The New Jersey Casino Control Commission last week announced the 2008 results for the eleven casino resorts in Atlantic City. Whilst the results were unsurprising they still make grim reading for the gaming industry and local governments used to depending on gaming tax revenues. In the fourth quarter of 2008 gross operating profits declined 45.8%, bringing the year’s total to US$940.9 million compared to US$1.25 billion in 2007 – a fall of 24.6%.

“Last year was a particularly challenging one for Atlantic City’s casino industry,” said Casino Control Commission Chair Linda M. Kassekert. “The decline in revenues and gross operating profits reflect the decline in overall economy as well as the continued increase in competition from gaming operations in neighboring states.”

Gross operating profits were down a scary 89% at the Atlantic City Hilton and 88.4% at Resorts. Tropicana and Trump Marina faired only a little better with profits falling by 52% and 58.4% respectively. Trump Plaza fell 21.6% and Trump Taj Mahal 16.7%. Harrah’s Atlantic City reported gross operating profits down by only 1.1% and Borgata declined by 17.9% but led the industry with gross operating profits of US$201.1 million. Bally’s (down 19.5%), Caesars (down 16.9%) and Showboat (down 31.9%) all saw profit margins fall.

As gross operating profit represents earnings before interest, taxes, depreciation, amortization, charges from affiliates and other non-cash charges, the industry reported a net loss of US$1.1 billion in 2008. The net loss in 2007 was US$64.5 million. The occupancy rate in the city’s casino hotels declined to 87.4% compared to 91.6% in 2007, but Kassekert noted that the decline in the rate may be misleading because the number of hotel rooms increased by 2,485.

The Atlantic City casinos are spending less on marketing and complimentary extras for customers. Figures released by the commission show that promotional allowances and expenses declined by 4.8% to US$1.6 billion. In the first two months of this year the Atlantic City casino industry has spent 21.8% less on expenses and 5.2% less on promotions.

In 2007 Atlantic City casinos experienced their first ever fall in revenue, down 5.7% from 2006. Casino gambling began in New Jersey in 1978 and profits rose year on year. In 2007 slot machine revenue fell with increased competition, particularly from the new slots parlours in Pennsylvania. In 2008 the casinos have had to contend with further competition from neighbouring states and a worsening economy that has caused customers to cut down on entertainment spending.

In this month’s Casino Connection magazine Joseph A Corbo, Jr, president of the Casino Association of New Jersey, stresses the importance of customer service. “Talking about the economy seems to be a good icebreaker, right? Not really. Our customers come here to escape. They don’t want to be reminded of declining 401 balances or investment portfolios. If we engage them in discussion about the economy — or even worse, our personal circumstances — we’re reminding them of the very things they’re trying to forget.”

He adds, “Our customers come here seeking enjoyable leisure time and a temporary escape from day-to-day concerns. Our core job is to give the customers what they seek.” Maybe now is the time that customers would really appreciate those little extras once handed out so readily as casino comps and largely taken for granted. (E-04.07.09)

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