When you don’t have a single dollar coming in from the floors of nine casinos over three months, the results are bound to be bad. And bad they were during the second quarter in Atlantic City. Gross operating profits in the city’s casino sector declined a staggering 170.4 percent year on year, for a loss of $112 million.
The bright spots came courtesy of online gaming, and to a lesser degree, sports betting, though the latter fell too when major competition was shelved.
Online gaming revenue propelled Golden Nugget to a net profit of $3.1 million for the second quarter, the only casino to do so.
“The profit reflects the fact that Golden Nugget is the number one online gaming operator in Atlantic City with the dominant market share,” said Robert Heller, CEO of Spectrum Gaming Capital. “Since they have a relatively small casino, the success of the online element offset the Covid-induced weakness in their smaller physical facility.”
Golden Nugget also operates with efficiency, said Michael Busler, professor of finance at New Jersey’s Stockton University. “The keys are to reduce operating costs as much as possible and then seek additional revenue sources outside of traditional in-person gambling,” he told GGB News.
In other relatively good news, the second quarter will likely be the only one earning such a poor grade. Casinos reopened beginning July 2, and while they faced limited capacity, no smoking, no in-restaurant dining and no entertainment, they still brought in revenue from casino play.
“That means, at best, a small increase in online revenue for the third quarter,” Busler said. “At worst, they could still have losses in the quarter, and the losses will continue into the fourth quarter, perhaps putting one or two casinos in financial distress.”
At the same time, online gaming will continue to add to the bottom line, as will sports betting, with a full roster of traditional sports back in action.
“It is no surprise that digital gaming and digital sports betting functioned particularly well in a pandemic,” said Michael Pollock, Spectrum Gaming managing director. “It should also be no surprise that those verticals will continue to grow in the post-pandemic world.”
Players who discovered online gambling during a period of quarantine will continue to play online, Pollock said. And gamblers who may not have willingly chosen an online option may now be accustomed to it, Busler said. “But I don’t expect online gaming to grow quickly, because now that the casinos are at least partially opened, gamblers may return to the casino and likely gamble less online. I think most gamblers prefer physically go to a casino”—especially if the restaurants, showrooms and spas reopen.
Moving forward, according to Pollock, “the continued growth of digital wagering will be based more on convenience rather than on a dearth of available options, which has been the case in recent months. The growth may slow, but will not disappear. The business model for online gaming pre-pandemic remains in place.”
And the resort will recover, he believes. “The precise timing depends on the timing of the pandemic’s demise.”
Busler agreed that the timing of the recovery is hard to nail down. New Jersey Governor Phil Murphy has lumped South Jersey with North Jersey, despite a geographic disparity in Covid-19 infection rates. “The recovery will depend on how quickly the casinos can operate fully,” Busler said. “Based on the governor’s past actions, I don’t anticipate a return to full operation until December or January. By that time, the losses for the industry will be substantial.”
But not insurmountable, Pollock added. “Atlantic City is comprised of some of the best operators in the world, including Hard Rock, MGM, Golden Nugget, Caesars/Eldorado and now Twin River, all of whom will develop effective marketing and operational strategies in the post-pandemic world.”
A combination of low taxes, a central location in the eastern U.S./mid-Atlantic region and an established tourism/entertainment infrastructure will also insure Atlantic City won’t fade away, though it will rebound slowly.
Busler said the city’s casinos will probably be profitable next year. “But the profits will be below 2019, which was their best year in more than a decade.
“By 2022, they should have fully recovered.”