Casinos are sprouting across New Jersey’s borders while shuttered Atlantic City integrated resorts coming back to life under new management.
For many, these events are a tell-tale sign that the region’s gaming market is finally making a turnaround after years of revenue declines. The rosy picture, however, gives some analysts that feeling that it’s déjà vu all over again.
International credit debt watchers Fitch Ratings and Standard & Poor’s (S&P) Global Ratings are warning that Atlantic City may once again find itself at rock bottom should the gaming market becomes oversaturated and casino competition in the neighboring states intensify.
They were referring to the re-opening of Hard Rock Hotel & Casino Atlantic City and Revel in Atlantic City and the added competition from MGM Springfield, which is set to open in Massachusetts in October 2018.
“There is a concern with the increased supply that will be created by the opening of the Hard Rock,” said Colin Mansfield, a director at Fitch Ratings and a lead analyst in the gaming, lodging and leisure sector, according to The Press of Atlantic City. “The market has shown signs of stabilization after the closures, the remaining operators are seeing increased profits and more supply will take away from the existing properties.”
Atlantic City, according to the two ratings agencies, is enjoying revenue growth at the moment as demand outweighs supply.
The New Jersey Division of Gaming Enforcement (DGE) announced that AC’s seven surviving casinos generated brick-and-mortar gaming revenue of $215.4 million in September, a healthy 6.5% improvement over the same month last year.
In the long term, S&P noted that continued gaming expansion will not have a long-term impact on the city’s credit rating.
“While there could be short-term economic and budgetary gains, they are unlikely to improve state credit quality. With declining tribal gaming revenues in Connecticut and the erosion of the Atlantic City gaming monopoly in New Jersey, long-term risks from commercial casino gaming are an ongoing credit risk,” S&P said in its report. “As states in the region continue their gambling expansion, coupled with the region’s weak demographic trends, the likelihood that these revenues will meaningfully supplement state revenues over the long term diminishes and will have long-term credit implications.”
