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Gaming Guru

Joe Weinert
 

Atlantic City Roundup

20 May 2003

ATLANTIC CITY -- Just 45 days after boasting record results for 2002, the Atlantic City casino industry reported a decidedly worse first quarter for the new year.

Gross operating profit at the 11 casinos declined 12.3 percent, to $237.6 million, on net revenue of $957.5 million, down 4.3 percent, according to the New Jersey Casino Control Commission.

The industry went from a net profit of $23.7 million a year earlier to a $14.7 million net loss this year.

Casinos felt the effects of a weak economy, higher gas prices and war in Iraq, but it was heavy snow in February -- include a blizzard on the usually high-grossing Presidents Day weekend -- that caused the most damage.

"February was the difference," said David Jonas, senior vice president of Atlantic City operations for Harrah's Entertainment. "Everyone managed their businesses well but we just couldn't recover."

Harrah's Atlantic City was one of only two casinos to report improved gross operating profit, or cash flow. It led the city at $41.4 million, up 10.1 percent, thanks to a 452-room hotel expansion and the addition of 1,200 slots last year.

Cash flow at the Hilton grew 5.3 percent, to $13 million.

Despite the challenging conditions, casino operators restrained themselves by not engaging in a war to recoup lost business. In fact, they reduced their promotional costs by 3.4 percent and their overall operating costs by 1.3 percent.

"We ought to be proud of ourselves, that as an industry we were do disciplined," Jonas said. "For that reason, there's a ray of hope when Borgata opens (in July) that if we all keep focused, we'll absorb Borgata and the industry has a chance to grow. If a market war happens, forget it."

The casinos reported hotel occupancy of 92.5 percent in their 11,706 rooms, a decrease of 1.4 points. The average rate per occupied room was $72.47, though the figure means little because Atlantic City casinos give away two-thirds of their rooms.

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Atlantic City will begin celebrating the 25th anniversary of casino gambling this week. It was May 26, 1978, that Resorts International Hotel Casino opened, with customers waiting hours in line on the Boardwalk for a chance to legally gamble in the first U.S. gaming jurisdiction outside of Nevada.

Former New Jersey Gov. Brendan Byrne, who supported the 1976 referendum that legalized casinos, and other dignitaries, will be at Resorts on Friday to re-enact the ceremonial first roll of the dice. On Sunday, Resorts management and employees will cut a giant cake on the Boardwalk.

The industry now employs 45,000, with another 5,000 added to the payroll when Borgata opens in July, and last year spent $1.1 billion on goods and services in its host county alone. One out of every four Atlantic County residents age 20-64 works in a casino and there is at least one casino employee from each of New Jersey's 21 counties.

"Since legalized gaming came to Atlantic City over a quarter century ago, the benefits of the industry have been undeniable," said Rep Frank LoBiondo, R-N.J.

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The financial toboggan ride continued at Carl Icahn's Sands Casino Hotel in the first quarter.

The independent, off-Boardwalk casino reported a 75 percent decline in earnings before interest, taxes, depreciation and amortization, to $2.3 million. Its net income fell 25 percent, to $39.8 million.

At the bottom line, Sands lost $4.4 million, putting its 12-month loss at $14 million. It had to tap $1.6 million from its cash reserve to fund operations.

The casino blamed harsh winter weather, a high-roller's win of $1 million, and decisions by previous management to discard most table games and change slot marketing.

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Atlantic City casinos could be competing against New York racinos by year end.

The New York legislature overrode a veto by Gov. George Pataki and approved a new revenue split with the eight tracks eligible to operate slot machines. The tracks will get to keep 29 percent of the revenue, with 8.75 percent allotted for purses and horsemen.

Aqueduct, one of two tracks in metropolitan New York City, said last month it would have 4,500 slots running within seven months of a new state deal. Las Vegas-based MGM Mirage will manage Aqueduct's slots. Empire Resorts said it plans to operate 1,800 slots at Monticello Raceway in the Catskills.

(Joe Weinert covers the gaming industry for The Press of Atlantic City. He can be reached at:jweinert@pressofac.com.)