Atlantic City casinos could lose more than $20 million a day in revenue and cut thousands of jobs, an industry executive said on Wednesday, as a New Jersey budget impasse forced operators to close shop.
All 12 of the city's casinos closed on Wednesday morning after a budget impasse led Gov. Jon Corzine to shut down non-essential services July 1, furloughing most state employees, a Casino Control Commission spokesman said.
The casinos, which generate millions of dollars in taxes for New Jersey, must have state-employed regulators in place to operate. A state appellate court on Monday rejected a plea by casinos to stay open.
It is a terrible thing for Atlantic City, Trump Entertainment Resorts Inc. Chief Operating Officer Mark Juliano said. For future investment it makes people think that there is not a government that is stable enough to administer their own policies.
Shares of Trump Entertainment, which owns three casinos -- all in Atlantic City, were down about 6 percent.
Corzine, who wants to raise the sales tax one percentage point to 7 percent to help close the state's $4.5 billion budget deficit, said on Wednesday he did not have the authority to exempt casino regulators.
Major casino operators affected include Borgata Hotel Casino & Spa, a joint venture between Boyd Gaming Corp. and MGM Mirage and Harrah's Entertainment Inc., the world's largest gaming operator, which runs four casinos there. Other casino operators in Atlantic City include Aztar Corp. and Colony Capital LLC.
The closure of casinos in Atlantic City comes amid speculation high gas prices and rising interest rates might be starting to dissuade at least some people from gambling.
Growth in the number of visitors to casinos in Las Vegas, the largest U.S. gambling market, has not kept pace with the build-up of capacity there, Majestic Research analyst Matthew Jacob said.
In the past, the casino industry has been very resilient, said Jacob. But we may be seeing ... somewhat of a breaking point where these economic forces do start impacting the casino industry.
The shutdown could also hit Atlantic City's plans to transform itself into an entertainment destination along the lines of Las Vegas, as companies evaluate the impact it will have on their bottom lines.
Trump Entertainment's Juliano said a prolonged closure could lead the company to lay off all of its 2,000 or so casino employees as well as affect its expansion plans.
Every two days of closure would cost Harrah's a penny in earnings per share, while Boyd Gaming would lose that much every three or four days, Jacob said.
The revenue loss to the industry could be between $20 million and $22 million a day, Trump Entertainment's Juliano said. We didn't think it would happen.
I don't think that it could have a really long-term effect on the industry, Jacob said. It is a reminder to investors that it is a regulated industry.
Trump Entertainment's shares were down $1.25, or 6.1 percent, at $19.03 at midday on Nasdaq. Harrah's shares were down $1.44, or 2.0 percent, to $69.09 and Boyd's shares were off 86 cents, or 2.2 percent, to $39.03 on the New York Stock Exchange.