Online Gambling Growth Of 32.1 Percent In 2016 Fuels Win For Atlantic City

Bolstered By Online Gambling, A More Focused Atlantic City Sees Revenue Rise For The First Time In A Decade

Atlantic City Finally Rebounds In 2016
For the first time since 2006, the Atlantic City casino industry experienced a revenue increase.

Last year, the city’s downsized casino industry posted gross gaming revenue of $2.6 billion, up 1.5 percent from $2.56 billion in 2015.

It was the New Jersey online gambling industry that would prove the difference maker.

In 2016, the online arm of the state’s gambling industry grew by 32.1 percent; enough to convert a marginal loss by the land-based industry into a small total win.

Is Atlantic City finally emerging from the dead?

On paper, a 1.5 percent gain is nothing to write home about, especially considering the growth of online. But given the turmoil AC has endured over the past few years, any gain, under any circumstances, is noteworthy.

Over the past few years, AC’s casino industry has been purged, with only seven casinos remaining, down from a peak of 12. In 2016, the boardwalk city saw the struggling Trump Taj Mahal shutter its doors.

Despite this, the industry as a whole isn’t far off from its 2013 tally: $2.87 billion in 2013 compared to $2.6 billion in 2016.

What this means is gaming revenue is concentrated at a smaller number of properties, suggesting that quality trumps quantity.

With revenue on the rise, it appears the Atlantic City market is beginning to right-size, although there are plans afoot to open at least one of the now shuttered casino properties.

In Atlantic City, less is more

The 2016 revenue numbers didn’t sneak up on anyone.

Over the past two years the individual casinos in the market have posted revenue increases, even as the industry as a whole continued to slide.

This multi-year trend can be seen by looking at the operating profit numbers of the remaining casinos from 2014 to 2015:

Casino2015 Op. Profit2014 Op. Profit% Change
Bally's$40 million $23 million76.6%
Borgata$216 million$158 million36.6%
Caesars$83 million$60 million39.4%
Golden Nugget$23 million$4.5 million396.3%
Harrah's$123 million$97 million26.0%
Resorts$16 million$2.5 million525.0%
Tropicana$46 million$60 million-22.4%

Upshot #1

I expect both individual casino revenues and profits to ascend when the 2016 data is released in the coming months.

The remaining casinos are no longer trying to hang on and survive, they’re thriving.

Reinvestment is happening across the board, and the city’s casinos are embracing new innovations in gambling, from online to skill-based slot machines.

Online spurs growth

What shouldn’t be lost in the shuffle is that were it not for online gambling Atlantic City would have experienced its tenth consecutive year of declining revenues.

Land-based casino revenue ($2.41 billion) was down 1 percent year-over-year, but internet gaming revenue rose 32.1 percent in 2016, falling just shy of $200 million. It was this $200 million that pushed GGR past 2015’s tally.

Suffice it to say, online gambling has become an integral part of New Jersey gaming revenue:

  • In 2014, online gambling accounted for 4 percent of the state’s gross gaming revenue.
  • By 2015 online gambling accounted for 6 percent of GGR.
  • And in 2016 online gambling accounted for 7.5 percent of GGR.

If the industry continues to grow, it’s not out of the question that 10 percent of New Jersey’s gaming revenue could come from online gambling by 2020.

Upshot #2

Without the legalization of online gambling in 2013, the takeaways from the year-end New Jersey casino revenue reports would shift from positive to negative.

The start of a new streak?

Historically, Atlantic City has been streaky when it comes to gambling, with the industry going through prolonged periods of plenty and famine.

Casino revenue in Atlantic hit an all-time high of $5.2 billion in 2006. Additionally, 2006 marked the 29th consecutive year of year-over-year growth, as casino revenue increased each and every year since the first casino launched in 1978.

Despite competition popping up in the area, the decade leading up to the 2006 record saw total casino revenue rise by 25 percent, thanks to modest, but sustained growth:

  • 1997: $3.906 billion (+2.43%)
  • 1998: $4.033 billion (+3.25% )
  • 1999: $4.164 billion (+3.25% )
  • 2000: $4.300 billion (+3.27% )
  • 2001: $4.303 billion (+0.06% )
  • 2002: $4.381 billion (+1.82% )
  • 2003: $4.488 billion (+2.44% )
  • 2004: $4.807 billion (+7.09% )
  • 2005: $5.018 billion (+4.40% )
  • 2006: $5.217 billion (+3.97%)

But from 2007-2015 the numbers went in the opposite direction:

  • 2007: $4.921 billion (-5.69%)
  • 2008: $4.545 billion (-7.64%)
  • 2009: $3.943 billion (-13.24%)
  • 2010: $3.565 billion (-9.59%)
  • 2011: $3.318 billion (-6.94%)
  • 2012: $3.051 billion (-8.03%)
  • 2013: $2.870 billion (-5.93%)
  • 2014: $2.742 billion (-4.47%)
  • 2015: $2.563 billion (-6.53%)

The decline has many causes:

  • Competition continued to appear, saturating the region with casinos.
  • Atlantic City itself became supersaturated with casinos, as the town of 35,000 residents boasted 12 properties.
  • There was also the financial collapse and economic recession that began in late 2008, which only exacerbated the problem.

Two of the three issues listed above are improving, as the number of Atlantic City has dropped significantly and the economy is turning around — although it hasn’t reached Atlantic City yet.

Looking to 2017 and beyond

Considering the city’s historical trends, and the current situation, it will be interesting to see if Atlantic City can continue this growth trend, or if 2016 will come to be seen as an outlier several years down the road.

There’s no reason the Atlantic City casino industry can’t build off of 2016:

  • Online gambling is still growing.
  • The New Jersey Division of Gaming Enforcement continues to be one of the most progressive regulatory bodies in the country.
  • With larger pieces of the market, the remaining casinos are reinvesting and innovating.

Of course, there are also dangers on the horizon. From continued casino expansion in surrounding states (or in North Jersey) to Atlantic City’s plunge towards bankruptcy.

Image credit: f11photo / Shutterstock, Inc.

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Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.