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July 29, 2014

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Atlantic City casinos cut back on freebies amid revenue slump

With casinos across the country taking in less money because of the recession, many are also handing out less freebies to gamblers.

In Atlantic City, the nation's second-largest gambling market, casinos made a 12.4 percent cut in March on the free hotel rooms, meals and show tickets they handed out to keep gamblers coming back.

The situation is much the same in other casino markets, including Las Vegas and the Midwest, where declining revenues forced casinos to look even more closely at how they dole out precious cash.

"We're much more cautious with our money," said Rob Stillwell, a spokesman for Boyd Gaming, which owns casinos in Las Vegas and Atlantic City and in Midwestern and Southern states. "You've got to be more strategic in targeting your customers."

Shelton Brown and his wife Alberta have been coming to Atlantic City from Baltimore since the first casino opened here 31 years ago.

"We can see a drastic change," he said. "It used to be your bus would pull in, they'd hand you $25 and a coupon for a free meal. They're cutting that out now."

Alberta Brown said it's also harder to get a free drink inside the casinos.

"It used to be you couldn't turn around without someone being right there offering you something," she said. "They came looking for you. Now you have to go looking for them."

For the first quarter of the year, Atlantic City's 11 casinos had $339.6 million in complimentary expenses, down 9.2 percent from the first quarter a year ago. Revenues at Atlantic City's casinos fell 7.6 percent last year, and so far this year, are down 16.2 percent.

Revenues at Nevada casinos were down 18.1 percent in February, and 14.6 in January.

Interviews with casino executives and analysts show that most major gambling markets are reducing their comp spending.

"You're seeing comps coming down because the market is just not allowing (casinos) to be as generous as they once were," said Steve Norton, a gambling industry veteran who runs a Missouri casino management company. "It's just not as viable to do that now.

"A lot of people are out of work," he said. "They have more time to spend in the casinos; they just don't have money to spend in them."

Resorts Atlantic City, where Norton was once vice president, is fighting off a foreclosure threat by its lender. Its co-owner, Nicholas Ribis, told New Jersey casino regulators earlier this year that Resorts had been giving away "too much food, too much drink, too much everything."

In March, Resorts gave away $6.3 million worth of comps, mostly in rooms and gambling credits to players. In March 2008, the total was over $9 million.

George Maloof, owner of the Palms Casino Resort in Las Vegas, said his casino's comp expenses have remained relatively flat as it deals with the downturn in Sin City. He said costs can go up as casinos try to gain new players through promotions, but operators can quickly tell if their offers work in luring guests to gamble.

When costs go down, Maloof said, it means casinos are focusing on giving away comps to gamblers whose play make the freebies worthwhile to the casino.

"It's usually because you have somebody who gave a comp who didn't deserve it," Maloof said. "It's probably a segment of your business that isn't playing to those comps."

David Schwartz, director of the Center for Gaming Research at the University of Nevada, said freebies typically go in cycles as casinos try to one-up each other to attract players, then pull back when their giveaways no longer become worthwhile. He said anecdotal evidence suggests comps have gone down in Las Vegas.

Some casinos made a conscious choice to cut back on comps when business worsened. The three Atlantic City casinos owned by Trump Entertainment Resorts have been telling investors for years that they are cutting back comps to try to whittle down massive debt that was holding the company back. Earlier this year, the company filed for bankruptcy.

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