that is derived from online gambling.

Percentage of gross gaming revenue from online gaming:

  1. Tropicana 8.2%
  2. Borgata 6.9%
  3. Golden Nugget 6.3%

It would appear the casinos that have embraced online gaming as a new vertical are performing better than the casinos that haven’t.

No signs of cannibalization

Worries of brick and mortar casino cannibalization also seem unfounded, as occupancy increased industry wide, including at the major online gaming properties – Caesars, Borgata, Golden Nugget, and Tropicana:

Hotel2013 Occupancy2014 Occupancy
Borgata85.4%86.1%
Golden Nugget79.5%83.2%
Tropicana72.2%77.3%
Caesars/Harrah’s/Bally’s82.1%83.6%

Not everyone was helped by the rising tide

Despite the addition of iGaming, Caesars’ three remaining Atlantic City properties didn’t fare as well.

Bally’s AC saw a 32% decline YOY; Caesars AC saw profits drop 14%; while Harrah’s AC experienced a 4.6% YOY decline.

These declines were softened with the addition of online gambling, as 3.5% of Caesars Entertainment’s Atlantic City 2014 revenue came from online gambling.

Neither was the introduction of online gambling enough to salvage several struggling properties, as Trump Plaza and Trump Taj Mahal both filed for bankruptcy in 2014 (Trump Plaza shuttered its doors in September) despite offering online gambling.

Upsides

As the Trump properties can attest to, online gambling is not a miracle cure, but it is an exciting new vertical that helped the remaining Atlantic City casinos increase both revenue and profits in 2014.

Was online gambling revenue less than initially expected? Certainly.

Has online gambling helped Atlantic City and New Jersey? Certainly.

Image Chris Parypa Photography / Shutterstock.com

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Steve Ruddock

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Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.