Ocean Casino Hits Stride in November. How Goes AC?
Ocean Casino Resort (l.) in Atlantic City turned around its fortunes, at least in November, when it posted a 48 percent increase in overall revenue. But does its success reflect the fortunes of Atlantic City? Some indicators say yes. Some say not so fast.
If Ocean Casino Resorts were a Broadway play, it would have received a boffo review for November, with a 66.2 percent increase in casino revenue compared to November 2018, and a 48.2 percent increase in overall revenue, including sports betting and online gaming.
“That the property is succeeding both in monthly year-over-year revenues and third quarter gross operating profit growth ($10.2 million Q3 2019 compared to $581 thousand Q3 2018) is evidence that Ocean is finding its stride,” said Rummy Pandit, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at Stockton University.
Terry Glebocki, CEO of Ocean Casino Resort, credits new marketing efforts, among other steps. “Our offers have been a major driver of our increased business levels and profitability,” she said.
As for Atlantic City itself the industry surpassed $3 billion in overall gaming revenue for the first time since 2012. She’s back, baby!
Well, maybe. There’s still a lot of climbing to do. In 2012, gaming fortunes were on the way down, not up, thanks to the arrival of casinos in Pennsylvania and the downturn of the economy several years earlier.
Since 2014, five properties in the shore resort closed, including the Taj Mahal and Revel—the former a response by owner Carl Icahn to a strike by Local 54, the latter because it aimed in the wrong direction.
In June, 2018, Ocean Casino Resort and Hard Rock Hotel & Casino Atlantic City both opened their doors on the same day. The two Boardwalk properties, separated from each other by Showboat, were reclamation projects, much like Atlantic City itself. One replaced the shuttered Taj Mahal, the other, replaced Revel, which closed just two years after it opened.
Hard Rock established itself as a force to be reckoned with from the get-go, emerging as one of the stronger properties in town. Credit its affiliation with the established and successful Hard Rock brand. Credit its stable corporate office, topped by an Atlantic City native, Jim Allen. Year to date, Hard Rock came in second behind Borgata in casino win, and third in overall win, trailing Borgata and Golden Nugget.
Ocean entered play snake-bitten by its affiliation with Revel, if only by structure. The property had no corporate support system, no track record. It lagged behind like a horse that stumbled out of the gate.
Some management changes later, and Ocean has turned the corner.
“The property had a history of being tone deaf to most Atlantic City customers, and we’ve now overcome that,” Glebocki, said. “To turnaround, we needed to make a lot of changes fast. I called it a top/down bottom/up approach. We needed to grow the revenues while reducing expenses. Certainly not the easiest thing to do, but that’s exactly what we did. We increased marketing offers to drive visitation, examined every expense and changed the fixed cost structure.”
Ocean has also taken a casino first philosophy, she said. “We put our casino guests first in absolutely everything we do, from offers to comp rooms to entertainment. We knew it was important to listen to our guests’ ideas and concerns, and I’m proud to say we’ve tailored the improvements made thus far to be responsive to what our guests expressed.”
Pandit called the 48 percent year-over-year increase in monthly total gaming revenue remarkable. “But not inconceivable for a property finishing only its 16th full month of operation.”
Is Atlantic City also doing remarkable given the past dozen years?
Third-quarter industry total gross operating profit has increased 12.5 percent year over year.
“This and other positive indicators are evidence that an industry wide strategy of diversifying both gaming and non-gaming products is beginning to pay off,” Pandit said.
But signs also point to the lack of growth in the overall pie, meaning the success of the two newcomers come at other properties’ expense. Based on year to date figures in November, six of the seven existing properties generated less casino win year to date in 2019, with Borgata only slightly in the plus column, based on figures released by the state Division of Gaming Enforcement (DGE).
Truth be told, sports betting and online gaming have also served as Atlantic City’s savior. Internet gaming win was $49.1 million in November compared to $26.9 million in the prior period, reflecting an increase of 82.4 percent. Sports’ wagering gross revenue was $32.9 million for the month, compared to $21.2 million for the same month last year, reflecting a 54.8 percent increase. Year to date, Internet gaming win increased 60.7 percent to $433.4 million when compared to the prior period. Sports’ wagering gross revenue was $270.0 million.
On the internet gaming front, Golden Nugget led with $18.9 million, doubling its November 2018 output and putting it in a position of making more money online than from its brick-and-mortar property.
Regardless of where it comes from, it all counts for the bottom line.
“The gaming product is changing nationwide,” Pandit said. “That New Jersey is taking the lead with respect to new gaming products such as online gaming and sports betting can only be a positive. We should expect to see New Jersey’s gaming properties continue to innovate and diversify their gaming product to remain competitive with neighboring casino markets such as New York and Pennsylvania.”
But let’s put these two sources in perspective.
“While internet casino gaming revenue and sports wagering revenue continue to grow at double digit rates this year, they still represent a fraction of the brick-and-mortar gaming market,” said DGE spokesman Leland Moore. “So far this year, brick-and-mortar win is $2.5 billion, compared to $433 million for Internet casino gaming win, and $270 million for sports wagering.”
Because brick-and-mortar revenue is so much higher, so are the taxes collected, even with a lower tax rate.
The question still unanswered is whether nine casinos can survive. Tilman Fertitta, owner of the Golden Nugget, says no. Caesars saw its profits fall 18 percent to $23.3 million while its Bally’s property decreased almost 23 percent to $14 million and Harrah’s declined 8 percent at $33 million.
“It’s not a nine-casino market, and I don’t understand why nobody realizes that,” Fertitta told the Press of Atlantic City. “It’s a seven-casino market, and when it was seven casinos, everybody was putting money back into the properties. Now, they won’t.”
Although all nine casinos were profitable for the third quarter, only six saw their operating profits increase, and year-to-date profits are down 4.5 percent, according to the Motley Fool.
While the casinos appear to be getting healthier, Atlantic City isn’t out of the woods yet. It’s been down this road before, and the end result has often been ugly.