Slumping economy, competition erode Monarch’s net
Any doubts that the Reno gaming market is becoming even more fiercely competitive were laid to rest as the parent company of Atlantis Casino Resort Spa reported a sharp decline in income during the last quarter of 2008.
Monarch Casino & Resort Inc. said it earned $410,339 in the quarter compared with income of $4.05 million in the same period a year earlier. For all of 2008, Monarch reported earnings of $9.5 million compared with $24.5 million in 2007.
Competitive pressures, the company said, were a major factor in the declining profits.
In the fourth quarter alone, Atlantis boosted its spending on comps to players by about $300,000 over year-earlier levels. For the year, spending on comps rose by nearly $1.5 million.
John Farahi, chief executive officer and co-chairman of Monarch, had a simple explanation for the increased spending on complimentary food, beverages and services: “Response to aggressive discount programs by our competitors.”
The company also boosted its spending on marketing during the year.
The sluggish economy also led to a 10 percent decline in revenues at Atlantis during the fourth quarter.
The casino business fell by about $2 million, hotel sales by about $1.5 million and food and beverage sales by about $750,000.
Other headaches for the company during the year included the continued expense of litigation with Kerzner International, which operates a resort called Atlantis in The Bahamas, over use of the Atlantis name in markets such as Las Vegas.
And the company’s depreciation expense rose by $1.5 million during the fourth quarter after it completed the addition of casino and ballroom space and finished a skybridge that links Atlantis to the Reno-Sparks Convention Center. Interest payments on borrowed money for the projects ran about $456,000 during the fourth quarter.
Last month, Monarch arranged a new credit line for $60 million through a syndicate led by Wells Fargo. Bank of America and Mutual of Omaha Bank also participated in the credit line.
The company doesn’t see a quick end to slumping profits.
“We anticipate the downward pressure on profits will persist as long as we continue to experience the adverse effects of these factors,” Farahi said.
On the other hand, he said the expansion project, along with upgrades of the spa, casino floor and other areas of Atlantis, position Atlantis to be a strong competitor in the hotel and gaming markets.
The company’s publicly traded stock, which traded at about $30 a share before the economic downturn, has been selling for less than $8 a share in recent days.
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