The Super Bowl helped Atlantic City casinos notch another big month in sports betting for February as they took in nearly $500 million in wagers on the big game, but the record books no longer matter as the coronavirus outbreak upends how the resorts operate.
The risks associated with the precarious financial condition of New Jersey's casinos are mounting as the state has ordered all casinos closed until further notice. Because they will still be able to operate their online gambling sites they may be able to offset some of the lost business, but with virtually every professional sports league suspending their seasons, it means online poker and casino games will have to carry the load.
Image source: Getty Images.
Yet sports betting has been the growth vehicle for Atlantic City since it was legalized in 2018, while peer-to-peer games such as online poker has declined.
Dustin Gouker, the lead analyst for PlayNJ.com, an online gaming industry site, said, "New Jersey's year-over-year gains remained impressive in February, but we are in uncharted territory now."
Online gambling's importance
Atlantic City casinos and racetracks won $287 million across all forms of gambling in the state last month, though it was slot machines and table games that accounted for the lion's share of the total.
Internet gambling, though, represented 18% of the total while sports betting accounted for 6% (handle is how much is bet; revenue is how much the gaming house won).
|
Source |
Revenue February 2020 |
Revenue Year-to-Date |
|---|---|---|
|
Casino Win |
$218.3 million |
$410.2 million |
|
Internet Gaming Win |
$52.0 million |
$107.1 million |
|
Sports Wagering Revenue |
$17.0 million |
$70.6 million |
|
Total Revenue |
$287.3 million |
$587.8 million |
Data source: NJ Division of Gaming Enforcement. Table by author.
As President Trump has declared a national emergency in response to the COVID-19 virus, and retailers and businesses of all stripes are temporarily closing their doors or canceling events with large numbers of people, casinos have also been forced to shut their doors to help thwart the spread of the virus.
MGM Resorts (MGM 1.51%), which owns the Borgata in Atlantic City, voluntarily decided to shut all of its casinos in Las Vegas before the state said everyone had to do it anyway.
Global operators like Las Vegas Sands (LVS 2.76%), MGM Resorts, and Wynn Resorts (WYNN 1.13%) just went through this in China, where the Macao gaming industry was shut down for two weeks at the cost of tens of millions of dollars to the casinos. That's a luxury many of New Jersey's casinos can't afford.
And now the sports world has come to a standstill as major league baseball, basketball, and soccer all suspended their seasons. Although there was hope college basketball's March Madness tournaments would still provide an outlet, the National Collegiate Athletic Association, which hosts the sporting event, has canceled it as well.
The state's racetracks, especially The Meadowlands Racetrack in East Rutherford, are endangered as the advent of sports betting in New Jersey has been a boon to their finances. It generated over $10 million in revenue in February, more than any other site and some two and a half times the amount realized at the second-place Resorts Casino Hotel.
More losers than winners
Yet PlayNJ's Eric Ramsey says some casinos are well positioned to capitalize on internet gaming's new role, pointing to the Golden Nugget as one example where its "online casino already generates more revenue than its retail casino, and others have been closing the gap."
Resorts, for instance, saw $14 million in casino win in February while the digital division generated $12 million in online gaming. But some are also not prepared for the coming shock.
MGM's Borgata, for example, has been New Jersey's biggest, most profitable casino, producing $66.4 million in total revenue last month. But 86% of it, or over $57 million, came from the casino itself; just 12% came from online betting.
Tropicana also realized just 12% of its revenue from internet gaming, while Hard Rock generated 10% of its revenue from the channel.
Further down, Ocean Resort only saw 2% of its revenue come from internet gaming, and some, such as Caesars Entertainment's (CZR) Bally's and Harrah's, don't even have an online casino presence, though Caesars itself does. But combining all of its operations, internet win is only 7% of the total.
Worse, only a few casinos offer peer-to-peer games: Borgata, Caesars, and Resorts, and only Caesars saw a year-over-year increase in revenue in 2019 as it hosts the Wolrd Series of Poker. The other two casinos experienced declines.
A bleak outlook
Numerous businesses and industries have obviously been affected by the coronavirus outbreak, but Atlantic City casinos were infused with new life through online betting and the legalization of sports betting.
Over 80% of their business is now in jeopardy, and as helpful as the extra business has been, it's unlikely internet gambling alone will be able to make up the difference.
