Casino analyst Schmitt puts his two cents on the table
CIBC World Markets analyst Bill Schmitt gave mixed reviews of the 12 Atlantic City casinos after a recent tour of the resort.
Business, Schmitt said in recent reports, "is good, but not great." The problem, he said, is Atlantic City appears to be running heavy promotions in reaction to the recent expansion at Tropicana, dubbed "the Quarter."
Although he expected the Tropicana to heavily market its expansion, "we were somewhat surprised to see that just about every property is marketing aggressively," he said.
Analysts tend to frown upon promotional spending, such as bus coin and other giveaways, because while it often leads to revenue increases, it hurts the bottom line.
Other observations Schmitt made: The poker craze continues, with casinos dismantling slot areas to make way for table games. In response, table game revenue is increasing, while slot play has been declining.
Also, Atlantic City is continuing to try to transform itself into an overnight destination and tapping into a younger, 21-to-49-year-old demographic.
Schmitt gave these reviews of some of the A.C. operators:
Borgata: Schmitt called the casino "a category killer" that has taken 14.3 percent -- the largest share -- of the market. He thinks Borgata has both grown the market and taken customers from existing properties.
Tropicana: "The Quarter," a retail and restaurant venue, has attracted impressive volumes of traffic, but the Havana Tower hotel expansion "falls short," Schmitt said.
"In our opinion, the rooms in the Havana Tower do not come close to matching the quality of the rest of the project," he said.
Harrah's: The casino, long focused on the older slot player, is "clearly being transformed to cater to a more upscale and younger crowd," Schmitt said. Harrah's has removed slot machines to make way for a new bar and table games, a trend in A.C. Although the move has not yet translated into greater revenues, Schmitt said he is encouraged that casinos are slowly attracting a younger demographic.
The Trump casinos: Trump Entertainment Resorts recently emerged from Chapter 11 bankruptcy protection and is quickly trying to play catch-up by renovating its casinos and working on plans for a hotel expansion at the Trump Taj Mahal.
"We believe this investment in the market clearly indicates a confidence that there is additional market potential out there," Schmitt said. "Given the success of the Borgata over the past two years and the overall profitability in the market, we would tend to agree."
