A Cloudy Q1 Revenue Report For AC Casinos Hides A Rainbow Of Positivity

Posted By Steve Ruddock on May 29, 2019

The topline numbers in the Q1 results don’t paint a rosy picture for the Atlantic City casino industry.

When compared to Q1 2018, gross operating profit was down nearly 30% industry-wide. All but one casino saw net revenue decline, and hotel occupancy was down over 5%.

But the dismal numbers are only half the story.

Those altogether bleak numbers start to look a bit brighter when you consider the market now boasts nine casinos, compared to the seven casino properties Atlantic City possessed in Q1 2018.

In fact, total casino revenue was up 17.6% year-over-year.

Atlantic City has a lot of moving pieces

Atlantic City’s ongoing metamorphosis is going to make any year-over-year comparison somewhat difficult.

In the past decade, the city’s gaming landscape has changed dramatically.

There’s been:

These varied, and largely concurrent, changes make it difficult to draw concrete conclusions about the health of the Atlantic City casino market, or where it’s trending.

The truth is, we simply don’t know yet.

Operating profits down; casinos still profitable

A perfect example of the market complexity can be seen in the Q1 operating profits.

Yes, operating profits were down in Q1 2019, but all of the established casinos did post a profit. That wasn’t a common occurrence before the market’s extreme contraction in 2014.

So, comparing Q1 2018 and 2019 tells a woeful tale, but adding in Q1 comps from 2013-2017 changes the narrative completely. It makes Q1 2019 look pretty good.

Furthermore, operating profits were expected to take a hit, as the market had to make room for two new casinos that opened in June 2018.

And there’s always the possibility that the market had over-corrected when it was reduced to just seven casinos. That would mean that the massive operating profits of 2018 were an anomaly.

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Occupancy rates vs. occupancy

Another example of data telling two different stories can be seen in hotel occupancy.

The total occupancy rate was down about 5%, but the number of occupied guest rooms rose by nearly 16%.

So, despite occupancy rates plunging, the city’s casinos had more guests. That doesn’t feel like a negative, even though occupancy rates were down significantly.

The reason is pretty simple: There’s more room inventory in Q1 2019 thanks to the opening of Hard Rock AC and Ocean Casino Resort in June 2018.

The two properties increased the number of available rooms at Atlantic City casinos by 28.6% compared to Q1 2018.

Q1 hotel occupancy rates atlantic city

What the numbers do tell us

The numbers are interesting and have some level of value.

For instance, it’s becoming apparent that certain casino properties are feeling the pinch of the new casinos more than others.

On the losing end is Harrah’s. The flagship Caesars property in AC has experienced the largest revenue decline in each of the last two quarters:

  • Q4 2018: -19.2%
  • Q1 2019: – 15.7%

At the same time, both of the new properties are hemorrhaging money. Hard Rock’s gross operating losses in Q4 2018 were $14.75 million. In Q1 2019, it lost $6.1 million.

Ocean Casino fared even worse. The property lost $19.3 million in Q4 2018 and $10.3 million in Q1 2019.

While it delves into speculation, it’s not a stretch to assume nine casinos is at least one too many, and at least one property is not long for the market.

And of course, New Jersey online gambling and sports betting continue to be a bright spot.

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Steve Ruddock

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.

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