Atlantic City casino profits fell more than 15 percent last year, as added competition in the beachfront gaming town resulted in reduced bottom lines.
The New Jersey Division of Gaming Enforcement (DGE) released the Q4 and 2018 full-year earnings reports for the city’s nine casinos on Monday.
For the 12 months that ended December 2018, net revenue increased 7.5 percent to nearly $2.9 billion, but gross operating profit for the gaming industry fell 15.4 percent to $582.6 million. Casino profits totaled $723.3 million in 2017.
Five of the seven casinos that were in operation prior to last June’s openings of Hard Rock and Ocean Resort reported annual profit declines. The biggest loser is also the city’s richest casino – the Borgata – which reported gross profits of $254.3 million, a nearly 19 percent drop.
New Jersey Casino Control Commission (CCC) Chairman James Plousis spun the report positive. Speaking with the Press of Atlantic City, the chief gaming regulator said the addition of “thousands of jobs and many exciting new amenities position us well for continued growth.”
Atlantic City’s nine land-based casino floors won $2.51 billion in gross gaming revenue in 2018, a four percent increase.
Gross operating profit is the result of earnings before interest, taxes, depreciations, and amortization – commonly referred to as EBITDA – as well as other miscellaneous items listed on a casino’s income statement. Along with gaming, revenue from hotel, food and beverage, and entertainment is included in the filing.
Investopedia says the metric “is a measure of profitability.” However, the online financial resource adds that EBITDA “can be misleading because it strips out the cost of capital investments.”
Visitation appears to be increasing in Atlantic City. The DGE filing shows that the casino resorts recorded more than 3.9 million occupied room nights in 2018, roughly an eight percent increase on the prior year. However, there were more rooms due to Hard Rock bringing 1,971 occupancies and Ocean Resort 1,399 back to market. The hotel occupancy rate was 80.7 percent last year compared to 86.9 percent in 2017.
Former Bally’s executive Wayne Schaffel said last summer that unless gaming revenues grow at least 15 percent in Atlantic City, “somebody’s not going to make it.”
Last month, Showboat owner Bart Blatstein took steps to obtain a gaming license for his Boardwalk property that doesn’t currently offer slot machines or table games. The DGE ruled the Philly real estate developer is suitable for licensure, and his petition is now being considered by the CCC.
Caesars Entertainment placed a deed restriction prior to selling the Showboat that prohibits the property from operating as a casino. To circumvent the regulation, Blatstein has pitched plans to construct a standalone casino next to the resort in a vacant lot that is currently home to sand volleyball.
The owners of the town’s nine casinos presumably hope Blatstein decides to forego gaming, as their gross profits continue to decline.
Bruce Deifik – the developer who reimagined the shuttered Revel into Ocean Resort – died this week in a car accident. His investment never turned a profit, and financier Luxor Capital took ownership of the casino property in January.