Headlines are gushing for Atlantic City as gambling revenues are up 17% in March from a year ago. This is certainly good news, but it usually pays to go a little deeper than headlines.
First of all, there is a bit of an issue with counting revenues month to month. Most companies don’t usually do this because it can give the impression of misleading trends, monkey around with stock prices and cause unnecessary emotional ups and downs among investors. There is a lot of data noise in month-to-month counting, which is why private companies usually go quarterly rather than month to month. Not to mention, if financial reporting were a fully free-market affair, meaning if the SEC or any other regulatory agency didn’t mandate reporting and its frequency was up to a simple agreement between shareholders and executives, then different industries would obviously have different reporting frequencies depending on what shareholders want.
The point is, who knows if monthly reporting is appropriate for the gambling industry in terms of identifying trends? It is difficult to know because the State wants its numbers to show that it is The Boss.
The first question to ask is, if revenues are up 17% month over month, is this due to luck (win percentage) or increasing volumes, or both and to what degree? Here are the raw numbers, released by the New Jersey government.
First, Bally’s, owned by everyone’s favorite Three Card Monte accounting street hustler (“Follow the solvent asset!”) Caesars, counting year-to-date since this gives a wider picture, numbers actually went down in gross revenue. Year-to-date revenue was $47.35M. Last year year-to-date brought in $48.45M for a drop of about 2%. Zooming in to March though if that tickles your investment fancy, there are some good signs of health. Slot machine win percentage stayed pretty much constant (8.9% last year vs 9.0% this year March), and win percentage for table games was down 2.4%. The drop in win percentage can account for the 2.2% drop in March gross revenue. Despite this though, volumes were up. Total drop/handle for March 2017 was $154.5M vs. $152M last March, for a volume increase of 1.6%, paltry but there. More people are coming to Caesars and they’re winning more.
Caesars Atlantic City though saw a massive increase in volumes this March, way more than simple noise can account for. Table games volume was up 51% (!) to nearly $70M from $46M last March, something of a serious groundswell. Win percentage for table games also went up a hefty 4.3%, and slots was constant. Overall Caesars Atlantic City saw a 32% rise in gross revenue this March, and it wasn’t just win percentage. Year-to-date saw a 24% increase. Caesars Atlantic City is doing much better than Bally’s, and the over 50% increase in volume is indicative of a serious boom.
Next up the Borgata, an MGM casino. Win percentage went way up 3.8% for table games and 0.2% for slots. Volumes were also up a respectable 2.6%. The combination of a better win percentage and higher volumes resulted in an 11.5% rise in March revenues, and 8.6% rise in gross revenue year-to-date.
How about Golden Nugget, now a Fertitta outpost, formerly owned by current President of the United States, DJT? (Sounds like the US is being run by an East Coast rapper. Or is it West Coast? I get my rapping coasts confused, but compared to BHO, which sounds like a pesticide, DJT is super white.) Here’s where a boom becomes even more obvious, the limited stats of March notwithstanding. Win percentage at table games plummeted to 10% from over 21% last March, and rose 0.3% for slots. So the Golden Nugget had quite an unlucky March, but the key is, volumes exploded higher 21.6%, Despite this explosion higher, March revenue fell 1.5%, BUT year-to date revenues rose 4.3%. Here you can see the danger of counting end figures month to month. They can make casinos look better or worse than they are actually performing by capturing an exceptionally lucky or unlucky month. Judging by volumes though, Golden Nugget is doing well and more people are gambling this year than last.
At Harrah’s in March, volumes were up again an impressive 19%. Win percentage at table games though dropped over 10%, and slot win rose 0.3%. An unlucky month but again with increasing volumes. Despite the lower win percentage, revenue was still up 3.7% in March, and 1.7% year-to-date.
DGMB Casino in Atlantic City saw a 16.3% increase in volume plus an added 9.6% increase in win percentage at table games, though a 0.7% decrease in slot handle, for a 25% increase in March revenues, and 18.7% increase year-to-date.
Finally there’s Tropicana, now owned by a consortium led by Carl Icahn. Tropicana saw a 29% increase in March volumes, plus a 6.4% increase in table games win percentage and a steady slot handle. Together this accounted for a 40% increase in March revenues and a 27.7% increase in revenues year over year.
The picture that emerges from Atlantic City is that many more people are coming to gamble. The place is finally waking up, the laggard is Bally’s, and it’s not just a March fluke. The numbers do carry over year-to-date. But while these numbers are certainly encouraging, especially the volumes, Atlantic City should be seen as retail investors in the stock market. When they start getting giddy, we’re in the deep phase of the boom. The stock market is showing similar patterns and the US economy looks pretty greased up. It could last for months, and probably does mean that unless war breaks out, MGM and Caesars will be safe for a short term trade.
Other than short term though, the long term positive that has come out of these statistics is that online gambling does not cannibalize casino revenues. It only adds to the market. Those who don’t normally travel to casinos are more likely to gamble online, and those who already travel to casinos are not likely to stop doing so just because online gambling is available. These are two different goods that attract two different markets.
