Making the News

Press of Atlantic City

Originally Published:Friday, February 27, 2009
http://www.pressofatlanticcity.com/106/story/414548.html

Casino 'comps' harder to come by

By Donald Wittkowski
Press of Atlantic City

ATLANTIC CITY - With the recession eating away at profits, casinos cut back in 2008 on the free hotel rooms and other promotional giveaways they use to lure customers to the gaming floor.

Promotional expenses - the gaming industry's so-called "comps" - dipped nearly 5 percent to $1.55 billion compared to $1.63 billion in 2007, according to year-end figures released Thursday by the New Jersey Casino Control Commission.

It was the second straight year promotional spending fell - not surprising, since casino revenue declined in 2007 and 2008 due to the faltering economy and extra competition from slot parlors in surrounding states.

The downward trend has continued into 2009. January's promotional spending declined 3.2 percent, to $115.4 million, compared to the same period in 2008, figures show.

Spending was down at seven of the 11 casinos last month. Borgata Hotel Casino & Spa, Trump Taj Mahal Casino Resort, Harrah's Resort and the Atlantic City Hilton Casino Resort increased their promotional expenses.

While the figures are down overall, one gaming analyst blamed the drop in promotional spending on lower business volumes, not a conscious decision by casinos to suddenly get cheaper with giveaways.

"Lower volume results in lower complimentary levels," said Harvey Perkins, senior vice president of Spectrum Gaming Group, a casino consulting firm based in Linwood. "This may not be a conscious effort. This is a natural mathematical occurrence."

Comps include such things as hotel rooms, meals, travel, entertainment, cash and slot machine credits that are given to customers free of charge or at discounted prices. Casinos shower their high rollers with penthouse suites and other lavish gifts but also spread the freebies around with lower-end gamblers to gain their loyalty, too.

Casinos often engage in marketing wars to one-up each other in the comp department, but the lower promotional spending in January reflects a decline in business caused by the recession and extra competition from slot parlors in Pennsylvania and New York. January's gaming revenue sank 9.4 percent to $321.4 million.

Borgata, Atlantic City's top-grossing casino, broke from the pack by increasing its promotional spending in January nearly 17 percent, to an industry-leading $20.3 million. In the fourth quarter, Borgata spent $59 million on comps, which equates to about 24 percent of the property's gross revenue for that period, according to casino analyst Justin T. Sebastiano, of Morgan Joseph & Co. Inc.

"We expect the promotional environment to remain high throughout 2009, given the intense competition from Philadelphia and New York City area slot machines," Sebastiano wrote in an investment report Thursday about Borgata.

Sebastiano noted that Borgata's heavy promotional spending cut into its earnings. For the fourth quarter, Borgata ended with gross operating profits of $36.7 million and a margin of 20 percent, which is the lowest in the 5-year history of the property, he added.

Prior to 2009, casinos were required to file only quarterly reports on their promotional spending. But now the data will be available each month on the Casino Control Commission's Web site under a new reporting system announced Thursday by gaming regulators.

"Providing this data in a timelier manner will increase transparency and allow analysts and the general public to better understand the gaming industry," said Linda M. Kassekert, the commission's chair.

Spending reports can be found online at

www.njccc.gov/casinos/financia/mthexp/

 

E-mail Donald Wittkowski:

[email protected]

 

 

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