Atlantic City operating profits for 2019 rose almost six percent over 2018. And New Jersey welcomed 116.2 million visitors last year, up almost five percent.
“Visitor spending hit a record of $46.4 billion, a 3.8 percent increase over 2018,” said Jeffrey Vasser, executive director of the New Jersey Division of Travel and Tourism.
Part of the spending increase resulted from the first full year of operation in 2019 of the Hard Rock Hotel & Casino Atlantic City and the Ocean Casino Resort.
”At its peak, Atlantic City accounted for a third of all of New Jersey visitors before dropping to about 15 percent five years ago,” Vasser said. “In 2019, area rebounded to 20 percent and it had the strongest spending growth in 2019 vs. 2018 with an increase of 5.3 percent.”
So much for the really good news. Now for the not-as-good news.
For the casinos that were fully operational in 2018, only Borgata and Golden Nugget had an increase in operating profit last year. Profit for Borgata rose 1.5 percent to $209.5 million and the Golden Nugget posted a gain of almost 5 percent to nearly $47 million.
Hard Rock swung from a $9 million operating loss in the second half of 2018 to an operating profit of $38.5 million in all of 2019. In the same period, Ocean went from an operating loss of nearly $21 million to an operating profit of $6.7 million.
The increase among the four properties came somewhat at the expense of the other five casinos, said Professor of Finance Michael Busler, finance program coordinator at Stockton University.
“In other words, the hope was that when Hard Rock and Ocean opened, they would be able to expand the market. Instead, the new casinos took some business away from existing casinos, although they did expand the market some. The same is true with revenue figures,” Busler said.
This being 2020, the year dominated by the coronavirus pandemic, bad news rules the roost. Much of the country shut down in mid-March and remains shuttered, including New Jersey and in particular, Atlantic City.
Tourism Economics has modeled the expected downturn in 2020. “Their projection is that New Jersey will be down about 25 percent in visitation to 88 million visitor trips,” Vasser said.
That remains to be seen. Let’s look at April, the first full month of closures and sports suspensions.
According to the New Jersey Division of Gaming Enforcement, April’s handle for sports betting declined 82.6 percent from $313.7 million in April 2019, and fell 70 percent from $181.9 million in March. Without the coronavirus pandemic closures, New Jersey sportsbooks would have generated some $500 million in bets in April, PlayNJ.com estimates.
New Jersey’s handle yielded $2.6 million in gross revenue, down 87.7 percent from $21.2 million in April 2019 and 80.3 percent from $13.2 million in March 2020.
“The picture for the industry is not pretty, and that will continue until sports leagues figure out a way to reopen,” said Dustin Gouker, lead analyst for PlayNJ.com.
The silver lining is that revenue at online casinos and poker rooms skyrocketed, reaching a record $80 million, up 118.6 percent and topping the $64.8 million mark set last month.
The jump in revenue from online casinos and poker is welcome, but there is no way yet for it to fully make up for the revenue lost by Atlantic City’s casinos and sportsbooks, Gouker said.
“April’s results prove that the gambling public is looking for a substitute while the casinos are closed. However, just like take-out for fine dining restaurants, I think everyone is looking forward to getting back to the full experience,” said Jane Bokunewicz, coordinator of the Lloyd D. Levenson Institute for Gaming, Hospitality and Tourism at Stockton University.
Such a dramatic shift to digital gambling could permanently alter the market, even after land-based casinos re-open, said Eric Ramsey, also an analyst for PlayNJ.com. “The longer the current closures go on the higher chance there is for a more permanent shift in bettors’ preferences for digital gaming.”
Poker, which almost tripled February’s revenue, posted a record $5.15 million in April. “Just three months ago it looked like online poker may all but disappear, now it is breaking revenue records that have stood for six or seven years,” Ramsey said. “That shows just how much the market has changed in such a short time.”
The question on everybody’s mind is what will the ensuing months bring.
In Atlantic City—and New Jersey for that matter—the majority of revenue and profit is earned from Memorial to Labor Day, with some being earned in the shoulder seasons Easter through Memorial day and then Labor Day until late Fall, Busler said.
“Already all revenue has been lost from Easter to Memorial Day. Assuming the casinos re-open by June 1, they will operate on a limited basis because the Governor will require social distancing. At best, they can return to normal operations in July. Their revenue for 2020 will be 30 percent or more below 2019. Losses will be large and difficult to predict at this point. At worst at least one casino could be forced out of business,” he said.
The rest of the Jersey Shore will fare a little better. On May 14, Governor Phil Murphy signed an executive order permitting beaches, boardwalks, lakes and lakeshores to open May 22 with social distancing measures and other restrictions in place. Some Jersey Shore communities planned to open even sooner.
“The announcement is a shot in the arm for our shore communities,” said Cape May County Freeholder and Mayor of Sea Isle City, Leonard Desiderio.
In the meantime, casinos stand to benefit from a pair of bills introduced in the legislature designed to help them survive the coronavirus outbreak, according to the Associated Press. The measures would temporarily excuse casinos from paying some taxes and fees and by giving them three years to repay loans before interest and penalties kick in.
Tax breaks would have to be used to rehire laid off casino workers and new applicants, attract customers to visit casinos, or promote events that would draw visitors to Atlantic City.
Tourism Economics predicts a recovery in New Jersey to 110 million visitors in 2021.
“New Jersey is resilient, and we are optimistic that despite the impact of Covid-19, our state will continue to thrive once travel resumes.” Vasser said.
