Author: Casino Connection Staff

Now more than ever, who wouldn’t want to get hold of a crystal ball—an accurate one? While there’s been plenty of speculation about the Covid-19 pandemic—how long it will last, how soon businesses will get up and running, how consumers will consume in the post-viral age—the lasting impacts of the contagion will be known only in hindsight.

In the meantime, we asked Bob Ambrose to share his views on the pandemic, and how it may shape the industry in Atlantic City and environs. A noted hotel and casino consultant, adjunct professor of casino management, and onetime Atlantic City casino executive, Ambrose spoke from his home in New Jersey.

At first, we were looking at a brief shutdown for Atlantic City. Now April is a loss, and May is looking questionable. How much can the industry tolerate? And is it important for AC to reopen by summer?

Ambrose: There’s no question that going past 30 days is scary for the entire industry. It’s going to depend on the properties themselves, how they’ve controlled their debt, and whether they’re individually owned. The Mt. Airy Casino in Pennsylvania, for example, is owned by a single entity. For properties that are part of a corporate structure based in another jurisdiction—like MGM or Caesars—that’s a whole different model.

If Atlantic City doesn’t see some summer revenue—worst-case scenario, it’s closed for part of the summer—it’s definitely going to impact not just the properties themselves, but all those suppliers and vendors, and the employees of those suppliers and vendors, and then the community: the local dry cleaner and grocery store.

Hopefully this can be right-sided pretty quickly, but the virus is a moving entity. We’re seeing the worst of it now in New York and North Jersey, but other states could be coming into the pipeline two to three weeks later, so casinos in those jurisdictions will be down longer and coming back online later.

The impact is horrible financially for the entire industry. The outbreak will have a negative impact on tourism for the remainder of 2020 and beyond, both in the U.S. and internationally.

When casinos reopen, could local or regional properties in Pennsylvania and New York grow their markets at the expense of AC?

At least for a time, people may choose to stay closer to their home base, for a smaller, regional casino experience, rather than travel and enter a huge casino property. The smaller properties—I’m thinking Parx, Rivers and those entities on the Pennsylvania side—will benefit, as people think, “I’ll just go out for an hour, do my thing, then go home” instead of driving to the shore.

It’s important to keep in mind that part of the disruption has been people’s income flow. The pipeline of disposable income for travel, gambling and entertainment among the masses will not be flowing as it did in pre-virus days.

Let’s look at online gaming as a potential bright spot. How much was it adding to the revenue pot in AC before the shutdown, and how much has it spiked since?

Atlantic City’s internet gaming had steady growth since legalization in New Jersey in 2013; iGaming saw a 61 percent increase year-over-year in 2019, a revenue total of $482.7 million. I think it’s too early to tell how much it’s activity contributed during the shutdown, but any gaming revenue for a casino during this time is meaningful.  

A lot of players are migrating online. Is there a chance they may not return to the casino, because online is more convenient and they’ve grown accustomed to it?

I don’t believe so for the long term. Online gaming has its purpose and some customers do prefer it, and the brick-and-mortar experience is completely different.

In the short term, online may continue to see more of a bump than normal, simply because of a reluctant customer base, people not wanting to return to a crowded environment such as a casino.

What will this crisis do to non-gaming, and will the whole resort “ship” be stabilized at once?

The integrated resort experience has grown in product and diversification in recent years, with each segment contributing its own unique experience and financial bottom-line under one property brand umbrella. Many times, these are separate companies within themselves, paying rent and employees apart from the main property host.

A positive note is that in Atlantic City, its hotel/casino properties were in a much stronger financial position headed into the shutdown. The entire model has been disrupted, but the financial way back will be a collective effort, with all parties in it together. The next quarter in gaming and hospitality will be very fluid, and the remainder of 2020 at times could resemble a patchwork quilt on the spread sheet.

The length of the shutdown is unknown, and it’s a huge factor as to what the industry looks like post-virus.

What do you foresee happening as we move into spring and summer?

Casino properties will reopen in stages. Obviously, customer demand will be slow, and we may see jurisdictions limiting the number of people and open areas within the casino environment, restaurants and other venues, mimicking what supermarkets are presently doing.

Casino floor managers have told me they’re looking for ways to redesign sections of their gaming floor, at least in the short term, to create more space between banks of games and individual units. It’s hoped that will make casino patrons feel more comfortable. Perhaps blackjack tables will be limited to three players. All of this is going to be on people minds when the government finally says, “You can go out now.”

There will be some pent-up demand, with people just wanting to be back out in the world. The variable in the equation is how long the industry is shut down, but marketing executives should be developing plans to revamp their summer campaigns, take an additional look at fall, and adjust as necessary.

Do you feel optimistic about the rebirth—again—of Atlantic City?

I’m always impressed with Atlantic City. It amazes me how it always comes back from adversity. Just when you think they’re about to close the Atlantic City Expressway, some little spark happens, and it all comes back to life.

We just saw that in the past couple of years. Properties like Hard Rock and Ocean took a chance, and investors followed, not just on the casino-hotel side, but at the street level. The city as a whole, despite its political issues, had just started to walk again from a steady crawl.

It’s down now, but yes, it’ll come back. The remainder of this year, in terms of projections for the properties, will have to be rewritten. Marketing plans have been scratched. Okay, we don’t like to lose the entire month of April, and this thing may go on even longer, but at least there’s a (tentative reopening) date out there, so marketing can begin to come up with ideas and plans and offers to infuse the flow of the customer base once things get operational.

It’s so important to stay in touch, not just with employees but with customers, letting them all know, “We’re all in the same boat. We want to get back to work and serve you and welcome you to our property.” But it’s going to be a very slow ramp-up. It’s not going to be like flipping a light switch. You’re not going to see a mad dash to the nearest casino.

Atlantic City is a ghost town these days due to the Covid-19 outbreak, and the state could lose $540 million per month in casino-related revenues as the lockdown continues, says the American Gaming Association.

The mandatory casino closure has left more than 26,000 casino workers jobless and will take a big bite out of the $3 billion industry.

“We haven’t seen it play out yet, but if you look at the economic numbers that are going to start coming out, this portends to be a worse economic downturn than we even saw in the Great Recession,” Clyde Barrow, a professor at University of Texas Rio Grande Valley and an expert on the casino industry, told the New York Post. “It will be the biggest blow to the casino industry that we’ve seen in a lifetime.”

Casey Clark, vice president of strategic communications for the AGA, said in a statement he remained hopeful that the casino business would rebound as it did after the recession, calling the industry “incredibly resilient.”

“Right now, we’re focused on working with the federal government so that all corners of the industry have the ability to weather this unprecedented public health crisis,” Clark said.

Still, the industry nationwide could lose more than $43 billion in revenue over the next two months if the Covid-19 crisis continues, according to a report in The Hill last month.

“Nothing is like it was before,” said Jose Torres, of Cafe di Roma in Atlantic City. “Everything has changed. Workers are only working three days as people are scared to come out. But as long as they let us keep open, we’ll stay open.”

Barrow said it’s a safe bet the pandemic will put some of the casinos out of business for good.

“Some may go into bankruptcy, as happened back in 2006 and 2010.”

In related news, at an emergency meeting April 7, the Casino Reinvestment Development Authority allocated $2 million in grants for small-business recovery in Atlantic County. The board also approved more than $60,000 for food assistance and homeless outreach in Atlantic City, according to the Press of Atlantic City.

In addition, CRDA signed a deal with the state Department of Health and Spectra Venue Management for the operation of a federally-run field hospital at the Atlantic City Convention Center for non-Covid-19 patients.

“I think the actions that this board took demonstrate our willingness and our ability to have compassion and understanding for the people in Atlantic City and Atlantic County, and our desire to be helpful in this crisis,” Board Chairman Robert Mulcahy said.

The small business grants will be administered by the New Jersey Economic Development Authority as part of its statewide recovery response. More than 1,000 small businesses in Atlantic County have applied for the $5,000 grants since the process began April 3, said CRDA Executive Director Matt Doherty.

Conversion of the Convention Center into a 250-bed field hospital has begun. The site, selected by the U.S. Army Corps of Engineers as a regional medical center, has the capacity for up to 3,000 beds.

In February, state taxes paid by casinos and racetracks in New Jersey amounted to almost $25.7 million. The casinos alone generated more than $24 million. It’s not chump change. The figures reflect 21 months of increasing overall gaming revenue, year over year.

That winning streak is now over with the March 16 closure of casinos in the state.

Based on data from the state Division of Gaming Enforcement (DGE)—excluding online gaming, internet sports wagering and state sales taxes—an estimated $738,261 in casino-related taxes and fees has been lost for each day the casinos have been closed. That estimate includes all land-based gaming revenue taxes, luxury taxes, parking fees, hotel room fees, tourism promotion fees, the progressive slot tax and expired vouchers, according to the Press of Atlantic City.

The one area where revenues will increase is online. If online revenues for March increase 50 percent over last March, it would generate an estimated $58.7 million. “But this would only make up about 26 percent of the $223.2 million generated by brick-and-mortar casinos in March 2019,” said Rummy Pandit, executive director, Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University.

According to DGE spokesman Lee Moore, the 15 percent internet casino gross revenue tax and the casinos’ 8.5 percent and 13 percent sports wagering taxes are deposited into the Casino Revenue Fund for programs that assist seniors and the disabled. The 8.5 percent and 13 percent sports wagering taxes for the racetracks go into the general fund.

Will the loss of revenues affect programs funded by the taxes? It’s a strong possibility, especially if the casinos remain closed into the busy summer months, said Pandit. “The longer the shutdown continues, the more difficult it will become to make up for lost tax revenues.”

And when the crisis ends, revenues will not be back to par right away.

Gaming, hospitality and tourism consumers may have less disposable income to spend in Atlantic City for some time, Pandit said, meaning the state’s revenue projections may continue to fall short. “So it’s compounded every which way,” he said.

John James has a long history in the gaming industry from working in Las Vegas casinos to multiple leadership positions in Indian Country. James took over at Foxwoods Casino Resort in July 2019, and has made progress moving the property forward, which came to an abrupt halt when Foxwoods closed in March in the wake of the spread of the coronavirus. James has been one of the most proactive of gaming executives and that didn’t change in this crisis. He and his senior management team immediately worked up ideas about how to maintain contact with the many constituencies of Foxwoods. He spoke the Casino Connection Publisher Roger Gros on April 6 to talk about how Foxwoods is approaching the situation.

Tell us how you reacted when the virus hit and all casinos across the country eventually closed down.

John James: Working in partnership with the Mashantucket Pequot Tribal Council, we monitored the breaking COVID-19 developments hour-by-hour. With guidance from the tribe’s chief medical officer and state and local authorities, we made the painful decision that Foxwoods Resort Casino would shut its doors for the first time in over 28 years. The safety of our team members, and our loyal guests, was always the driving factor.

Much like the rest of the world, we are being responsive to the changing developments of the COVID-19 crisis. We are continuing to closely partner with our chief medical officer, the state of Connecticut, and the CDC to decide when it is recommended to safely reopen our doors. This is being evaluated day by day.

It’s an unprecedented situation, and as bad as the health concerns are the economic impact is even more devastating. Explain why that is so difficult for the owners of Foxwoods, the Mashantucket Pequot tribe. 

We don’t know much about what the aftermath will be, but this pandemic will surely have long lasting effects on everyone, and we are, of course, no exception. What we do know is we carry the determination and resilience to help us pave a realistic path forward.

We remain committed to our 5,500 loyal team members, who’ve shared this journey with us for over 28 years. They are the true heart of Foxwoods Resort Casino and are responsible for creating countless memories and moments of wonder for our guests throughout the years. We will continue to cover health insurance for our team members who have been furloughed.

This is the best path for us to preserve jobs at Foxwoods and the Mashantucket Pequot Tribal Nation and show compassion for our team and loved ones during these unprecedented times.

Some people seem to think that once the casinos reopen, whenever that will be, the crisis will be over. You don’t believe that. Why is that?

Lives have been dramatically altered and the recovery back to our once “norm” will be slow. With record unemployment and significant economic impacts, rebuilding our nation will take time.

You are approaching this recovery as basically a “one day at a time” challenge. What do you mean by that?

We must remain nimble and flexible to the changing environment around us. While we can plan, success includes the right reactions at the right time to substantial recovery.

You also recognize that this crisis has hit so many of your constituencies, just some of what are tribal members, employees, vendors, tenants, partners, and charities. This is obviously the human side of this crisis. How do you take care of so many people on the way back?

We recognize the significant stress this has on our team members, partners, Tribal community and beyond, and are working tirelessly to minimize the impact. We are looking to provide as many resources as we can to our teams.

Our goal is to continue to communicate new developments and to bring everyone back to Foxwoods safely and as business levels allow.

You believe that there will be a new normal once casinos reopen. Explain what you mean by that and how casinos will be able to adapt to that. 

It will be a good time to challenge the status quo and think outside of the box on how we operate. With social distancing remaining in place, we’ll have to change how we do business and look for new ways and new technology to keep our guests and team members safe. The new “normal” is to react to new developments and use critical thinking to find solutions.

Decision making is going to be most important once the properties get the OK to reopen. What will those decisions be tied to?

At this point, it is all about team member and guest safety first. We recognize guests trust us and come to the Wonder Of It All because it makes them feel and experience something special. We will continue to infuse that optimism in all our programming regardless of the changes to operations.

What will some of the realities of this “new normal” be in the short term?

The impact to the future of how we responsibly gather will be one of our biggest priorities. We remain committed to offering a safe and healthy destination for team members and guests. We will stay adaptable and resourceful in the way we offer experiences.

The long-term health of the tribal enterprises are crucial for tribal members, employees and all the other constituents. How can that be achieved? 

We must have our state and federal leaders work with tribal leadership to help rebuild the future. Native casinos should not be excluded from funding programs benefiting the gaming industry.  It’s imperative they recognize the substantive contribution these enterprise make and those who give back to team members and their local communities.