Making the News

Star Ledger

Originally Published:Friday, July 11, 2008

Bill LaPenta, director of financial analysis for the Spectrum Gaming Group, a casino consulting firm, said each weekend day lost generally accounts for 2-to-3 percentage points in lost revenue, or about half of A.C.'s overall 11 percent decline.

For A.C. casinos' revenue, it's double (digit) down

By Judy DeHaven
Star Ledger

June was supposed to be the start of Atlantic City's last hurrah, the final push during its typically strong summer season before a full smoking ban takes effect this fall and adds yet another headache to a litany of problems the flagging economy, higher gas prices, increased competition plaguing the seaside resort.

Instead, total casino revenue plummeted 11 percent last month. All but one casino took a hit. And eight saw double-digit declines.

"It's brutal," said Carlos Tolosa, who oversees Atlantic City operations for Harrah's Entertainment, the world's largest gambling company.

"I believe it bodes ill for the rest of the year. I think we're in for tough times."

The state Casino Control Commission reported yesterday that Atlantic City's 11 casinos won $373.6 million from gamblers last month, down from $419.8 million in June 2007. For the first half of the year, revenue has fallen 6.1 percent to $2.28 billion, putting A.C. on track for yet another year of decline.

June's dismal results came after May brought some hope a 1.6 percent increase in revenue. And it came as casino markets across the country especially the gambling behemoth, Las Vegas are showing disappointing results, contradicting the adage that gambling is immune to the woes of the economy.

So far in June, Iowa, Indiana and Illinois have reported revenue declines. Missouri didn't, only because it was helped by the opening of a new casino.

But the big story is Nevada. Officials yesterday released figures for the month of May the latest available that showed the state's gambling revenue fell 15.2 percent; along the Las Vegas Strip, revenue was down a whopping 16.4 percent.

In response, investors continued their punishment of casino stocks, as shares in three of the largest publicly traded companies MGM Mirage, which co-owns the Borgata in A.C., Wynn Resorts and the Las Vegas Sands all cracked new lows yesterday.

Deutsche Bank analyst Andrew Zarnett said the Strip could experience its worst year-over-year decline in history.

"I think that the consumer is tapped out," Zarnett said in an interview. "And while they would still like to spend, they understand the reality of the current situation higher energy prices, higher food prices, job uncertainty, low consumer confidence."

As people are scaling back on their Las Vegas vacations, they are also taking fewer trips to places like A.C., preferring instead to go to local slot parlors such as in Pennsylvania or New York or forgo gambling altogether.

"There's a school of thought that says if there's not going to be many fly-to vacations, then drive-to vacations will increase," Zarnett said. "But there's the bottom of the economic demographic, and they just can't afford to go anywhere. Maybe last year they could, but now they can't."

Mark Juliano, Trump Entertainment Resorts' CEO, has seen that first-hand.

At the three Trump casinos in Atlantic City, hotel occupancy remains strong. The casino parking garages are filled. And patrons continue to arrive by bus.

"But people are spending less," Juliano said. "The $500 bankroll is now $200 or $300."

While Harrah's was the only Atlantic City casino to report an increase, Tolosa, the eastern division president at Harrah's, said a hotel and pool expansion that helped boost revenue may have come at the cost of the company's three other A.C. casinos: Bally's, which saw revenue plummet 17.5 percent in June; Caesars, down 12.9 percent; and Showboat, down 13 percent.

"It's more the migration of our own customers to the other properties to try the new rooms and try the pool vs. me growing the market," he said.

There were some factors that helped or hurt individual casinos. Borgata opened a hotel tower, the Water Club, late in the month, which helped keep its revenue nearly flat (down 0.3 percent). The Trump Taj Mahal (down 18.3 percent) and Trump Marina (down 23 percent) played unlucky at the tables.

Bally's was hurt by a reconfiguration of its Claridge hotel tower. And Harrah's also benefited from a 41.2 percent increase in table revenue, a result of the casino's efforts to resuscitate its table play.

But one thing that hurt all of the casinos was the calendar one less Friday and Saturday compared to the previous June.

Bill LaPenta, director of financial analysis for the Spectrum Gaming Group, a casino consulting firm, said each weekend day lost generally accounts for 2-to-3 percentage points in lost revenue, or about half of A.C.'s overall 11 percent decline.

As for the rest of the decrease, LaPenta cited the usual suspects: competition, the economy, a partial smoking ban and $4-a-gallon gas.

Even so, LaPenta remained somewhat optimistic about July and August.

"I don't think the rest of the summer will be any worse," he said.

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