The first full month of Atlantic City’s two new casinos has passed and the results are encouraging.
The addition of Hard Rock and Ocean casinos grew the market 10.13 percent in July to $272.321 million.
More important, the seven incumbent casinos saw just a 9.36 percent gaming revenue decline, which was less than the 10 to 15 percent that many are speculating.
Now, July is just one month, and not a typical month because it’s the peak of the beach resort’s summer season. Numbers will change.
We could find that Hard Rock and Ocean benefitted from people curious about the new properties and their numbers will decline, especially when cold weather sets in. For example, gaming revenues usually fall upwards of 25 percent from their July peak through their November through February trough. They sometimes drop more depending on severe winter weather. To illustrate, gaming revenues this January were $184 million, 31 percent below the previous July.
Or we could find that Hard Rock and Ocean ramp up over the next two years or so as they build player databases, though maybe by taking bigger bites out of their competitors.
For fun, let’s say July was representative. In the month, Tropicana lost business at an annualized rate of around $45 million, Borgata just over $60 million, and Caesars’ three properties about $85 million.
Those numbers would be of some significance to the individual operations—declines of 6 percent for Borgata, and roughly 10 percent for the Trop and Caesars.
But in the big scheme, such revenue declines would be small. They would represent just one-half of one percent for Borgata parent MGM Resorts, under 1 percent for Caesars companywide and under 2 percent for Eldorado after it closes on the purchase of Tropicana Entertainment.
Further, the declines themselves will be mitigated by the arrival of sports betting, say by 10 percent or more. Thus, a projected $60 million decline at Borgata might end up $50 million to $55 million. That is a mere drop for MGM, which will take in $12 billion next year.
Some selective cost controls and a little natural growth could, in effect, make such declines immaterial to the parent companies. MGM, for example, has a lot more riding on its new resort in Macau than on new competition in Atlantic City.
And in Eldorado’s case, revenue declines have proven almost irrelevant as the company’s M-O is to refocus marketing and cut costs to grow profitability at properties it purchases.
As for the two new casinos, the results were about as might be expected.
Hard Rock did $32.386 million in gaming revenue, nearly twice the $17.58 million done by predecessor Trump Taj Mahal in its last July in 2016. That made Hard Rock third in the city behind Borgata’s $71.124 million and the Trop’s $33.698 million.
With Hard Rock’s deep pockets and being early in building its database, it’s safe to say the Rock is here to stay. The big Borgata numbers, by the way, proved that brand’s power.
Ocean’s $15.180 million, on the other hand, was last in the city and just above Revel’s final July of $14.893 million in 2014. As an independent operator alone at the end of the Boardwalk and given the navigation issues of the original Revel floor plan, Ocean will have a tough go of it. But without a mountain of debt to service, Ocean has a chance.
