Friday, January 11, 2008

Holy Rolling

Casinos were very recently (next to tobacco) the darlings of sin, for they had everything an investor could desire: growth, demographics, real estate, entertainment, deterministic odds, and cash flow. It was deemed, by optimists to be somewhat recession proof to boot.

Yesterday we saw Atlantic City's latest year on year revenue figures as reported here in NJs largest paper the the Star Ledger, yesterday, which showed a 5.7% drop - the first time EVER that gross revenues have sagged. Bloomberg broke out the individual gaming win figures for in Dec, YoY for each house which are rather more illustrative:

Hilton -15.9%
Bally's -15.8%
Borgata +1.7%
Caesar's -6.7%
Harrah's -10%
Resorts: -21.5%
Showboat: -14.3%
Tropicana: -20.9%
Trump Marina -6.8%
Trump Plaza: -4.3%
Taj Mahal: -11%

Industry Totals -10.5%
USD$ 371mm vs. USD$415mm in 2006

Two things are particularly noteworthy, on top of Cassandra's unsolicited opinion that Atlantic City is one of the true armpits of not just New Jersey, but America. The first is that competition (from PA slots and local pony tracks) was cited as the reasons - not the economy. But the erosion in December takes are particularly grim, and are likely to reflect more than secular competition.

The second point of interest is that The Borgata - the swankest, swishest of destinations (if such a description is actually possible in AC) eeked out a small gain, while the most plebeian of casinos (Resorts, Tropicana, Bally's) clocked up the largest drops. Clearly, the economy. real estate prices, inflation in energy and food are hitting some punters at a certain end of the inequality spectrum harder than others.

But like restaurants, and retail, casinos will prove to be squarely in the realm of consumer Discretionary (note the upper-case "D"), and seem on the path of being clusterf*cked by rising costs and falling revenues. Atlantic City is, of course, NOT Las Vegas. But one would be forgiven for questioning in what ways do they really differ, and will this be sufficient to overcome the domestic drag and cost-push pressures?

They have a rather special saying in Atlantic City, from the more optimistic hey-days of the Steel Pier: "You can lead a horse to water, but if you want to make it dive, you have to push it...hard"


Anonymous said...

Another indication that the "me too" UK embracing of casino's will be a day late and dollar short. The whole milking of asian high rollers seems to be a long term losing proposition as more and more global competition for casinos comes in.
As another aside i have always felt in any true crisis the state lottery method of funding will come a cropper and add to the stress on various state budgets.

Didn't someone do a spoof of Guns and Roses' "Paradise city" called "Geriatric City". I always thought it was weird AL but can't find anything on the web. But its a good depiction of Atlantic city and its army of coin bucket weilding pensioners is one of those disturbing images i wish i had never seen.

"Cassandra" said...

AC is much closer to Newark and Camden than it is to Las Vegas or Macau.

It is a sad place in the best of times when the sun is shining and the water is sort-of-blue.....ish, but in January or February, when its grey and the water is brown, and the days are short, there is a despair and melancholy about the whole place, a pervasive sense of failure and resignation in people, the kind that says: I didn't plan this...I didn't wan't just happened, slowly, deliberately, inexorably... The place is a bummer and if it were razed to the ground, no one would shed a tear.