Making the News

Press of Atlantic City

Originally Published:Wednesday, October 1, 2008

Harvey Perkins, senior vice president of the Linwood-based casino consulting firm Spectrum Gaming Group, cautioned the casinos not to simply throw their money away on promotional freebies that don't translate into profits.

"If they want to go to gimmick-based marketing, they have to ensure it's profitable," Perkins said. "The production of just revenue without profit is meaningless."

As credit tightens, southern New Jersey businesses shift strategy

By Erik Ortiz
Press of Atlantic City

Compared with the wild gyrations on Wall Street, the action at the slot machines and blackjack tables in Atlantic City may not be such a gamble after all.

But the casinos and other local businesses are hardly immune to the growing financial crisis. In response, they are pursuing strategies to control their costs and boost business.

Spirit Airlines, the only major carrier serving Atlantic City International Airport, has dropped unprofitable routes, most recently ending service this month from Long Island, N.Y., to Florida just three months after starting it.

The Miramar, Fla.-based airline also has cut jobs, reportedly 145 flight attendants and 120 pilots in the past three months. On Sept. 3, it furloughed 70 of its 500 pilots represented by the Air Line Pilots Association.

"Spirit is continuing to keep costs low in order to continue offering low fares so that travelers can keep traveling," airline spokeswoman Misty Pinson said Tuesday.

The airline also is pursuing a new source of revenue: selling advertising space aboard planes on seat backs, window shades, overhead bins, tray tables, drink carts and bulkheads.

The first client for Spirit's Mile High Media is the tourism ministry of the Bahamas. Flights in and out of Atlantic City on Monday were emblazoned with decorative ads throughout the cabin.

Trico Lift, an equipment rental company based in Millville with several locations around the country, has been tightening expenses and pooling resources wherever possible, according to spokeswoman Terry Carpenter.

She said the company has responded to the building slowdown in some areas by pursuing new business in other regions that are expanding, including opening a new office on Sept. 1 in Houston. It has also begun offering contract fleet maintenance and safety inspection services.

Some companies said they are waiting to see how the market shakes out before committing to any changes. Jomar Corp. in Pleasantville, which designs and manufactures machines that produce plastic bottles, has about 80 percent of its business tied to foreign companies. How Jomar will be affected by its international clients remains to be seen, said company President William Petrino.

"Most of our clients are multibillion-dollar businesses, and when you run a billion-dollar business, you also run a lot on credit lines," Petrino said. "When they start having a problem getting the credit, that can affect the businesses they work with, too."

The effect of the credit crisis on Atlantic City's biggest industry has been apparent for months, as three new casinos have been delayed because of financing problems.

Current casino operators are doing what they can to keep revenue coming in. One senior gaming executive urged the resort's City Council to consider delaying or repealing the casino smoking ban that begins Oct. 15. Casinos fear the ban will force smokers to flee Atlantic City for gaming markets that have no smoking restrictions.

"We can't control the financial crisis. That's something that has to resolve itself. The bigger challenge is the smoking ordinance," said Larry Mullin, president and chief operating officer of Borgata Hotel Casino & Spa. "The one thing we have control over is the smoking ban."

Even before the financial markets hit meltdown mode, the casinos responded to the lousy economy by cutting back on the expensive promotional giveaways - the so-called "comps" - that traditionally are used to lure customers. In the second quarter, the industry spent $375 million for comps, down 11 percent from the $421.1 million in the same period last year, figures show.

But comping is far from dead - and could increase again if casinos continue to lose customers because of the economic slowdown. Borgata is running an aggressive cash-back promotion in October for slot players. Other casinos continue to offer gas cards or giveaways as an incentive to help gamblers cope with high fuel prices.

Harvey Perkins, senior vice president of the Linwood-based casino consulting firm Spectrum Gaming Group, cautioned the casinos not to simply throw their money away on promotional freebies that don't translate into profits.

"If they want to go to gimmick-based marketing, they have to ensure it's profitable," Perkins said. "The production of just revenue without profit is meaningless."

Another immediate concern for the casinos is having enough cash flow to continue making basic maintenance on their properties and to refurbish their hotel rooms and restaurants, Perkins said.

"The operators really need to get a handle on things to have a vibrant balance sheet for maintenance capital," he said.

Mullin noted that with all of the choices customers have for gambling in New Jersey and surrounding states, it would be foolish for the casinos to neglect their appearance or allow things to go stale.

"The main thing is to keep our product as fresh and clean and presentable as we can, because there is a lot of competition," he said. "This is not the time to diminish that product."

Business editor Kevin Post contributed to this report.

E-mail Erik Ortiz:

EOrtiz@pressofac.com

E-mail Donald Wittkowski:

DWittkowski@pressofac.com

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