Inside Asian Gaming

August 2008 | INSIDE ASIAN GAMING 33 B ut last summer was anything but, thanks to the pasting inflicted by the new racetrack slots in Philadelphia and New York. This summer add the fallout from the mortgage meltdown, which has screwed credit into the ground, and the combination of a slumping economy and rising fuel costs and a partial smoking ban which in a few months will be a total smoking ban and Atlantic City’s casinos are swimming in even rougher seas. “It’s very difficult for anymarket tohandle one challenge,thismarket’s having to handle four,” said industry analyst H a r v e y Perkins. “And only one was known, which was the competition factor. The rest nobody knew was coming, unless your name is Kreskin.” Perkins, senior vice president of Spectrum Gaming, one of the industry’s leading research and consulting firms, lays no claim to clairvoyance, but when he peers into the mists of Atlantic City’s immediate future he admits to encountering only more mist, most of it still blowing in from those racinos in her key feeder markets. “We still haven’t seen any sign that this additional supply has been eaten up yet.This still presents a challenge to Atlantic City,” he said.“And we still haven’t seen the full ramp- up of Pennsylvania. You’re going to have two Philadelphia casinos coming on line, which represents a greater expansion of the convenience market.” There is an analogy, he says, in how Las Vegas flourished in the face of the onslaught from California’s Indian casinos and Reno did not. “Atlantic City, unlike Vegas, at the first instance o f supply s h o c k , e x p e r i e n c e d alarming declines.” New Jersey was the only one of 12 U.S. states with commercial casinos to see revenues decline in 2007. It moved in a direction opposite the rest of the nation, down 5.5 percent against a 5.3 percent increase nationwide. The new competition had a lot to dowith it.In this respect ErnieD’Ambrosio,managing director of the Atlantic City office of leisure and hospitality consultants The Innovation Group, agrees with Perkins.“Last year, I think, caught a lot of people by surprise,”he said— “the depth of the impact.” As for this year, it has been “brutal,” to quote a recent report in The Philadelphia Inquirer. Casino revenue was down 4.8 percent in the first quarter. EBITDA, the measure of a casino’s ability to generate profits, was down 17.7 percent as a result. Nine of the city’s 11 casinos experienced EBITDA declines. The average price of a hotel room dipped from $101.84 in the last three months of 2007 to $93.03. The second quarter wasn’t looking too promising either. May was only the second month this year that gambling revenues were up compared to last year, and that was against a May 2007 that Pennsylvania helped drag down by 5.5 percent. And the increase was less than dazzling, easy comps notwithstanding—it was 1.6 percent—and that was with an extra weekend day, better- than-average table hold, a strong Memorial Day holiday and Uncle Sam’s economic stimulus checks. Slot win actually was down 1.5 percent,better than last May’s 7 percent slide, but despite a 2 percent decrease in the number of machines per casino, average win per day essentially was flat. Casino revenue was down 4.4 percent through the first five months of 2007. This year it was down 5 percent. Last year, slot win was down 6.9 percent. Through May 2008 it was down 7.1 percent. About 60 miles away at the 2,750 or so slots and EGMs at Harrah’s Chester Casino & Racetrack in Chester, Pa., revenue was up 25 percent. Farther north and east, at Philadelphia Park Casino and Racetrack in Bensalem, Pa., the win at some 2,700 machines was up more High Tide in Atlantic City Summertime in Atlantic City and the living’s supposed to be easy—sun, surf, salt water taffy, charter buses bursting at the seams with day- trippers, the endless jangle of 35,000 slot machines. Feature