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Posted At : March 3, 2009 10:52 AM | Posted By : D McKee
Related Categories:
Colony Capital,Economy,Donald Trump,Harrah's,Atlantic City
Last week, the Press of Atlantic City reported a 5% drop in comping along the Boardwalk and Marina District. However, the story played it as merely a reflection of decreased business in Atlantic City. Yesterday, however, The Associated Press weighed in with a completely different take.
According to Spectrum Gaming Group's senior veep, Joe Weinert, the fanny-packers are getting left out of the comp action. "It's a conscious decision to cut back. They have to target their cash very carefully and cut out the low-end customers. They're being very careful about how they're throwing those free dollars around," he told reporter Wayne Parry.
Displaying the can't-do spirit that has made Colony Capital the scorn of the Boardwalk, Resorts Atlantic City CEO Nicholas Ribis told regulators the casino had given away "too much food, too much drink, too much everything." (Maybe if Colony would stop borrowing money it can't repay it wouldn't have to sweat the comps so much.)
Selected reductions in comping, as reported by the AP, are as follows (Jan. '08 vs. Jan. '09), rounded to the nearest full point:
Resorts: $7.8 million/$6.3 million (-19%)
Bally's: $15 million/$11.3 million (-25%)
Caesars: $12.4 million/$11.1 million (-10%)
Showboat: $9 million/$8 million (-11%)
Trump Marina: $6.5 million/$5.6 million (-14%)
Trump Plaza: $7 million/$6.1 million (-13%)
Most of those cuts roughly parallel the overall decline in the market. As for the "outlier," Bally's, a whopping comp cutback is certainly in keeping with the general decimation of that sprawling complex. I guess we know now which of its four Atlantic City casinos Harrah's Entertainment would put "in the sell block," if push came to shove.
"Off the box" redux: Since Donald Trump wants his name taken off bankrupt (again) Trump Entertainment Resorts, one reader has submitted a possible replacement moniker -- "Blowhard Entertainment Resorts."
I respect Joe Weinert and his opinion on the comp spend in AC. Unfortunately his take on it is misguided. Since Q4 numbers are not published yet, we will have to use YTD Q3 2008 as a barometer for promo allowances. When comparing promotional expenses for YTD Q3 2007 and YTD Q3 2008, the spend is virtually flat at 22.8% of net revenue vs 22.5% of net revenue. This is the most common method of measuring year over year changes. The industry expects no major change in promo allowances in a Q4 comparison or a Q1 2008 vs 2009 comparison. This justifies the position of comp expense being down as a reduction of volume not cost cutting.
Thanks. AP's numbers are (obviously) very incomplete but they appear to jibe more closely with your interpretation than with Mr. Weinert's.
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