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Economic Downturn Hits Casinos
Profits were down markedly at Dover Downs casino during the third quarter, with income limited by added Delaware taxes and costs associated with building a hotel addition, according to results released Thursday.
Profits for the quarter ended Sept. 30 were $4.9 million, down from $7.4 million during the same period last year. Net earnings per diluted share were 16 cents, compared with 23 cents for the same quarter last year.
Overall revenues declined 1 percent, with gaming revenues down 2.2 percent. Other operating revenues were up 13.9 percent as a result of the newly expanded hotel complex. Occupancy levels were at 89 percent during that period.
The times remain challenging for those dependent on discretionary spending, said Denis McGlynn, president and CEO of Dover Downs Gaming & Entertainment.
"Given the economic environment, and a hurricane in the region during the first weekend in September, a 1 percent decline in revenues is pretty positive. We look forward to seeing the benefits of our recent expansions when the economy improves," he said.
McGlynn said the financial picture was clouded by added state taxes on slots earnings, depreciation of the new Colonnade casino addition, and interest against its line of credit for that expansion. The company did fairly well compared with Delaware Park, which has been more hurt by new competition in Pennsylvania, he said.
"I think it's common economic doctrine that, if you start raising taxes in a down economy, you wind up giving less resources to whatever industry is impacted to compete. That's the situation we're in now. We're hopeful the Legislature will address this issue next year, and give us some more tools to get more competitive," McGlynn said.
Casino operators throughout the region, and nation, are feeling the effects of the downturn. Boyd Gaming, which operates the Borgata in Atlantic City, said operating income for that casino was $39.5 million during the third quarter, versus $54.5 million during the same quarter last year.
And Penn National, which operates the new Hollywood Casino in Harrisburg, Pa., reported its net revenue was $617.9 million for the quarter, down from $629.5 million a year back.
MGM Mirage, which operates hotels in Las Vegas, reported that third-quarter profit fell 67 percent, as gamblers who had less discretionary income stayed away. The company announced Wednesday it would halt plans to build a casino complex in Atlantic City.
It's a tough time for the industry all over the country, with few exceptions, said Joseph Weinert, senior vice president of the consulting firm Spectrum Gaming Group in the Atlantic City area. He is also editor of the Gaming Industry Observer.
"The industry has been seen as recession-proof, so to speak. This is the first time the economy has put the hammer down on the industry," Weinert said.
