Atlantic City casino profits down 6.8% in second quarter

ATLANTIC CITY, N.J. – More competition continues to mean smaller profits for Atlantic City’s casinos.

The nine casinos saw their gross operating profit decline by nearly 7% in the second quarter of this year.

It’s the latest indication that the addition of two new casinos last summer is making things more difficult for properties that were there earlier. Of the seven casinos that were in business before Hard Rock and the Ocean Casino Resort opened, only one — the Borgata — saw its operating profit increase for the quarter.

And even one of the newcomers had a tough time in the second quarter: Ocean, which has been trumpeting its return to profitability this year, lost nearly $1.2 million during April, May and June, the only casino in the city to report a gross operating loss for the quarter.

Statistics released Thursday by the New Jersey Division of Gaming Enforcement show the casinos posted a collective operating profit of $159.3 million, down 6.8% from the second quarter of 2018.

The Hard Rock and Ocean casinos opened the last week of June 2018.

Their presence in the market has helped drive down gross operating profit, which is earnings before interest, taxes, depreciation, and other charges. It’s a widely accepted measure of profitability in the Atlantic City market.

For the first half of this year, it is down nearly 17%.

“The market was still adjusting to the new level of competition through the second quarter,” said James Plousis, chairman of the New Jersey Casino Control Commission.

Even before the June 27, 2018, debut of Hard Rock, which had previously operated as the Trump Taj Mahal, and Ocean, the former Revel casino, many wondered whether the Atlantic City market could handle two additional casinos after regaining its balance as a smaller market.

Between 2014 and 2016, five of the then 12 casinos went out of business, and the remaining seven found their equilibrium in a smaller market, where less competition meant higher profits for the survivors.

Ocean reported a gross operating loss for the second quarter, hurt by poor performance on the casino floor in April and May.

“While that’s not looking great, we are making money now,” said Michael Donovan, Ocean’s senior vice president and chief marketing officer. “We made money in June, we made money in July and we continue to make good money in August. Overall, we’re happy with the results.”

The performance of Ocean is being closely watched by industry observers, given its troubled history.

In the two-plus years that it operated as Revel, it went bankrupt twice, never came close to turning a profit and shut down in September 2014. It remained closed under the ownership of Florida developer Glenn Straub, who sold it to Bruce Deifik in January 2018.

Deifik reopened it under a new name last June but quickly ran out of money once the busier summer months ended. By January of this year, hedge fund Luxor Capital, who had been one of its lenders, agreed to take over.

Hard Rock posted an operating profit of $11.2 million for the quarter.

It has grabbed market share and now ranks as the No. 2 casino in Atlantic City in terms of gambling revenue, trailing only the perennial market leader Borgata.

“We are very pleased with our continued success and increased profitability,” said Hard Rock president Joe Lupo. But he cautioned that healthy increases in monthly revenue reports are not translating into big profits for many individual casinos because of third-party online providers who get part of that revenue.

Borgata had the largest operating profit at $55.4 million, up 4.7% from the second quarter last year. It was the only casinos whose operating profit increased in the second quarter this year compared with a year ago.

Harrah’s had a $23 million second-quarter profit, but that was still down 27% from its performance over the same time period last year.

Tropicana’s profit was $22.6 million, down $10.5%; Caesars’ profit was $16.3 million, down 33.7%; Golden Nugget’s profit was $10.1 million, down nearly 29%; the profit at Bally’s was $9.3 million, down 20.5%; and Resorts showed a $5.3 million profit, down more than 40%.