April 05, 2011--ATLANTIC CITY -- Casino earnings plunged 27 percent last year as the fragile economy and competition in surrounding states made it more challenging for Atlantic City's gaming industry to make money.

Altogether, the 11 casino hotels posted gross operating profits of $534.9 million in 2010, compared with $729.7 million in 2009, year-end figures released Monday by the New Jersey Division of Gaming Enforcement show.

Operating profits fell 44 percent in the fourth quarter to $62.6 million, reflecting a dismal winter for the nation's second-largest casino market.

Tropicana Casino and Resort was the lone standout for 2010, posting higher operating profits for both the fourth quarter and the entire year. Tropicana is in the midst of a turnaround under the ownership of billionaire financier Carl Icahn, who bought the property for $200 million last year after the troubled former operators were stripped of their casino license.

Mark Giannantonio, Tropicana's chief executive officer, could not be reached for comment Monday but said earlier that the casino's strategy of pursuing high-end table games players has been paying off.

Gross operating profits represent earnings before interest, taxes, depreciation, amortization and other charges. Also known as cash flow, it is considered the best measure of profitability in the gaming industry.

Borgata Hotel Casino & Spa saw its operating profits drop nearly 15 percent in 2010 but maintained its No. 1 position overall at $174.7 million. Harrah's Resort was second at $134.6 million, down 9 percent from a year ago.

The Atlantic City Hilton Casino Resort, Resorts Casino Hotel, Trump Marina Hotel Casino and Trump Plaza Hotel and Casino all posted operating losses for the year. The Hilton was the biggest loser, posting an $18.9 million operating loss, followed by Resorts at $18.6 million.

Trump Marina, which suffered an $8.3 million operating loss for 2010, is under sale for $38 million to Landry's Inc., a Houston-based gaming, restaurant and entertainment conglomerate.

The Hilton is searching for a new owner after defaulting on its loan and being threatened with foreclosure by lenders. Houlihan Lokey, an investment bank retained by the lenders to sell the Hilton, is in the process of collecting bids. Michael Coster, a senior vice president at Houlihan Lokey, said a new buyer should be announced in a month or two.

While weaker properties such as the Hilton are in the red, Atlantic City's gaming industry remains profitable overall. However, it continues to be hurt by the sluggish economy as well as stiff competition from casinos in surrounding states. Pennsylvania, Atlantic City's chief rival, introduced table games last July to intensify their border war.

"Table games really took hold in Pennsylvania," said Dennis Gomes, chief executive officer of Resorts.

Gomes and financial backer Morris Bailey bought Resorts in December for $31.5 million. Gomes said Atlantic City "hit bottom" in the fourth quarter but predicted an upswing in 2011. He said Pennsylvania's casinos will have a harder time stealing customers from New Jersey in an increasingly competitive environment.

"I think 2011 should be a building year for the industry," Gomes said. "If the economy improves, it's going to be an even better year for Atlantic City."

Gomes said Resorts has been posting stronger results in the first quarter under his ownership, after experiencing a "free fall" under the previous operators.

"Turning it around was like turning around a gigantic aircraft carrier," he said. "The free fall was huge. We're ecstatic with our ability to turn it around."

Resorts and other Atlantic City casinos hope to use their hotel rooms to attract more overnight guests from Pennsylvania and other feeder markets as the economy mends. The industry's average hotel occupancy rate was 82 percent in 2010, the same as in 2009.

Mount Airy Casino Resort is the only Pennsylvania casino that has a hotel, although the Sands Casino Resort in Bethlehem will open a new 300-room tower this spring. Pennsylvania is looking to add more Atlantic City-like amenities in a push to overtake New Jersey as the nation's second-largest gambling market behind Nevada.

A new report by Linwood-based casino consulting firm Spectrum Gaming Group shows that Pennsylvania was one of the top performers last year among the commercial casino states, while Atlantic City was the worst. Pennsylvania's gaming revenue surged 31 percent to $3 billion. Atlantic City's revenue declined nearly 10 percent to $3.6 billion, Spectrum reported.

Spectrum said casino parking charges and roundtrip tolls on the Atlantic City Expressway and Garden State Parkway may be discouraging customers from driving to Atlantic City. The company estimated the total cost of tolls, parking and gas to Atlantic City at $30.

"Thirty dollars. In an industry that is usually denominated in billions of dollars, that lowly amount may make all the difference in coming months as Pennsylvania and New Jersey compete for customers," Spectrum said in its latest newsletter.

Contact Donald Wittkowski:

609-272-7258

[email protected]

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