Abstract
Atlantic City's 2016 Better Than Its 2015, Due to Online Gambling; City Still Faces Enormous Economic Challenges Due to Gambling's Almost-Decade-Long Decline
For the first time in a decade, Atlantic City had an up year: its 2016 gambling revenue was just shy of $2.6 billion, a slight year-over-year increase from its 2015 revenue of approximately $2.56 billion. (Atlantic City last saw a year-over-year increase in 2006, before the Great Recession.) The gain was powered by a 32% year-over-year increase in Internet gambling revenue, which climbed to $196.7 million for 2016, partially offset by a 0.3% decline in land-based gambling revenues at Atlantic City's seven surviving casinos. It may not do the new president's ego any good to know that the closure of a casino bearing his name (the Trump Taj Mahal) did not significantly hurt Atlantic City, and that in fact, the venue did better on an aggregate basis—even if only fractionally—without his namesake casino.
Good news for Atlantic City's casinos is good news for Atlantic City: casinos are—even after the closure of five of 12 of their number—the city's largest employer (both directly and indirectly, in terms of the businesses that service them) and largest contributor to municipal revenue. Atlantic City, in fact, is a cautionary tale about the danger of over-reliance on any one industry, especially something as fickle as entertainment/tourism, which is very vulnerable to changes in taste, to competition from newer offerings, and to economic downturns reducing potential customers' discretionary spending. Since the Great Recession, which was more or less contemporaneous with the start of Atlantic City's precipitous casino revenue decline, the poverty rate has risen to 37%—almost four-in-ten residents earn less than the depressingly low federal poverty levels of $11,800.0 for an individual and $24,300 for a family of four. That poverty level is almost three-and-a-half times New Jersey's average poverty level (11%) and more than two-and-a-quarter times the national level (15.47%).
Nevada Casinos Swing from Net Loss to Net Profit
In the fiscal year ending June 30, 2015, Nevada casino resorts had $24.6 billion in revenue but a net loss of $662 million. A year later (fiscal year ending June 30, 2016), the state Gaming Control Board's annual report shows that the casinos had revenues of $25.2 billion and income of $979 million. The $600 million in additional revenue (2016 over 2015) 1 led to a $1.6 billion swing from loss to profit—obviously, more was going on than just the revenue increase (though the revenue increase, a gain of 2.4% year over year—obviously helped). With the revenue gain, Nevada casinos came in just a hair (0.1%) under 2007's record $25.3 billion revenue.
Continuing a now long-standing pattern in Nevada, most of the casino revenue is non-gambling: for fiscal 2016, gambling revenue accounted for only 34.2% of total revenue—barely more than a third—and was the lowest percentage to date, declining slightly from fiscal 2015, when gambling revenue was 34.9% of total revenue. It's been almost 20 years (fiscal year ending June 1998) since gambling brought in more than half of Nevada casino revenue. As Gaming Law Review and Economics Editorial Board Member David Schwartz put it, “Nevada casino resorts have always been about more than just gambling.” The truth of that can be seen in looking at how the revenue grew in fiscal 2016: gambling revenue only grew around 0.25%, but room revenues grew 8%, while dining revenue grew nearly 3%.
Maryland Casinos Set State Revenue Record for December 2016
Maryland's casinos brought in $133.5 million in revenue in December 2016, soaring past the previous record ($104.3 million) set in May 2016, according to the Maryland Lottery and Gaming Control Agency reported.
The increase was powered largely by the opening of the new MGM National Harbor casino resort. The $1.4 billion complex was open for 23 days in December, bringing in $41.9 million in gambling revenue, a significant number that helped push the state casinos' aggregate results over the top—though still second to the $48 million brought in by the Maryland Live casino.
However, while the aggregate numbers were record setting, that doesn't mean the news is good for all six of the state's casinos. Maryland Live's $48 million was down 11.4% on a year-over-year basis from December 2015, which decrease is attributed at least in part to a loss of customers to the new MGM National Harbor casino. While analysts note that the gaming market overall grew in Maryland, showing that development can stimulate growth, the fact that some of the new casino's revenue seemingly came at the expense of other casinos shows that new development is not all upside.
Macau Casino Revenue Grows for Fifth Straight Month
In December 2016, Macau's casino revenue rose 8% on a year-over-year basis, to $2.48 billion, according to the Macau Gaming Inspection and Coordination Bureau. This gain built on a 14.4% year-over-year increase for December 2016, and is the fifth month in a row of increases.
However, while the second half of 2016 was positive for Macau's casinos, the first half was still strongly negative, as a several-years-long decline continued through the first part of the year. As a result, annual revenue for 2016 declined 3.3% from 2015. The good news is projected to carry forward into the new year, with some analysts, such as ones surveyed by Bloomberg, expecting a 7% annual revenue increase for 2017. That increase though, while very welcome, will only eat into—and not even begin to fully erase—the significant revenue reductions experienced by Macau over the last few years. Increases are being led by gains in “mass market” (i.e., non-VIP gamblers), itself being driven by an increasing focus on non-gambling amenities and marketing to mass market players; however, the gambling venue is still experiencing significant challenges in the form of China's ongoing anti-corruption campaign and economic headwinds. The opening of new, more tourist-friendly (i.e., more Las Vegas-style) casino resorts, while good for the area's total gambling-related revenue, will also pose a threat to older, more purely gambling-focused casinos, which may experience some cannibalization of customers.
Asian Gambling Market Becoming More Crowded: Philippines, Singapore, India, Japan
Another challenge for Macau's casinos is the increase in gambling venues elsewhere in Asia. Such venues not only draw non-Chinese gamblers who might otherwise go to Macau, but also have drawn off part of Macau's Chinese VIP gambler clientele, who—in the wake of China's anti-corruption campaign—have looked for venues which are less scrutinized by China than Macau is.