While revenue figures have been evening out for Atlantic City’s remaining eight casinos, the resort could see another round of casino closings as a wave of new casinos opens in the Northeast according to a report by Moody’s Investor Services.
The report notes that new casinos are being built in New York, Massachusetts, Pennsylvania and Maryland, all of which could draw customers from Atlantic City.
“We expect more casino closures to occur in Atlantic City as some struggle to grow their business and face additional competition,” Moody’s said in the report.
Atlantic City saw four casinos close in 2014 due largely to decreased revenue in the face of competition from casinos in Pennsylvania and Maryland and around the Northeast. Though the eight remaining casinos recently reported strong profits for the year to date—a sign that city officials say shows the resort market is stabilizing—Moody’s noted that overall casino revenue for the city is still down eight percent over last year.
Three of the city’s casinos are also “already on the brink,” of closing. The Trump Taj Mahal, Caesar’s Atlantic City and Bally’s Atlantic City are all involved in Chapter 11 bankruptcy proceedings.
“As the number of casinos shrink, some of the remaining casinos have seen revenues increase,” said Moody’s. “But we expect increased competition will keep the heat on incumbents, and that number of casinos in Atlantic City will likely continue to shrink.”
Moody’s pointed to eight casinos set to open in New York, Massachusetts, Pennsylvania and Maryland by the end of 2018. The $5 billion in new casino construction will increase the Northeast market—which many analysts feel is already saturated—by 30 percent.
The new construction is being driven by an increase in government approval of gambling licenses “in a bid to keep more casino tax dollars within state borders,” said Moody’s.
Atlantic City, however, will not be alone in feeling the pressure from these new projects. Existing casinos in Pennsylvania. Maryland, Rhode Island and New York will also face challenges from the new competitors, the report said.
“A number of incumbents will feel the heat more keenly in markets that are already overcrowded and where existing casinos have already been carving costs to stay ahead,” the report, written by Moody’s gaming analyst Peter Trombetta, said.
For example, the scheduled first new casino will be the MGM National Harbor, set to open in Maryland, near Washington, D.C., in the fall of 2016. The report notes that the existing Maryland Live! Casino will likely lose customers to the project. The region also saw the opening of Caesars’ Horseshoe Casino Baltimore last year, which will also have to compete.
A similar situation will increase competition on Philadelphia area casinos and New York’s existing racino properties, the report said.
The new casinos will positively affect one industry, however—slot machine manufacturers.
“The new casinos will be ordering some 20,000 new slot machines, boosting revenues for manufacturers that have been hit by slowing gaming revenue as existing casinos delay replacing older machines,” the report said. “The biggest suppliers will likely benefit the most.”
