Tourism and leisure businesses have taken a hit in 2020 thanks to the coronavirus pandemic. And if businesses take a hit, so do tax revenues generated by these businesses.
The one segment of tourism not hit as hard surprisingly is gaming. Through October, taxes paid by casinos decreased $12.7 million or 5.5 percent over 2019 levels, according to the Press of Atlantic City. The decline should have been worse given the almost four month closure of casinos and the restrictions placed since July’s reopening.
The reason: online revenue.
“Internet gaming revenue more than doubled year-to-date as of October. Taxes on that revenue significantly helped to offset losses in the tax revenue from brick-and-mortar slots and table games,” said Jane Bokunewicz, coordinator of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University.
During the shutdown between March 16 and July 2, online gambling and sports betting continued and in fact increased as the only games in town. Plus taxes on internet gaming revenue are 15 percent compared to the 8 percent for brick-and-mortar casinos.
“For an industry looking at a year-to-date loss of nearly 23 percent of total gaming revenue due to pandemic-related challenges, an equal degree of decline might have been anticipated in the industry’s tax contributions,” Bokunewicz said.
Taxes from online casino gross revenue rose by more than $59 million through October over the same period in 2019. The $117 million in taxes generated represents around 54 percent of the year-to-date total of $217.4 million collected from gambling taxes. Online and mobile sports wagering revenue taxes also increased by more than $3.6 million.
Bokunewicz said when people return to brick-and-mortar casinos after restrictions end, it could be a boost for casinos and the state.
“Casinos would pay the lower gross revenue tax rate of 8 percent on slot and table revenue, but also benefit from additional spending by guests on nongaming amenities at their properties. The state would continue to benefit from the casino tax contributions on gaming plus other amenities (food and beverage, sales and room taxes), and also from the many jobs that are created by live table games, in-person wagering on slot machines and hotel operations,” she said.
Gaming revenue taxes go into the Casino Revenue Fund for programs that support seniors and the disabled. In 2019, the fund received $233 million from gaming taxes with an estimated $261.5 million for 2020, prior to the pandemic. The taxes derived from sports betting revenue are divided between the state General Fund and the Casino Revenue Fund.
In other Atlantic City news, in what seems like eons ago, a typical Saturday night in casinos often featured star power performances in showrooms, local bands jamming in clubs and this time of year, holiday parties. Restaurants were packed with diners. Festivities often heated up at 10 p.m.
These days, 10 p.m. marks the end of the night as clubs and bars shut down to help stem the surge of Covid-19 cases. Restaurants shift to take out only.
“It’s so discouraging,” said Joe Lupo, president of Hard Rock Hotel & Casino Atlantic City.
What was a 24-hour industry early in the year struggles to stay afloat by adhering to a series of protocols and through online gambling, according to the Philadelphia Inquirer.
The casino enforces masks, new outside air rotates into the property 10 times an hour, temperatures are checked on the way in, and masked dealers work behind plastic dividers.
In November Borgata laid off 73 workers and reduced the hours of 349 others after Governor Phil Murphy imposed a 10 p.m. to 5 a.m. prohibition. Its third-quarter gross operating profits dropped 97 percent from last year.
Hard Rock has stayed steady near the top of the pack, grossing $28.8 million in October, second to Borgata at $41.2 million.
“It’s going to be a long, slow winter,” Lupo said. “And there are going to be less people here and less people working.”
The pandemic economy has taken a severe toll on casino workers, especially cocktail servers and bartenders who depend on tips, said Bob McDevitt, president of Unite Here’s Local 54. Before the coronavirus pandemic, the union had 10,000 employed on the job. Now it’s 7,000.
All told, the nine casinos employed 22,000 people in October, down 17 percent from 2019.
McDevitt said the union had some 200 workers test positive for Covid-19, but “almost none of them we could trace back to work. It was almost always a family member, a gathering. The numbers in Atlantic City are far lower than you’d expect in a place where there’s a lot of people, eating and drinking going on,” he said.
In developments unrelated to Covid-19, add $1 million a year to the cost of doing business at Hard Rock. That’s the figure the property will shell out through 2032 as part of the settlement with two former tenants.
The agreement, reached in January, required the first installment of $1 million paid two months later. The remaining 12 payments are due annually beginning January 1 of each year, according to the Press of Atlantic City.
The tenants were not named in the casino’s financial filings and Hard Rock officials did not respond for confirmation. But when the resort opened in June 2018, the former Trump Taj Mahal Casino Resort included Robert’s Steakhouse and Scores Atlantic City gentlemen’s club, both operated by businessman Robert Gans. Both reopened with Hard Rock.
Earlier this year, both venues closed after being told their leases would not be renewed. The two companies had been involved in a lawsuit with Hard Rock that predated the casino’s reopening. The casino hotel did not believe it was legally required to honor a lease agreement from the former owner.
