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AC Casinos Stand to Lose $20 Million a Day
Atlantic City casinos may possibly lose more than $20 million a day in gambling revenue, according to an industry executive on Wednesday. The closure was due to a budget impasse that the state of New Jersey is now facing.
Gov. Jon Corzine was forced to withdraw unnecessary government services in accordance to state laws. The law requires state-employed gaming inspectors to monitor operations in the casinos and their jobs fall under the unnecessary services, thereby forcing the closure. The casinos have gone to the Supreme Court with a plea to stay open during the closure, but the plea was rejected Monday evening.
"It is a terrible thing for Atlantic City," Trump Entertainment Resorts Inc. Chief Operating Officer Mark Juliano said. "For future investment it makes people think that there is not a government that is stable enough to administer their own policies." Trump entertainment's shares in the stock market went down 6 percent.
Major casino operators affected include Borgata Hotel Casino and Spa, a joint venture between Boyd Gaming Corp. and MGM Mirage, and Harrah's Entertainment Inc., the world's largest gaming operator, which operates four casinos in the city.
This recent closure in Atlantic City coincides with speculations that high gas prices and the rise of interest rates might be steering at least a number of people away from gambling.
"In the past, the casino industry has been very resilient," said Jacob. "But we may be seeing ... somewhat of a breaking point where these economic forces do start impacting the casino industry," Majestic Research analyst Matthew Jacob said.
The shutdown could also stunt the city's plans to emulate the entertainment factor of Las Vegas, as companies think about the long term effect of this recent move by the government.
Juliano of Trump Entertainment said that a extended closure could affect the employees of the company, as it might need to lay off all of its estimated 2,000 casino work force. Aside from this, expansion plans might be halted, or at best thought over.
Jacob estimates that Harrah's could stand to lose 1 cent in earnings per share, while Boyd Gaming would be losing 1 cent every three to four days that it remains closed.
Juliano had thought it was a bluff. "We didn't think it would happen."
"I don't think that it could have a really long-term effect on the industry," Jacob said. "It is a reminder to investors that it is a regulated industry."
Trump Entertainment's shares were down $1.25, or 6.1 percent, at $19.03 at midday on Nasdaq. Harrah's shares were down $1.44, or 2.0 percent, to $69.09 and Boyd's shares were off 86 cents, or 2.2 percent, to $39.03 on the NYSE.
