ATLANTIC CITY — The second quarter of 2020 is the only three-month period without in-person legalized gambling in the seaside resort since it was first introduced in 1978, and the casino industry’s financial reports released Monday reflected that grim reality.
Atlantic City’s casinos reported a 170.4% year-over-year decrease in gross operating profits for April, May and June, a period when all nine of the city’s gambling parlors were shuttered by order of the governor to mitigate the spread of the novel coronavirus.
With only online gaming and limited sports betting available, the city’s casinos endured a $112 million loss in gross operating profits, compared to a $159 million reporting period last year, according to data released Monday by the state Division of Gaming Enforcement.
Casino Control Commission Chairman James Plousis said COVID-19’s impact on the industry made comparisons between the two reporting periods unreasonable. The DGE news release also said 2019 and 2020 were not comparable.
“It is also noteworthy that, during this period, the casinos undertook an amazing effort and expense to prepare a safe environment for the return of employees and guests,” Plousis said in a prepared statement following the release of the numbers. “That critical investment enabled the casinos to begin welcoming back visitors with appropriate limits in July, and started Atlantic City on the road to recovery.”
Atlantic City’s casinos closed March 16 and were not permitted to reopen until July 2. The 107 days without casino gaming is the lengthiest closure in the industry’s 42-year history.
The significant loss in operating profit was not surprising given the industry-wide shutdown, said Jane Bokunewicz, coordinator of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University. While room, food and beverage expenses could be cut by reduced purchasing, other operations continued, she said.
“Casinos incur substantial expenses even when the properties are closed to the public. Utility costs continue in order to keep the buildings climate controlled and some employees, like security, surveillance, and maintenance, remain working on site,” Bokunewicz said. “Additionally, some casinos continued to pay employee health care benefits and allowed employees to use accrued benefit time during the shutdown.”
Substantial cleaning and safety precautions were put in place in preparation for the reopenings and, at most casinos, the revenue from internet gaming and sports wagering was not enough to cover these expenses, she added.
Even after the industry reopened last month, COVID-19 took a significant toll on the city. The state’s mandated capacity restrictions and prohibitions on indoor dining, smoking and beverage service on the casino floor impacted guest visitation levels and total gaming revenue.
The industry’s quarterly reports show gross operating profit — a widely accepted measure of profitability for the gaming industry — as well as net revenue, hotel occupancy and third-party business sales.
Net revenue — a figure that includes gaming, hotel, food and beverage, and other sources of income — was down nearly 85% in the second quarter.
The industry reported $121 million in net revenue during the three-month period this year, compared to $796.8 million during the same time last year.
Because the casinos were closed for the entirety of the quarter, no hotel occupancy statistics were reported.
Only Golden Nugget Atlantic City reported a gross operating profit in the second quarter of this year.
The Marina District casino reported just more than $3.1 million in operating profits in the quarter, largely due to the strength of its online gaming presence.
The industry’s quarterly profit reports have not been encouraging since the June 2018 openings of Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort. In the eight quarterly reports since the two properties entered the Atlantic City market, the industry has reported comparable increases only twice, in the third and fourth quarters of 2019.
The first quarter of 2020, which included the March shutdown, was a 65.4% decrease in gross operating profit from the same quarter in 2019.