Markets in Action: Recession and Casinos in the USA

Chris Atkinson asks whether the US recession will cause the casino industry to take a hit

Atlantic City, New Jersey, is knows for its 11 casinos that not only provide thousands of jobs for those nearby but also attract tourists which gives vitality to the local economy. However recently the casinos have been hit hard and have seen their revenue slashed. In September there was the greatest ever decline in revenue since gambling was legalized, and with the October report being released on Monday, we can expect an even more negative report. Furthermore Atlantic City gaming revenue has gone down by 6.3 % or $3.6 billion for the first nine months of the year.

A report compiled by the Casino control commission showed that the Atlantic City casinos lost 951 part and full time positions in the month period from September to October. Further layoffs have come to the biggest and most successful casino, Borgata, where 400 people just lost their jobs. Many people saw Borgata as the ‘No 1 money-maker’ but this shows that no casino is immune to the deterioration that is taking place in the gambling market. Furthermore Harrah’s entertainment, the world’s largest gambling company which runs four of the casinos in Atlantic City has just had to cut its work force by hundreds in recent weeks in wake of the terrible economy and suffered a net loss of $129.7 million in the third quarter.

Donald Trump, the world known multi-billionaire has just had to knock off $46 million to sell one of his casinos and this reflects the problem that these casinos are facing. He has also just reduced the salaries of the top executives by 5% in an attempt to save money. Another problem that Atlantic City casinos have is that from October 15th there was a smoking ban on the casino floor. This led to many major players preferring to gamble their money away elsewhere where they could smoke, however there has been a one year lift on the ban starting on November 16th to give the casinos some help during the terrible economy.

Finally Pinnacle’s proposed casino in Atlantic City is on indefinite hold as it waits for the sluggish economy to pick up again and Pinnacle Entertainment issued a statement that it could be ‘years and years’ before they complete their project.

In conclusion during the current crisis people generally have less money to spend and are therefore less willing to gamble away what they have left. The household saving ratio in America has been increasing and people are happier to stay at home, saving their money, than risk it at big casinos where, in most cases they have to pay for flights along with hotel rooms. Except for professionals gambling is seen as a luxury activity, where people expect to lose money, but these types of gamblers are not going to be anywhere near the 11 casinos in Atlantic City until we pull ourselves out of this mess we are in and we can expect more layoffs in the future at these casinos.