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Occupancy Rates at Atlantic City's Casino Hotels Remain Stable
Despite 40% Drop in Gambling Revenue From 2006 Peak

By Donald Wittkowski, The Press of Atlantic City, Pleasantville, N.J.McClatchy-Tribune Regional News

April 29, 2012--Casinos continue to enjoy the benefits of their hotel operations -- generating more than a half-billion dollars annually in room revenue -- even as competition has eroded gambling revenue.

Hotel occupancy rates remain above 80 percent annually; the average nightly room price continues to hover close to $100.

Tapping the hotel inventory for more overnight guests is a key part of a newly launched

$20 million marketing campaign that portrays Atlantic City as a diverse tourism destination, not just a gambling haven.

Jeffrey Vasser, president of the Atlantic City Convention & Visitors Authority, said casino-hotel occupancy levels suggest that visitors are staying longer and coming here for far more than just gambling trips.

"You just can't look at gaming revenue as an indicator of casino business and the health of Atlantic City," Vasser said. "I think a big part of this is that there is more to do in Atlantic City than gaming. I think it is conventions and that more people are coming for entertainment. I think that is the big thing that is driving occupancy and keeping room rates consistent."

Figures released this month by the New Jersey Division of Gaming Enforcement show that the average hotel occupancy rate for the casinos was 83 percent in 2011, essentially the same as in 2010 and 2009. The average nightly room rate for 2011 was $99.18, almost identical to the corresponding 2010 figure and slightly higher than the $95.58 in 2009.

Altogether, the casino industry earned $508.2 million in hotel revenue in 2011, down slightly from $509.9 million in 2010 but higher than each year from 2006 through 2009, figures show.

Analysts say the occupancy rates indicate that hotel business remains steady, even though gambling revenue has plunged nearly 40 percent from its peak of $5.2 billion in 2006 to $3.3 billion in 2011.

"The value of Atlantic City as a destination resort is apparent in the average daily room rate and hotel occupancy, even as gaming revenue declines," said Israel Posner, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at the Richard Stockton College of New Jersey.

Atlantic City is trying to remake its image from a gambling-centric town to a broader tourism destination stocked with upscale restaurants, shopping and entertainment. The new $20 million marketing and advertising campaign, funded by the casinos, includes no mention of slot machines or table games, focusing instead on the city's nongambling amenities. Tourism officials hope to attract more overnight guests and convention groups instead of relying largely on a steady flow of daytripping gamblers.

"People still want to get away," Vasser said. "Atlantic City is a great destination. It plays to the strength that we are close to large population centers. It's the nongaming sector that is keeping people here."

Revel, Atlantic City's brand new $2.4 billion megaresort, will add another 1,898 hotel rooms by the time it fully ramps up operations later this year. The remaining 11 casinos have a total of 17,029 rooms.

Atlantic City's hotel inventory pales in comparison to the 150,000 rooms at the Las Vegas casinos. However, Las Vegas' average occupancy rate of 84 percent and nightly room rate of $105 in 2011 were only slightly higher than Atlantic City's figures in those categories, according to data compiled by the Las Vegas Convention and Visitors Authority.

Nationally, the average occupancy rate for hotels was 60 percent and the nightly room rate was $101.63 in 2011, Smith Travel Research reported. Hotel occupancy and room rates slumped during the recession, but are climbing again nationwide now that the economy is recovering.

Occupancy rates in the casino industry are skewed by "comping," the practice of giving gamblers free rooms in return for their play at the slot machines and table games. Analysts estimate that about two-thirds of the rooms are comped industrywide. The number of comped rooms varies from casino to casino.

Shawn McCloud, vice president of analysis for casino consultant Spectrum Gaming Group, said it appears Atlantic City's casinos are comping more rooms now as they fight to hold on to customers against the rival casinos in surrounding states. Overnight customers are highly prized by casinos because they tend to be more lucrative than daytrippers.

"It's more bodies in the building," McCloud said.

Atlantic City's average occupancy rate hit 92 percent in both 2006 and 2007, but declined to 87 percent in 2008. The recession and stronger competition from the Pennsylvania casinos cut into business in 2008. However, the opening of new hotel towers in 2008 at Borgata Hotel Casino & Spa, Harrah's Resort and Trump Taj Mahal Casino Resort -- adding nearly 2,600 new rooms to the market -- greatly expanded capacity and also contributed to the lower occupancy rate.

McCloud noted that Borgata, Harrah's and the Taj Mahal were able to boost room revenue from 2008 to 2010, suggesting that the hotel expansions paid off. The Taj's hotel revenue slipped in 2011, while Borgata and Harrah's continued to trend upward.

Caesars Atlantic City is another casino that has been able to steadily increase room revenue in recent years. Moreover, Caesars stands apart from the rest of the industry by being the only casino to increase its hotel occupancy rate over 2007 levels. Caesars ended 2011 with an industry-leading 93 percent occupancy rate, just above its 92 percent in 2007.

Caesars has undergone several renovations since 2008, when nearly 700 rooms in the Centurion Tower were fully overhauled, adding luxury accommodations at its center-Boardwalk location, company spokeswoman Katie Dougherty said. In 2011, Caesars completed renovations on the Ocean Tower, one of its original hotel towers. The casino is currently completing a multimillion-dollar renovation to its nearly 100 penthouse suites, Dougherty added.

Caesars Entertainment Corp., parent company of Caesars, also owns the Bally's, Harrah's and Showboat casinos in Atlantic City. It is the city's dominant casino operator. Dougherty said Bally's, Caesars, Harrah's and Showboat have undergone more than $1 billion in renovation and expansion in the past 10 years, including retail, dining and entertainment attractions to complement the hotel projects.

Higher room counts generally translate into bigger revenue. Borgata's industry-leading 2,767 rooms generated $115.5 million in revenue in 2011, tops for Atlantic City. Harrah's, second to Borgata with 2,590 rooms, was also second in hotel revenue in 2011, at $79.2 million.

The smaller properties, or those with fewer than 1,000 rooms -- Atlantic Club Casino Hotel, Resorts Casino Hotel, Trump Plaza Hotel and Casino and the former Trump Marina Hotel Casino, now known as Golden Nugget Casino Hotel -- have generally struggled the most.

The Atlantic Club, formerly known as the Atlantic City Hilton Casino Resort, has suffered the steepest declines in hotel occupancy since 2006, when its rate was at 96 percent. The financially troubled property ended 2011 with a 61 percent occupancy rate, lowest in the industry. Occupancy at all other casinos ranged from the mid-70 percent level to Caesars' 93 percent.

Michael Frawley, the Atlantic Club's chief operating officer, acknowledged that expansion projects at other casinos hurt his property in recent years. In March, the former Hilton changed its name to the Atlantic Club and began a new marketing strategy as a low-cost casino catering mainly to local customers. Frawley predicted the new marketing plan, combined with recent improvements to the casino, will begin to boost hotel occupancy.

"Being one of the smaller properties in the market, our position certainly wasn't strengthened by the added competitor room supply we saw in years past," he said in a statement. "Moving forward, I don't see us as the same property we were then. We've remodeled the casino floor, added new slot product, drastically reduced our food and beverage price points and implemented the only free parking in the market. I see us differentiated as one of the best gaming values in the market. We believe that will be reflected in future occupancy."

Contact Donald Wittkowski:


Atlantic City vs. Las Vegas casino hotel rooms Average hotel occupancy levels and nightly room rates: 2007 2008 2009 2010 2011 Atlantic City Average occupancy rate 92% 87% 83% 82% 83% Average room rate $103 $98 $96 $99 $99 Las Vegas Average occupancy rate 90% 86% 82% 80% 84% Average room rate $132 $119 $93 $95 $105 Source: New Jersey Division of Gaming Enforcement and Las Vegas Convention and Visitors Authority

Atlantic City room occupancy rates Change Change 2006 2007 2008 2009 2010 2011 from 2010 from 2006 Atlantic Club--96% 96% 91% 80% 71% 61% -10% -35% Bally's 96% 93% 94% 90% 90% 91% 0% -5% Borgata 94% 95% 87% 83% 86% 86% 0% -9% Caesars 96% 92% 87% 92% 91% 93% 2% -3% Harrah's 91% 93% 85% 81% 83% 86% 3% -5% Resorts 89% 92% 85% 70% 66% 76% 10% -13% Showboat 93% 90% 88% 83% 83% 83% 1% -9% Tropicana 92% 91% 87% 84% 83% 83% 0% -9% Trump Marina*--83% 85% 82% 74% 73% 74% 2% -8% Trump Plaza 79% 84% 86% 82% 78% 76% -2% -3% Trump Taj Mahal 91% 91% 87% 82% 82% 79% -3% -12% A.C. Total 92% 92% 87% 83% 82% 83% 0% -9% *Formerly the Atlantic City Hilton; **Now known as Golden Nugget Source: Spectrum Gaming Group

Atlantic City room rates Average nightly rooms rates for Atlantic City casinos from 2007-11 2007 2008 2009 2010 2011 Atlantic Club--$77 $76 $68 $71 $66 Bally's $104 $87 $85 $87 $88 Borgata $144 $143 $133 $131 $134 Caesars $96 $95 $90 $95 $101 Harrah's $103 $89 $94 $100 $99 Resorts $63 $63 $65 $66 $69 Showboat $104 $89 $88 $92 $94 Tropicana $110 $103 $102 $111 $102 Trump Marina*--$86 $88 $85 $81 $84 Trump Plaza $95 $95 $86 $89 $91 Trump Taj Mahal $92 $93 $89 $93 $92 *Formerly known as Atlantic City Hilton; **Now known as Golden Nugget Source: Spectrum Gaming Group and New Jersey Division of Gaming Enforcement


(c)2012 The Press of Atlantic City (Pleasantville, N.J.)

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