The Showboat’s Employees Were Shocked by the Closing, Because the Casino Remains Profitable
Atlantic City saw an increase by nearly 35% of its gross operating profit in Q2 of 2014. The increase is due mainly to the numbers produced by the Borgata Hotel Casino & Spa, the city’s most profitable gaming location.
Borgata reached a $88 million tax settlement with Atlantic City in June. Most of the city’s casinos showed a profit, though their profits largely declined in the second quarter. In all, the 11 operating casinos showed a gross operating profit of $83 million.
What Is Gross Operating Profit?
Gross operating profit is a defined as earnings before taxes, interest, depreciation, and other expenses. Gross operating profit is an accepted indicator of profitability in the casino gambling industry.
The Borgata had an operating profit of $43.2 million, accounting for more than 50% of all profits for Atlantic City casinos in the second quarter. The increase in gross profits equaled more than 53% of the
Joe Lupo Attributes “Cabin Fever” to Increases
Joe Lupo, the SVP of Borgata, said that the casino had a good quarter by any standards. Of the $43.2 million, $11.8 million came from the tax settlement. “Take that away,” said Lupo, “And we still had a very profitable quarter. We had great visitation and volume.”
When asked to explain Borgata’s 53% increase from one year to the next, Lupo told reporters it was “cabin fever“. He added, “People wanted to get out and come down to Atlantic City.”
Revel Casino Q2 Losses
Readers only need to look at the gaming figures for the three casinos closing their doors in the next month to figure out why those businesses are closing. Of the three, Revel Casino had the biggest losses in the second quarter, with $24.3 million in losses.
Though it’s an appalling figure for a start-up business expected to be a next-generation gaming venues for Atlantic City, the losses represent a marked 44% improvement over the $43.7 million in losses over the same period last year. Revel is closing its casino on September 2, while the hotel closes on September 1.
Trump Plaza and the Showboat
Trump Plaza showed a $3.3 million operating loss for Q2. In 2013, the faded symbol of Atlantic City had a modest $143,000 profit in the second quarter of last year. Trump Plaza will close its doors on September 16.
The Showboat showed an operating profit of $7.6 million for the second quarter. The fact that the casino is still one of the most profitable operations in Atlantic City has caused considerable anger among the 2,000 employees who will lose their jobs when the casino closes on August 31.
The Showboat did show a decline of revenue from the $9.5 million collected in the second quarter of 2013. The closing of the Showboat is more of a sign of the weakness of its parent company, Caesars Entertainment, which is saddled with over $23 billion in debt. Caesars closed the Grand Tunica Casino in Mississippi earlier this summer, in an attempt to limit it operating expenses.
Startups and Turnarounds
Caesars Interactive showed a $2.7 million quarterly loss, but those losses are attributed to investments in support and marketing for the Caesars line of legal online gambling sites the company launched to support their burgeoning new business.
Resorts Casino continues its turnaround. The casino had a loss of $1.3 million in the second quarter of 2013, while Resorts Casino showed a $2 million profit in 2014.
Hotel Occupancy up 5%
For the Atlantic City casinos in Q2, hotel occupancy was at 83%. That number is up 5% from the previous year. That increase might not help the casinos which are closing (or their ex-employees), but the hotel traffic increase is a good sign for Atlantic City in general. The city is seeking to transition from gambling-based economy into a non-gaming related tourist and vacation destination. That requires investment in attractions, shows, dining locations, and shopping outlets, as well as better infrastructure to accommodate tourism.
Part of that infrastructure includes better access through airports, which are an important reason why certain New Jersey politicians want to use a proposed North Jersey casino to generate over a billion dollars in revenues for Atlantic City. This money would be channeled to infrastructure-building projects in and around Atlantic City over a 10 year period. When completed, Atlantic City would presumably be better placed to compete for tourist dollars from non-gaming visitors.
