ombined, the 11 casino hotels posted gross operating profits of us$ 111.2 million for the quarter, compared with us$ 148.7 million in the same period a year ago, the New Jersey Casino Control Commission reported this week.
The gaming industry, which was already struggling with the weak economy and tight consumer spending, also got hit in the first quarter by record snowfall and drenching rains that discouraged customers from traveling to Atlantic City. One analyst noted that the bad weather affected some key weekends for the casinos, including Super Bowl Sunday and the Presidents Day holiday.
“I think it was a huge impact,” said Harvey Perkins, senior vice president of the casino consulting firm Spectrum Gaming Group. “The competitive climate is tough enough, but when you add the weather on top of it, it made a tough situation even more difficult.”
The first quarter is traditionally the slowest time for casinos because of the winter weather. Gaming revenue was down 8.5 % in January, 15.7 % in February and 5.6 % in March.
Even the top-grossing Borgata Hotel Casino & Spa could not escape winter’s wrath. Borgata’s gross operating profits fell 16 % to us$ 39.4 million. Boyd Gaming Corp., Borgata’s parent company, estimated that powerful snowstorms in February cost the casino between us$ 6 million and us$ 7 million in earnings.
“Severe winter weather took a heavy toll on Borgata’s first-quarter results,” Paul Chakmak, Boyd Gaming’s chief operating officer, said during a May 4 conference call with gaming analysts. Tropicana Casino and Resort was the only gaming hall to rake in higher profits for the quarter, up 6.2 % to us$ 5.1 million.
While seven casinos stayed profitable for the quarter, the Atlantic City Hilton Casino Resort, Resorts Atlantic City, Trump Marina Hotel Casino and Trump Plaza Hotel and Casino all posted losses. The Hilton suffered the biggest loss at us$ 8.2 million.
Gross operating profit represents earnings before interest, taxes, depreciation, amortization and charges from affiliates. Also known as cash flow, it is widely considered the best measure of profitability in the gaming industry. After interest, taxes and the other charges, the casinos reported a net loss of us$ 19 million in the first quarter, compared to a net loss of us$ 91.6 million for the same period last year.
One highlight in the first quarter was an increase in the hotel occupancy rate, rising to 76.9 percent from 75.3 % a year ago. The number of occupied room nights increased to 1.18 million, up 22,000 room nights.
Atlantic City’s profit slump also reflects competition from slot parlors in Pennsylvania, New York and Delaware. Competition will grow even more intense in coming weeks, when Pennsylvania and Delaware add Atlantic City-style table games in a major expansion of their gambling attractions.
Pennsylvania’s casinos will also begin extending lines of credit to their customers for the first time, giving gamblers easier access to money. Atlantic City casinos have been allowed to extend credit since gaming began in 1978. “The additional feature that may be somewhat significant with table games in Pennsylvania is that they will come with credit. Now the playing field is going to be leveled off,” Perkins said of the impact on Atlantic City.