Atlantic City Casinos On Road To Recovery, Covid Uncertainty Lingers

Atlantic City casinos are still creating profits even as the entire industry continues to recover from economic losses suffered during the height of the coronavirus pandemic.

Atlantic City casinos reported $169.42 million of gross operating profit in the second quarter of 2021, according to the New Jersey Division of Gaming Enforcement. Three stand-alone iGaming licensees reported a combined $15.76 million in GOP over the same period.

That is a clear improvement compared to the $112.5 million in operating losses in the second quarter of 2020. Remember, Atlantic City casinos were closed for all of April, May, and June last year, and only iGaming was permitted.

However, most of the industry generated higher profits in 2021 compared to pre-pandemic levels in 2019. Other market indicators, such as net revenue, non-gaming revenue, and industry employment, are lagging.

Here is a look at some key takeaways from recent Atlantic City casino data.

Atlantic City casinos report strong 2Q profits

Gross operating profit “is a widely-accepted measure of profitability in the Atlantic City gaming industry,” notes the NJDGE.

The combined GOP of the nine brick-and-mortar casinos was 11.2% higher than 2019’s $152.35 million.

Eight casinos were profitable last quarter and seven reported profit gains in 2021 compared to 2019.

Borgata’s $40.4 million this year was a 27% drop from two years ago but still led the AC market by more than $12 million.

Tropicana ($28 million, +24%), Hard Rock ($26.1, +131%), Harrah’s Resort ($24.9 million, +8%), Caesars ($18.5 million, +13.5%), Ocean ($17 million, +1,516%), Resorts ($7.3 million, +37%), and Golden Nugget ($10.7 million, +6%) all outperformed 2019.

Bally’s reported a quarterly operating loss of $3.5 million. But, the casino has new owners who are currently spending four times the property’s $25 million purchase price on capital improvements.

Have you heard about how much online gaming is growing?

In 2021, NJ gaming regulators collect financial reports from three iGaming licensees. There were only two in 2019.

The GOP of the three iGaming entities in 2Q ‘21 was $8.8 million more than the two in 2Q ‘19.

The newest entity, Golden Nugget Online Gaming, reported $7.8 million. Meanwhile, Caesars Interactive Entertainment NJ reported $4.4 million and Resorts Digital posted $3.6 million.

Tale of two revenue streams for Atlantic City casinos

Net revenue includes casino win (minus promotional spending) and non-gaming amenities, such as restaurants, hotel rooms, entertainment, and conventions

Combined net revenue for the 12 reporting entities was $726.57 million, according to the NJDGE.
The 10% difference from 2019’s $806.8 million is largely due to declines in non-gambling revenue which fell by nearly 23% in 2Q ‘21 compared to the same period in 2019.

For much of the second quarter of 2021, indoor services were restricted because social distancing and masks were still required inside.
The decline would have been worse if not for online gaming and sports betting. The growing gaming segments continue to offset dips in land-based gambling revenue for Atlantic City casinos.

Net gaming revenue in the second quarter of 2021 exceeded 2019 by 3%.

The industry term is ‘operational efficiencies’

Increased profitability with declining revenues usually signifies cost-cutting measures are taking place.

Indeed, Atlantic City casinos have slimmed down their operations. Compared to 2019, general operating expenses were down more than $30 million, or nearly 10%, in 2021.

Most notable of all is the industrywide reduction in labor costs, which is down nearly 5%. Atlantic City casinos are employing almost 6,000 fewer people today than two years ago. And that figure does not actually include employees still on mandatory furlough or leave of absence.

Casino operators say they are having trouble finding people to work. This problem was exemplified at Borgata, which did not open The Water Club hotel until well into the summer because of labor shortages.

Atlantic City casinos primed for strong 3Q in 2021, too

Most indications are that Atlantic City casinos are enjoying a lucrative summer. June and July set all-time monthly records for total gambling revenue.
Of course, the uncertainty surrounding the Delta variant of COVID-19 lingers over the future.

“Relaxation of restrictions on non-gaming amenities, mass vaccination, and the return of warm weather should help non-gaming revenues grow in the third quarter,” said Jane Bokunewicz, coordinator of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism (LIGHT) at Stockton University. “If, despite the impacts of a surge in the Delta variant, the city’s casino operators continue on the path set this spring, we should expect to see even stronger returns in third quarter 2021 and, in time, a recovery in non-gaming revenues as consumers return to pre-pandemic activities.”

AP Photo/Wayne Parry