I’ve gotten many questions from journalists about how Sandy is going to ultimately impact Atlantic City casinos. I think that the real impact is going to medium-term, and that it’s going to be very difficult to quantify.
First of all, a recap: on Oct. 28, all of Atlantic City’s casinos closed, only the fourth time that’s happened. By Nov. 2, they’d all reopened, with most reporting minor storm-related damage. So if you’re looking for the immediate impact, it’s about six days’ worth of gaming revenue.
Using the first-half of 2012 as a baseline, we can estimate that the entire city lost about $51 million in direct gaming revenue during the lost week. But that’s not all; using the 2011 gaming/non-gaming split as a baseline, we can further estimate that casinos lost another $19 million in non-gaming business.
For a market already in severe decline, losing $70 million in revenue is never good news. For that matter, it’s not good news for any market. But this isn’t going to be a disaster financially, since all casinos should cover business interruption insurance, which takes care of exactly this kind of problem. Remember when the Bellagio blew a transformer (or whatever) a few years ago and had to close? Business interruption insurance made that a little less painful for the company. So in the immediate short run of this fiscal year, I don’t think that Sandy is going to put any casinos out of business.
Pushing things out a little further, though, I’m not as optimistic. The casinos themselves were left mostly unscathed by the storm’s devastation, but many of the communities in the New Jersey/New York area weren’t so lucky; several of them still don’t have power today (Nov. 5), and thousands, at the very least, are dealing with severe storm damage to their homes.
It might be callous to talk about casino feeder markets when people are still using generators for power (if they’re lucky), but I’ve already received several calls asking me about the storm’s impact, so here goes: it’s likely going to have a big mid-term impact as residents of the area that Atlantic City draws on face the challenges of recovering and rebuilding. If your car has been reduced to a flooded-out wreck and your home is (literally) a disaster area, it’s not likely that a gambling excursion will be high on your list of priorities. For that reason,
I think Sandy will have a negative impact on Atlantic City over the next few months, and perhaps longer.
Beyond that horizon, I can’t say much. I don’t think that the storm damaged the city’s reputation in any way, so I don’t think that, in the long term, Atlantic City will suffer much from Sandy’s legacy. Of course, that doesn’t make things easier over the next year or so for casinos that were struggling before the storm. I wouldn’t rule out the possibility that, before area residents are able to put their lives back together, one or more casinos slides into bankruptcy or closes outright. So it may be that Sandy alters the landscape in Atlantic City in more ways than one.