It’s official: Atlantic City casinos will be back in business on July 2. That Thursday will mark the end of what will have been 106 days with no land-based gambling in New Jersey.
Independence Day weekend has been the tentative date for the return of gambling for a while now, but Gov. Phil Murphy made it official this past weekend. Racetracks and indoor dining at restaurants will resume at the same time.
The Garden State is in a uniquely difficult position, being both a hotspot for the novel coronavirus and a state that relies heavily on tax revenue from gambling. To date, it has seen nearly 170,000 confirmed cases of COVID-19 and 13,000 deaths.
Meanwhile, every day the casinos remain closed represents a net loss of approximately $6.4 million in gambling revenue — of which $450,000 would have been paid back in taxes.
As a result, the Murphy administration is being pulled in two directions at once.
On one side are those concerned that reopening businesses too quickly will produce a catastrophic second wave of infections. On the other are Atlantic City business owners warning that a prolonged shutdown will lead to additional layoffs.
Casinos hope tight restrictions will allay fears
Although it’s not quite as early as they might have liked, the long Fourth of July weekend is high season for Atlantic City casinos.
The lengthy wait combined with the holiday weekend should mean a lucrative reopening for the city. Even mid-week openings elsewhere have produced long lineups of eager gamblers despite the reduced capacity.
On the other side of the equation, New Jersey has imposed some of the strictest precautions yet seen. Casinos will only operate at one-quarter capacity at first, compared to one-third or one-half in most other states.
The restrictions don’t just apply to the casinos and their staff, either. Masks will be obligatory for guests, as will health screening upon entry.
Murphy made it clear that he expects casinos to eject any “knuckleheads” who refuse to comply.
Financial impact of Atlantic City shutdown
The silver lining for New Jersey is that its casinos can legally operate online.
Although NJ online casino apps only produced about 20% of the state’s monthly gambling revenue prior to the shutdown, that contribution has become increasingly important. Internet gambling activity has soared in legal states since land-based casinos closed.
In May, combined online revenue for NJ casinos and poker sites was up 124% year-on-year. Comparing that to 64% year-on-year growth in February, it’s safe to infer that the additional increase is a direct result of the shutdown.
The state also taxes online revenue at a rate of 15% compared to 8% for conventional casino revenue. From the government’s point of view, then, every dollar in new online revenue offsets nearly two dollars produced on the casino floor.
Using 2019’s $2.7 billion in land-based casino revenue as a reference, the direct cost of the shutdown is about $7.4 million in revenue per day — which equates to about $600,000 in taxes.
On the other hand, the state has added roughly $1 million in new daily online revenue. That’s $150,000 in taxes each day, compensating for roughly a quarter of the direct loss in tax revenue.
By that estimate, COVID-19 will have cost New Jersey nearly $48 million in tax revenue from casino gambling and poker alone by the time July 2 rolls around.
None of this factors into sports betting revenue, which has cratered despite the existence of online sportsbooks. Even under normal circumstances, NJ online sports betting revenue far exceeds that of the retail sportsbooks. Those losses are beyond the state’s control and will continue for as long as most sports remain suspended.
US casino industry almost fully reopened
Casinos in the US closed their doors in near-perfect unison in mid-March. New Jersey’s shutdown order took effect at 8 p.m. on March 16. All states with casinos had issued similar instructions within a week thereafter, and only 16 small tribal casinos were still taking bets.
The reversal of the shutdown has been a more gradual affair.
Tribal casinos led the way, exercising their sovereignty to reopen in piecemeal fashion beginning at the end of April. As far as commercial casinos go, the South Dakota town of Deadwood was both the last to close and the first to reopen on May 7.
As of this writing, 778 casinos have resumed business while only 211 remain closed.
With only nine total casinos, New Jersey won’t have nearly as big of an impact in strictly numerical terms. However, the importance of the casinos to Atlantic City’s struggling economy will make July 2 arguably the last big milestone on the industry’s road back to normalcy.
Aside from New Jersey, only six other states remain fully closed at the moment. Illinois is the largest of these in terms of number of casinos, and it has not yet set a reopening date.