Earlier this year, the New Jersey Department of Gaming Enforcement released revenue numbers for 2017. They were good, up for the second straight year after a decade of decline. Limited specifically to gambling, though, there was limited context from which to measure the overall health of the casino industry.
This week, the DGE published a more comprehensive report that includes some of that context. It’s good, too.
Across all products and services, the seven properties in Atlantic City generated about $3.54 billion in combined revenue for the year. That’s an increase of 0.9 percent from 2016, again the second consecutive year of growth. About $2.6 billion of the total can be attributed to casino operations, and nearly $250 million of that came from NJ online gambling.
Growth away from the casino floor is a particularly good sign, with hotel occupancy and entertainment spending both up significantly.
Top-line numbers in Atlantic City
Borgata remained the runaway king of the market in 2017. It generated more than $1.1 billion in revenue by itself, responsible for almost one-third of the total haul. Harrah’s, its neighbor in the Marina District, holds the silver medal with about half that number.
A good chunk of casino revenue comes from non-gaming items, such as hotel rooms, retail, food & beverage, and entertainment. And most of those numbers were strong, too.
Hotel occupancy reached 86.9 percent for the year, up 5.4 percent from 2016. The average cost for one of the city’s 11,286 casino rooms was about $108 per night. Caesars led this category, clocking in with 91 percent occupancy at the second-highest rate ($111.42/night). Total entertainment revenue was up 6.0 percent to about $165 million, while food and beverage sales were slightly sluggish.
The numbers also reveal some streamlining within the industry. Revenue increased measurably, but backend profitability is a better yardstick for financial well-being. Across all Atlantic City casinos, gross operating profit grew by a staggering 23.7 percent to nearly $725 million.
Some of that growth can be attributed to the success of the low-overhead online gambling industry.
Online gambling key to continued gains
Continuing to allay fears of cannibalization, online gambling now serves to underpin Atlantic City’s land-based casinos.
New Jersey gambling sites generated about $245 million in revenue last year, an annual increase of about 25 percent. And as mentioned, this revenue comes with fairly low overhead. Much of that $245 million went straight into the profit column.
It’s likely no coincidence that the maturation of the iGaming industry has correlated with the recovery of casino revenue.
There’s no sign of slowing, either, as online casinos are already turning in record-setting numbers to begin 2018. Monthly revenue totals north of $20 million seem to have become the new norm. What’s more, federal movement may soon allow for the creation of an NJ sports betting industry, another vertical that could bolster revenue.
Overall, the data seems to confirm that the local industry has turned the corner on its financial woes. It’s worth noting, though, that these 2017 increases were posted with one fewer casino than in the year prior.
Sustainable growth in a crowded market?
Atlantic City currently has seven operational casinos, down from an all-time high of twelve. Some would say seven is just about the right number for the market.
The former Trump Taj Mahal closed in October 2016, taking its piece of revenue with it. It was a relatively small piece, though (about $200 million annually), and the gap was quickly filled. The thinning of the field allowed the overall profit numbers to tick upward, as the Taj had been operating under a deficit during its final year of life.
For a time, it wasn’t clear whether or not the city would ever recover from the turmoil of the mid-2000s. New Jersey’s economy isn’t exactly thriving, and growing competition from neighboring states — New York, Pennsylvania, and Delaware all have casinos near the border — means there’s less incentive for those residents to trek to the shore.
The 2017 financials show that Atlantic City can still support seven healthy casinos. But by the end of 2018, it will have to accommodate at least nine. The former Taj is set to reopen as Hard Rock Atlantic City this year, and the Revel/TEN will become the Ocean Resort Casino.
Both properties are targeting summer openings, and both have rather large buildings to fill. They’ll add almost 6,000 hotel rooms to the city, an increase of more than 50 percent over the current total. Accommodations at the top-tier Ocean Resort, in particular, figure to compete with Borgata’s as the most expensive in town.
Atlantic City nearly collapsed the last time it tried to support these many casinos, but NJ online gambling has given the landscape a makeover. However much speculating we can do, only time will tell whether or not the pie can still feed nine hungry mouths.