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Online Bet Startup Costs Shrink AC Casino Earnings

Written by:
Associated Press
Published on:
May/22/2014
Online Bet Startup Costs Shrink AC Casino Earnings

ATLANTIC CITY, N.J. (Associated Press) - Startup costs associated with Internet gambling, and the closure of one casino in January lowered Atlantic City's casino earnings by 8.4 percent in the first quarter of this year compared to the same period in 2013.

Figures released Thursday by the state Division of Gaming Enforcement showed the casinos had a gross operating profit of $38.7 million.

But the numbers get better when the Atlantic Club, which closed on Jan. 13, and Caesars Interactive, the online entity that does not own a bricks-and-mortar casino and cannot be directly compared to any other licensee, are excluded.

Without the Atlantic Club or Caesars Interactive, the Atlantic City casinos saw an increase in gross operating profit of 4.6 percent for the quarter.

That's because Caesars Interactive posted a $7.1 million loss, due in large part to startup and one-time costs associated with the launch of Internet gambling last November. And the Atlantic Club operated for a full month in January 2013 compared with only 12 days this January before it shut down.

Gross operating profit reflects earnings before interest, taxes, depreciation, and other charges, and is a widely accepted indicator of profitability in the casino industry.

New Jersey's fledgling Internet gambling industry won $43 million from gamblers through the end of April this year, but it experienced its first-ever monthly decline in April, to $11.4 million compared with $11.9 million in March.

Keith Smith, president of Boyd Gaming, which owns half of the Borgata, said his company is happy with how online gambling has gone so far.

"It is still early in the game but we are greatly pleased with our performance thus far," he said. "We believe the New Jersey market is making considerable progress. I also feel confident about the prospects for future growth."

Matt Levinson, chairman of the New Jersey Casino Control Commission, focused on the results from brick and mortar casinos that operated for the entire first quarter in 2014 and 2013.

"After the winter we had, I am encouraged with these first quarter results," he said. "Total revenue is flat and gross operating profits are up, even though snow virtually shut down the state several times, and there were significant startup expenses related to internet gaming.

"Despite the fact that New Jersey declared a weather-related state of emergency six times in the quarter, the occupancy rate is up for the industry," Levinson said. "Casinos report higher food, beverage and entertainment revenue in the quarter; and third-party sales in the casinos are up by almost 6 percent. In addition, luxury tax collections in the quarter are up a healthy 5 percent compared to the same period a year ago, showing that the people are spending more money here and that is a positive sign for Atlantic City."

The city's casino hotels averaged 70 percent occupancy for the quarter, with Caesars posting the highest at 81 percent. The Borgata had the highest average nightly room rate at $127.42; not counting the Atlantic Club, which only operated for 12 days in January, Resorts had the cheapest average room rate at $73.49.

Wayne Parry, Associated Press

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