In January, the New Jersey Division of Gaming Enforcement reported the first increase in annual gaming revenue since 2007, and industry insiders heralded the end of Atlantic City’s “Lost Decade.” While it is still difficult to chart the full impact of four casino closures, or the increase in competition from new casinos in the region, one thing is clear—Atlantic City’s casino industry is changing.
One of the more obvious changes to the Atlantic City casino industry is the addition of internet gaming products. Taxed at 15 percent compared to land-based gaming at 8 percent, internet gaming has been as lucrative for the state as for gaming operators. As of June 30, the state has collected $89.8 million in total gross revenue tax from internet gaming, and revenue for internet gaming operators has passed the $600 million mark.
Indeed, New Jersey’s success in raising tax revenue through the legalization and regulation of internet gaming has led several states to consider implementing their own internet gaming operations based on New Jersey’s model.
Despite early concerns that internet gaming would cannibalize land-based casinos, analysts (specifically Eilers & Krejcik) have provided evidence that New Jersey’s venture into internet gaming has done more good than harm. The addition of revenue from internet gaming has slowed and reversed the decade-long decline in total gaming win.
Internet gaming has experienced double-digit percentage revenue increases year-over-year for 2015 (21 percent), 2016 (32 percent) and 2017 (26.6 percent to date as of July 31, 2017). Table gaming win increased by 7.21 percent in 2016 compared to a decline of 8.63 percent in 2015, and slot win declined by 1.11 percent in 2016 compared to 7.64 percent and 9.16 percent declines in 2015 and 2014.
The decline in slot revenue (2007-2016) has been a long-term trend for the Atlantic City casino industry. A number of factors have contributed to this decline, including the national economic recession, increased regional competition (eight casinos opened in Pennsylvania in 2006-2010) and changes in gambler preferences.
Previous studies by the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism (LIGHT) at Stockton University have examined the impact of the economy and regional competitors on casino revenues, and LIGHT’s Millennial Entertainment Preferences study has provided insight into the tastes and expectations of younger gamblers. To a lesser degree, LIGHT has also examined the impact of declining visitation on the city’s gaming, hospitality and tourism industries as a whole. Figure 1 shows visitation (annual vehicle counts at the Pleasantville Toll Plaza of the Atlantic City Expressway) in comparison to slots, table games, internet gaming and non-gaming revenues.
The influence of the recession and regional competition can be seen in the peak and rapid decline in gaming revenues and visitation between 2006 and 2010. Likewise, the impact of the 2014-2016 casino closures can be seen in the sudden drop and decline in gaming as well as non-gaming revenues for those years.
Declines in slots revenue also track closely with declines in the number of chartered casino buses entering Atlantic City. In 2009 (the first year the South Jersey Transportation Authority counted vehicles rather than visit-trips), Atlantic City welcomed 177,596 buses. In 2013, that number was 102,248, before dropping to 63,006 in 2016. Whether this decline is more closely related to the introduction of internet gaming (at the end of 2013) or the shrinking number of “traditionals” (persons born between 1927 and 1945) who represented the majority of charter bus passengers is difficult to say.
Another method for examining shifts in the Atlantic City casino industry is to view gaming and non-gaming revenues as percentages of the total revenue share. Figure 2 shows total casino revenue shares for 2016, 2011 and 2006.
In 2006, slot revenue accounted for 58 percent of Atlantic City casinos’ total revenue. By 2011, slot revenue share had dropped to 52 percent, and in 2016 it represented 49 percent.
Table gaming revenue share has also declined, but to a lesser extent (2 percent in a 10-year period). In fact, non-gaming revenue has surpassed table gaming for total casino revenue share, growing from 20 percent in 2006 to 27 percent in 2011 before the casino closures and 26 percent in 2016 after the closures.
Internet gaming is becoming a greater share of casinos’ total gaming revenue, increasing from 4.48 percent in 2014 to 5.81 percent in 2015 and 7.56 percent in 2016. In 2016, internet gaming represented 5 percent of casinos’ total (gaming and non-gaming revenues).