Borgata Casino Has Lead among Legal Atlantic City Casinos
Atlantic City’s casinos earning were down 8.4% over the first quarter of 2014, compared to last year’s numbers. The lower numbers are said to be from the startup costs associated with the launching of legal online gambling in Atlantic City, along with the closing of one of the city’s casinos.
The Atlantic Club closed in January 2014, so the numbers for most of the Q1 compared 11 casinos versus 12 in the previous year. The Atlantic Club faced bankruptcy and dwindling revenues, so the additional operation’s earnings are not as big of a factor as one might expect.
Rollout Costs Impacted Q1 Numbers
The rollout of licensed Internet gambling in New Jersey cost millions of dollars in startup costs. Casinos made corporate deals with online gaming companies and payment services. The technology needed to support online casinos and card rooms is not cheap. Security and geographic location technology must be cutting edge, so the costs incurred are significant.
Though maintenance and upkeep require additional expenditures, big fees associated with a launch are a one-time expense. The Q1 expenses were expected and necessary. No doubt, gaming media will be reporting next year how the Q1 earnings are up significantly, because they are compared with this year’s inflated costs.
Matt Levinson, chairman of the New Jersey Casino Control Commission, told the Associated Press the rollout cost significant amounts of money. Businesses have to account for such drags on growth in the early stages of a new venture. Levinson said, “There were significant startup expenses related to internet gaming.”
Real Comparisons
The Division of Gaming Enforcement also provided numbers without certain expanses included, to provide a better perspective. Since the Atlantic Club closed on January 13, one could take out those numbers and the numbers the same club did in Q1 last year. Also, since Caesars Interactive cannot be directly compared to a 2013 licensee, once can eliminate those numbers from the comparisons.
When such factors are eliminated and a true comparison is made between the 1st Quarter of 2013 and 2014, the casino gross operating profit of the combined 11 continuing Atlantic City casinos was up by 4.6%. In real terms, Atlantic City’s gaming industry showed a marked improvement over last year.
Boyd Gaming Pleased with Online Gambling
Kevin Smith, the president of Boyd Gaming (which owns 1/2 of Borgata Online) says he is pleased with the launch of online gambling in New Jersey. Smith told the associated press, “It is still early in the game, but we are greatly pleased with our performance thus far. We believe the New Jersey market is making considerable progress. I also feel confident about the prospects for future growth.”
Borgata Online has been the leader among Atlantic City’s Internet casinos. Borgata captured a 50% market share in the early months. Though Caesars has narrowed the gap since and Borgata holds just under 40% of the market, it is still the industry leader.
Casino Control Commission Is Satisfied
Matt Levinson says he is satisfied with the Q1 results, given the variety of challenges the rollout faced. Startup expenses combined with technical difficulties and poor weather to challenge the land-based and online operations, but the statistics show growth, not decline.
When asked about the challenges, Levinson said, “After the winter we had, I am encouraged with these first quarter results. Total revenue is flat and gross operating profits are up, even though snow virtually shut down the state several times.”
Land-Based Revenues Were Strong
Levinson added that the state of New Jersey declared weather emergencies six times in the 1st quarter, but the occupancy rate at the Atlantic City hotels were up. On a citywide basis, casino occupancy averaged 70%. Caesars posted the highest percentage with a 81% occupancy rate.
Third party sales were up 6%, while the non-gaming related revenues increased. Over the past couple of years, New Jersey’s casino operators have focused on increasing revenues from non-gaming related ventures, such as food, beverages, and entertainment. The strategy appears to be working.
888 Holdings Shocked by Weak Numbers
On the other side of the Atlantic Ocean, the Q1 feedback is not so positive. Brian Mattingly, CEO of 888 Holdings Plc, says he is surprised by the slow reception to legal gambling in the U.S. Mattingly told Bloomberg News, “We are absolutely shocked by the slowness of the market.”
888 Holdings Plc, which operates US.888.com, announced it would shift advertising from online slot machines to poker. Such a strategy might be wise, because numbers throughout the American eastern seaboard have shown that slots numbers are declining. Reports in Pennsylvania, New Jersey, and Connecticut have shown similar drops in slots gaming in recent months.
