While there were some hopes that the opening of two new casinos in Atlantic City in mid-2018 would “grow the pie” enough so that every property could win, the suspicions that cannibalization would rule the day have been proven correct.
The New Jersey Division of Gaming Enforcement’s second-quarter 2019 financial report released on Thursday produced more of the same, as industry revenues grew by 18.2% compared to the same quarter in 2018 — while gross operating profits declined by 6.8%.
This was the fourth and final quarterly report that reflects the late-June 2018 opening of Hard Rock casino — formerly the Trump Taj Mahal — and Ocean Casino Resort — the not-so-old Revel site.
Two new casinos battling for customers via aggressive marketing campaigns forces the holdover casinos to do the same.
The added revenues suggest that new blood has come to town, with some longtime customers perhaps coming more often given the added casino options.
But in the third quarter of 2018, revenues rose just 6.4% while profits declined by 9.3%.
In the fourth quarter, it was a 7.5% rise in revenues vs. a 15.4% slide in profits. And in the first quarter of 2019, it was an impressive 17.6% rise in revenues and a grim 29.6% decline in profits compared to early 2018.
The good news is that the next quarterly report will be more “apples to apples” — both relevant quarters being in the new, nine-casino era.
But details of the latest report make “good news” harder to swallow.
The only casino property to show an increase in quarterly profits in the April/May/June 2019 period was the mighty Borgata, up 4.9% to $55.4 mm — nearly one-third of the profits for the entire Atlantic City casino industry.
All other casinos had double-digit declines in profits compared to the seven-casino second quarter of 2018, ranging from 10.5% for Tropicana to a rough 40.7% drop for 41-year-old Resorts (which also finished last in profit total among the holdover casinos at $5.4 mm).
And Ocean Casino Resort, which is making a big effort to rebound, actually lost money in the second quarter (a modest $1.2 mm).
The six-month numbers show that not even Borgata has been able to post profits on par with the first half of 2018 — though a drop of a mere 3% in the face of new competition is impressive.
Harrah’s, though second to Borgata in first-half profits, also had the greatest drop at 34%.
Year-old Hard Rock’s first-half 2019 net revenues of $181.6 mm made it a (very) distant second place to Borgata, just a trace ahead of Harrah’s.
Two new casinos also brought more hotel rooms — nearly 3,400 more — and more options for consumers. The occupancy rate in the first half of 2019 was 77.1%, a decline of 4.3% from the first half of 2018.
The quarterly reports always list not only each property’s occupancy rate, but also the “average rate per occupied room.”
Golden Nugget has both the fewest rooms — 717 — and the lowest average price so far in 2019: $81.73 — yet had the lowest occupancy rate at 67.1%.
Resorts is second on both fronts, at 942 rooms and a rate of $92.97.
Borgata, king of the market since the day it opened in 2003, has the most rooms (2,767), the highest rate ($167.92), and an above-average 80.2% occupancy rate.