The Price Is Right: Hotel Room Rates Driving Revenue At Atlantic City Casinos

Posted By Steve Ruddock on April 12, 2019 - Last Updated on April 11, 2019

The New Jersey Division of Gambling Enforcement released the Q4 2018 report on Monday, and there is plenty of data to sift through.

Unlike the monthly reports that focus on gross gaming revenue, the quarterly reports provide a more nuanced view of the Atlantic City casino market.

Revenue, operating profits, hotel occupancy, and room rates are just some of the data laid bare in the reporting. And because it provides a year-end synopsis, the fourth quarter report is the most anticipated.

Here’s what the latest report tells us about the Atlantic City casino market.

Revenue and profits go in opposite directions

When it comes to revenue and operating profits, 2018 was a mixed bag for Atlantic City casinos.

The market saw net revenue grow from $2.7 billion in 2017 to $2.9 billion in 2018. That’s an increase of 7.5%.

At the same time, gross operating profits decreased by 15.4% in 2018. AC casinos pocketed $688.6 million in gross operating profits in 2017, but only $582.6 million in 2018.

Neither of those results is overly surprising considering the market gained two new casinos — Hard Rock and Ocean Resort (now called Ocean Casino) — in late-June.

But not every casino experienced a decline:

It appears Hard Rock and Ocean (larger, swankier properties) are poaching some of Borgata’s higher-end customers.

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More hotel rooms cause occupancy rate to fall

Things were just like Jekyll and Hyde on the hotel side.

With the addition of the two new casinos, room inventory increased by 25%. The 15,000 rooms were the most in the market since 2014.

A lot of those rooms went unoccupied. Occupancy rates decreased by 6.2%. But, as seen in the chart below, 2017 was a severe outlier on that front, so 2018 occupancy is in line with other years.

What might be a little surprising is the lower occupancy rate didn’t have a negative effect on room rates.

Casinos benefit from higher room rates

The average price of a room at Atlantic City casinos ballooned from $108.35 to $137.03 year-over-year.

So what does that tell us?

On average, the number of occupied rooms in Atlantic City was at its highest level since 2014:

  • 2014: 14,303
  • 2015: 10,873
  • 2016: 11,038
  • 2017: 9,819
  • 2018: 12,234

And since the average room rate increased by more than 30%, the average daily haul from hotel rooms rose by 35% Y/Y.

  • 2014: $1.442 million
  • 2015: $1.117 million
  • 2016: $1.166 million
  • 2017: $1.063 million
  • 2018: $1.676 million
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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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