No one ever said that Atlantic City was recession-proof, and now we have the numbers to back it up. Revenues fell 7.1% in 2008, with profits down by 25%. From the AC Press:
The casinos can still make money, but the industry is far from recession-proof.
While gross operating profits fell significantly in 2008 and the fourth quarter, they managed to remain in positive territory, according to figures released Thursday by the state Casino Control Commission. Profits dropped by nearly 25 percent to $940.9 million last year, down from $1.25 billion in 2007.
Fourth-quarter profits fell by almost 46 percent to $131.9 million, down from $243.5 million in the prior-year period. The numbers are not surprising, said casino analyst Cory H. Morowitz, of Morowitz Gaming Advisors LLC.
The resort’s 11 casinos contended with competition from Pennsylvania slot parlors, temporary smoking restrictions on the gaming floors and a drop in consumer spending linked to the nation’s worsening economy.
“I think consumer spending will not improve until at least the fourth quarter this year, maybe beyond that,” Morowitz said. “It really is dependent on employment and consumer confidence. Consumers are not going to feel flushed for quite a while.”
The impact of less spending in the casinos is evident by declining revenues and income — only Harrah’s Atlantic City managed to improve its revenue in 2008.
But combined, the casinos posted a net loss of $900 million in the fourth quarter, compared to a net loss of $235 million in the same period a year earlier.
The larger income decline includes more than $890 million in non-cash write-downs required in the fourth quarter under certain accounting rules, said Linda M. Kassekert, the commission’s chair.
I’m surprised that gross gaming revenues fell by only 7.1%. For all of the belly-aching about the partial smoking ban and competition from Pennsylvania, Atlantic City’s gaming win actually declined less than Nevada’s, which shrank by about 10%. People are still willing to come to Atlantic City; they are just gambling less.
Of course, those fourth quarter numbers were awful, which suggests that, barring some miraculous turnaround, 2009 will be an even more challenging year.