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Atlantic City News Round-Up

For three years now Aztar Corp. chairman and CEO Paul Rubeli has been pleading with Atlantic City casino executives to slash the costly cash incentives they give to gamblers. During the second quarter this year, they finally followed his advice.

Unfortunately for the industry, the cost-cutting measure coincided with a softening economy that caused players to restrict their gambling dollars. As a result, the Atlantic City gaming industry reported second-quarter declines in revenue, gross operating profit and net income, the New Jersey Casino Control Commission reported.

"As the second-quarter results would indicate, the slowing economy is clearly having an effect on the Atlantic City market, although we believe operators continue to be very focused on controlling costs, which has helped preserve margins in this difficult operating environment," Bear, Stearns & Co. analyst Jason Ader said.

The industry reported gross operating profit, or cash flow, of $285.2 million, down 3.2 percent, on net revenue of $1.2 billion, down 2.1 percent. Its net income decreased 11.5 percent to $37.6 million, although that figure can be misleading due to corporate fees and strategies that have nothing to do with a casino's performance.

Casinos gave gamblers $156.8 million, down 7.3 percent, in such incentives as cash coupons and bus-passenger coins. Overall operating expenses declined 1.7 percent to $875.2 million.

Casinos did raise their level of "comping," giving gamblers complimentary rooms, food, drinks, show tickets and other items with a stated retail value of $143.2 million, up 3.9 percent.

Harrah's, in many respects, was the industry's second-quarter leader. It was the only casino to report gains in both revenue ($109 million, up 0.2 percent) and cash flow ($40.5 million, up 4.7 percent). It led the city in operating margin at 37.1 percent.

Bally's reported the highest cash flow at $45.6 million, down 5.2 percent.

Resorts (up 15.5 percent) and Trump Plaza (up 13.5 percent) reported the biggest percentage gains in cash flow, though the actual results were below their 1998 levels.

The industry reported 94.9 percent occupancy in its 11,489 hotel rooms.

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Billionaire investor Carl Icahn boosted his stake in the Sands Casino Hotel stock to 77.5 percent after buying 493,321 shares in a private sale. He previously owned 72.6 percent of the shares.

Icahn has yet to disclose his master plan for expanding Sands, which has experienced three straight declining quarters since he took the casino out of bankruptcy 10 months ago.

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A powerful state agency that reinvests casino dollars and a neighboring township want to bulldoze a strip of cheap motels and vacant property lining one of Atlantic City's three entryways.

The Casino Reinvestment Development Authority, which invests 1.25 percent of casino revenue in redevelopment projects throughout New Jersey, proposed a $10 million plan to revitalize the Route 40 entry. The road most benefits the Atlantic City Hilton and Tropicana.

The CRDA wants casinos to dedicate their redevelopment funds to Egg Harbor Township, where the 27 targeted properties are located. The two parties envision building non-casino hotels or office buildings.

The township would use its power of eminent domain to condemn the properties if it could not buy them privately. It remains to be seen whether casinos will support the project.

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Trump Taj Mahal received unwanted national attention when an in-room robbery led to gunfire in the casino's porte cochere.

Police arrested two of the three suspects, who allegedly bound and gagged two partners in a private card game in a Taj hotel room. One victim escaped and opened fire with a semiautomatic weapon.

There were no injuries.

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Anyone with Internet access can now view live construction pictures of Borgata, the $1 billion casino hotel being built in Atlantic City. The project, a joint venture of Boyd Gaming and MGM Mirage, has reached the eighth floor of its hotel tower and its sprawling low rise is taking shape.

The live pictures are available at www.theborgata.com. Click on "Building Borgata," then "Live Construction Cam."

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Atlantic City's closest casino competition, the racetrack slots in Delaware, reported a robust July. The three tracks generated slot revenue of $53.3 million, up 8.1 percent, for the five-week reporting period.

Two of the tracks, Delaware Park and Dover Downs, operate with the state limit of 2,000 slots. The other, Harrington Raceway, has 1,151 games.

(Joe Weinert covers the casino industry for The Press of Atlantic City newspaper. He can be reached at jweinert@pressplus.com.)

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