For Atlantic City casinos, high season brings low numbers

The arrival of summer is supposed to make life easier for Atlantic City's casino operators. This summer, however, is off to a rocky start.

Revenue numbers for June show a drastic dropoff of nearly 14 percent, extending a string of gloomy economic reports into what had always been the high season for gambling halls along an ocean beach.

The anemic economy, increased unemployment, fears for job security, and growing slots competition from Pennsylvania have cut into discretionary spending that used to find its way to Atlantic City.

Atlantic City's 11 casinos took in $322.7 million in revenue last month - down $50.9 million compared with a year ago. The figure is just below the $323.4 million they generated in June 1998, when there were a dozen casinos in town.

Each of the 11 gambling halls reported a revenue decline, ranging from 4.2 percent at the Borgata to 24 percent at the Atlantic City Hilton. Again, a first for a summer month.

Revenue from dealer-staffed table games, which Pennsylvania slot houses currently do not offer but are pushing lawmakers to legalize, decreased at a clip almost as fast as slots revenue: 11.3 percent compared with 14.5 percent for slots.

"[The revenue decline] is better than some previous months," said gaming analyst Andrew Zarnett, "but given we are in the summertime, which is a peak season for Atlantic City, it's still terrible.

"As new supply continues to come online in the form of PhillyPark, the downtown Philly casinos, table games in Pennsylvania, and additional New York slots capacity, Atlantic City will continue to experience declining market share," said Zarnett, of Deutsche Bank AG. "If we look ahead in five years, we will find the Atlantic City market to be significantly smaller than it is today, with fewer casinos."

Meanwhile, the eight Pennsylvania casinos, led by PhiladelphiaPark Casino and Racetrack, generated $165.1 million in gross slots revenue, up nearly 22 percent from the previous year.

The four casinos in Atlantic City that are owned by Harrah's Entertainment Inc. each reported double-digit decreases last month: Bally's (-19.1 percent), Caesars (-16.6 percent), Harrah's Resort (-12.4 percent), and Showboat (-10.1 percent).

"This is the third summer that revenue is down," said Dan Nita, Harrah's Entertainment's mid-Atlantic president. "We will not hit last year's numbers. That's becoming apparent."

For the first half of the year, the city's casinos generated $1.94 billion, down 15.3 percent from the same period in 2008.

Nita said last month's figures were affected by the same dynamics, including the economy and new gambling competition, that affected the first five months of the year.

New Jersey's unemployment rate rose in June to 8.8 percent, up from 8.4 percent, the highest in the Northeast and the Garden State's top rate in 17 years, according to the New Jersey Labor Department.

Nita said the poor weather in June, when virtually every weekend brought some rainfall, had little impact on gaming revenue.

The huge spike in Pennsylvania slots revenue was attributed primarily to the addition of the Sands Casino Resort in Bethlehem, which opened May 22 with 3,000 slot machines. The Sands took in $19.6 million last month.

When comparing only the seven Pennsylvania properties that were open in June of both years, the year-over-year slots revenue increase was 7.4 percent.

But clearly, the Sands Casino hurt more than just Atlantic City's gambling halls.

Three of the eight Pennsylvania casinos registered revenue declines last month. Mount Airy Resort and Casino in the Poconos reported the biggest decrease - 14.5 percent. The casino is less than 40 miles from the Sands.

"Absolutely, it's had an impact on our property," president and chief executive offer George Toth said yesterday. "A large portion of our database was sitting out there in the Bethlehem/Allentown/Easton area."

Janet Augenthaler, 66, of Queens, N.Y., visited the Sands Bethlehem Casino on June 30 and was impressed. The avid slots player has gone to Atlantic City, Empire City Casino at Yonkers Raceway, and Mohegan Sun in Connecticut in the past.

"I'm staying away from Atlantic City right now," she said, "because I prefer to go somewhere closer."

Pressure on Atlantic City is coming from all fronts.

Maryland is anticipated to add 15,000 slot machines in five locations, including Baltimore, over the next two years.

Earlier this week, the two Indian casino resorts in Connecticut - Foxwoods and Mohegan Sun - announced a joint billboard campaign aimed squarely at Atlantic City.

The billboards, on major arteries in North Jersey, as well as the A.C. Expressway and the Long Island Expressway, proclaim: "Two worlds beat one city."