Cross-Border Competition and the Recession Effect on Atlantic City's Gaming Volumes
2014; Volume: 18; Issue: 2 Linguagem: Inglês
ISSN
1531-0930
Autores Tópico(s)Financial Literacy, Pension, Retirement Analysis
ResumoAbstractAtlantic City casinos were hit by both the 2007-2009 recession and the addition of legalized gaming in Pennsylvania at about the same time. Results of this study show a significant decrease of $422.9 million in monthly slot coin-in for Atlantic City casinos when Parx and Harrah's, the first two Pennsylvania casinos, opened. When Sands, SugarHouse, and Valley Forge opened in Pennsylvania during the following year, there was no additional significant effect to Atlantic City casinos' slot coin-in. Atlantic City casinos also had a significant decrease in table games drop of $34.1 million monthly when table games started in Pennsylvania. The recession had no significant effect on either slots or table games volume once the effect of the new casinos in Pennsylvania was accounted for. To counteract decreased volumes, casino management needs to understand how much gaming volume they are losing to competition and to the recession.Key words: recession, cross-border competition, Atlantic City, gaming volume, PennsylvaniaIntroductionAtlantic City, the second oldest and third largest gaming market in the U.S., struggled with slow growth and decreased revenue even before the Great Recession that started in late 2007. While the U.S. gaming market as a whole saw an increase in gaming revenue in 2007 even with the recession late in the year, Atlantic City casinos saw a decrease (American Gaming Association, 2013b; New Jersey Casino Control Commission, 2008). Tliis year was the first period with a year over year decrease and the market lias experienced a continual decline since (New Jersey Casino Control Commission, 2008). Since late 2006, Atlantic City casinos have faced overlapping economic issues: Pennsylvania's first casino opening in December 2006 and the Great Recession that began in December 2007.The majority of Atlantic City gaming customers live within 75 miles of the city (Eadington, 2011), which means the markets that would be in direct competition for Atlantic City customers would be Delaware, some casinos in Pennsylvania, and one property in Maryland. Pennsylvania was the only market that liad a change in their gaming market during the recession period. Maryland did not open their first casino until late 2010. While Delaware did not add new casinos the existing ones did increase the number of slot machines for the period right before the recession although Atlantic City was still seeing a year over year increase at this time (UNLV Center for Gaming Research, 2014), so Delaware was not having a negative effect on the visitors to Atlantic City. Like Atlantic City, Delaware lias also seen a major decrease in gaming revenue since the Great Recession and Pennsylvania's legalization of gaming (UNLV Center for Gaming Research, 2014). Since the only change in the gaming region at the time was Pennsylvania, this is the only market that is considered in this study.Despite the increasing attention to the Great Recession and the legalization of gaming, research on the effect of these two issues on casino gaming volumes is scarce. Even less research has explored the effect on one portion of a region when another portion of the region increases gaming availability. Therefore, the purpose of this study is to quantify how much of the decline in Atlantic City gaming volume is due to the economic recession and how much is due to the legalization of gaming in Pennsylvania. Identifying the potential factors of this decline is paramount since management strategies to each circumstance should be different. Determining the effect of the recession, distinct from interstate competition, will assist casino management in investigating how much, if any, each new competitor casino contributes to the region's decline in gaming volume. This information will thereby help casino executives make well-informed business decisions. Furthermore, since the present study is among the first to investigate the effect of the Great Recession and the legalization of gambling in Pennsylvania simultaneously on the gaming volume in Atlantic City, it fills a critical void. …
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