Operating costs have led to a fall in land-based casino profits in Atlantic City, New Jersey. Figures released for the first quarter of 2023 saw gross operating profits down by 15% when compared to last year.
There are nine land-based casinos in Atlantic City and the first three months of this year haven’t been as successful as they wished.
The reported figures came from the New Jersey Division of Gaming Enforcement. They are the regulatory body for the New Jersey gambling industry. The report showed that the operating profit recorded by Atlantic City’s casinos was $135.4 million. However, that figure is $23.6 million less than was recorded in the first quarter of 2022.
It’s a different situation for online casinos in the state of New Jersey as per NJ bet. Revenue figures have been showing increased amounts being earned in the early part of 2023. This includes a record $152.9 million in January 2023.
With the weather still being cold at the start of the year, many gamblers preferred to stay at home and gamble online. Figures do seem to back that up with high amounts gambled online in the first and last three months of the year.
That’s one reason why in the first couple of months of this year, online casino gambling reached $295.5 million. That was a 10.3% increase on the figures for the corresponding period of time in 2022.
The new year has seen gambling at the online casinos in New Jersey becoming an increasingly important part of the state’s gambling industry 2013 saw online gambling launched in New Jersey. Since then over $6 billion in revenue has been earned. It now accounts for nearly 40% of the total gross gaming revenue figures for 2023.
With the US gambling industry still expanding, why has the gross operating profits seen a 15% fall? Analysis of the figures shows that the costs being incurred by the nine Atlantic City casinos have increased in 2023.
The wages paid to housekeeping staff have risen significantly. This has been the case after the casinos agreed a new contract with their employees last summer.
The new contracts saw a $22 hourly rate introduced for housekeeping employees. In previous years, unions had been seeking improved health care and pension benefits. Last year though the emphasis was placed on significant pay increases.
The land-based casinos feared that there was a possibility of strike action taking place. All nine of the casinos in Atlantic City agreed to the new terms after a strike had been authorized against though not signing the new employment contracts.
Resorts president Mark Giannantonio said that he was “thrilled for the employees” who had been “working really hard for us.” However, the increased costs have now started to hit the profits being made.
There has also been an increase in the number of employees on the payroll. Experts see the current situation as something that often happens when an industry anticipates future growth and success. While they wait for the extra revenue to arrive, the additional costs incurred cause a drop in profits.
Mark Giannantonio believes that another reason for the drop in profits is the current higher rate of inflation in the US. This is continuing to put pressure on the land-based casinos and causing even higher costs.
There has also been mixed news regarding financial figures for other casinos in the first quarter of 2023. Bally’s recorded a loss in the first quarter of 2022. However, this year their operating profit is $88,000. Also doing well was Harrah’s profit that saw a 21% increase compared to the same time period last year.
It wasn’t such good news for Resorts who recorded a $284,000 loss compared to a profit of $527,000 in last year’s Q1. Borgata’s profit saw a major fall, down just over 50% to $22.8 million. Hard Rock and Tropicana both saw profits down by a double-figure percentage.
Net revenue for the casinos was $765.6 million. That was an increase of 5% from the amount earned in the first quarter of 2022. There were also increases in areas such as hotel occupancy and the average hotel room rates.
The hope will be that inflation is curbed and revenue continues to increase. That happening will hopefully see the operating profit figures showing a better comparison to the results seen last year.
Atlantic City land-based casinos have spent over $1.5 billion in capital improvements over the past two years. This should see improved results in the future.