On February 17, Hard Rock Hotel & Casino Atlantic City hosted its Town Hall Meeting for employees, where they learned from Hard Rock International Chairman Jim Allen and Hard Rock AC President Joe Lupo that over 2,400 of their eligible union and non-union team members will receive bonuses totaling $10 million for the third consecutive year following a record-breaking year with the largest increase in coin-in, table games drop, and gross gaming revenue over 2019.
“A double bonus because of our success in 2021 is a differentiator in the Atlantic City market. I look at it as a real investment in our people,” Lupo tells Yogonet in an exclusive video interview conducted on March 3. “We’re only one of two properties that saw increases in 2021 versus 2019, so we could not be more proud and obviously our employees are making the difference. They are the reason that this is happening, and it will have long-reaching effects.”
During the Town Hall meeting, Allen spoke about Hard Rock International’s expansion, as it will be opening a new New York hotel around Times Square within the next month, Hard Rock Bristol in Virginia, and it has recently opened Hard Rock Casino Nothern Indiana in Gary. “So it’s exciting for our employees to see that they’re working for the fastest growing gaming company in the United States and worldwide,” Lupo tells Yogonet.
During the interview, Joe Lupo, who also has recently been named President of the Casino Association of New Jersey (CANJ), explains any potential gaming projects in New York City and the existing project in North Jersey would see a differentiation in experience and tax jurisdiction versus Hard Rock Atlantic City, which will enable them to market differently. Furthermore, he says Hard Rock is putting together a rewards program that is expected to see the company stand “far and above” competition in omnichannel presence. Also, he says they are testing a model including esports betting, and believes there will be more opportunities with esports as it grows. He also addresses the smoking ban project for Atlantic City casinos: “This is just the wrong time to consider this.”
Hard Rock Atlantic City will be celebrating its fourth anniversary in late June, and it is already number two in the market out of nine casinos, versus companies that have been in the market for over 20 years with larger databases, Lupo notes. “The casino business really focuses a lot around the database and obviously you need visitors to come in. So we’ve taken a different approach that has been important for us to grow. That’s why we’ve invested in our employees and give them bonuses and get it out there to hire more people,” he notes as a differentiator from other gaming companies, which have “taken a philosophy of let’s cut back and let’s cut back the business.”
Lupo underlines the importance of hiring people and also ensuring revenue growth to offset the additional labor cost, as opposed to anticipating less revenue and cutting back labor costs. “It has and continues to be important we have enough people here and provide a good guest experience. It has been advantageous for us, and obviously helps when we have ownership that reinvests in the employees, but we’re in the mode of growth and it’s helped with our exceeding market-share. The only way to grow is by providing good guest service and increasing market-share, and you can’t do that when you’re cutting back on your labor,” the casino’s President explains.
Furthermore, Lupo puts online sports betting as a key factor for record-breaking performance levels, which saw US commercial gaming revenue hit $53 billion in 2021. In January, New York launched mobile sports betting, “and there was a real worry that some of that New York traffic was coming to New Jersey and you’d see a decrease in New Jersey, where actually you saw an increase in both New Jersey and then the big numbers that happen in New York as well. So you’re seeing new opportunities for gaming being sports betting and online,” he points out. He also says the pandemic saw people get very comfortable with online activities, with every trend from a mobile standpoint going up, and 80 to 85% of the sports betting being done online now.
“There’s a couple of different companies who are artificially inflating the numbers at a loss. So you’ve seen companies like DraftKings report, I think, $900 million loss for the year 2021 because they’re spending so much promotional money and advertising money to try and acquire market share and acquire database. They’re doing it at a loss, so some of those numbers are actually out of the company’s promotional dollars. You’re seeing that from Caesars and BetMGM, and you’re seeing losses in some of that. While it’s great gross gaming revenue numbers and it’s great taxable revenue, it’s just kind of artificial and you’re not going to see that continue as time goes on because obviously, companies can’t continue to take such a big loss, but they’re driving that ability for consumers to get familiar. And in the end, that’s all good for those taking wagers,” Lupo tells Yogonet.
Jim Allen said in February’s event that the company has lined up at least three potential sites in New York City for a casino. Also, Hard Rock holds a partial ownership stake in the Meadowlands racetrack in East Rutherford, New Jersey, just outside New York City, and has proposed building a casino there, a plan that still remains viable. According to Lupo, expectations are that these plans will be approved in both, probably sooner in New York than New Jersey. “If we can have one of those licenses, I think it’ll work very collectively from our standpoint of the Northeast Corridor. We’re also putting together a program where you’ll be able to use rewards at all Hard Rocks, whether it’s a Hard Rock Hotel in the Caribbean, whether it’s a Hard Rock Cafe on the West Coast, or a Hard Rock Casino in Atlantic City or Florida. But we also believe that 60-70% of the gaming in South Jersey comes from New Jersey and Pennsylvania. So there’ll be a small percentage of gaming that will be affected to South Jersey, and also gaming sportsbook revenue grew, and I think you’ll see the numbers grow in this market as you weigh them collectively for the Northeast Corridor. But these properties down here in South Jersey are different. They’re complete resort destinations much bigger than what you’ll see in New York, out of much favorable tax jurisdiction standpoint, so we can market differently and market more heavily to be able to ensure that, especially that consumer who wants to stay overnight, see a show, grab dinner, go to the spa, all in one location, that’s going to be a different resort experience than you’ll get and that you currently get at Resorts World, up at Aqueduct in New York right now. That’s a drive-in market and it’s a much different experience,” Lupo says.
Hard Rock AC boss also believes this upcoming loyalty program will see them stand out from the competition in terms of omnichannel presence, as consumers will be able to use rewards and collect that database from cafes, hotels, casinos, not only domestically, but all over the world. “I was asked the other day, ‘Are you hoping for more online revenue than land-based revenue?’ And we’re not,” he says. “Most of those online consumers are new consumers and they’re within the state boundaries to make the bet anyway here in New Jersey, so at the farthest they are is two hours away. So those are opportunities for us to talk to new customers through different channels, offer them rewards playing online to be able to come down to this property, as well as use this property to then be able to talk to those consumers who live in North Jersey. So I think that’s the best example where that omnichannel presence or application has been found very useful. And with the reinvestment that’s being put in 600 million here in the Hard Rock, 400 million at Caesars, Ocean is putting in some reinvestment, we’re looking to ensure that this land based community here in South Jersey really remains stable.”
When asked about the casino’s recent partnership with Esports Entertainment Group for the first sanctioned esports skill-based wagering event in the United States, set to take place March 19-20, Lupo says it is actually a test. “The esports is coming. I don’t know what to expect to be honest with you, because it’s brand new. It’s going to be speaking to a much younger consumer, and we know some stats and figures about that millennial that’s typically not the very low percentage of gaming revenue at your typical land-based property. And I’m also interested to see, we don’t know too much about how much somebody wants to wager versus how much somebody wants to wager watching somebody in competition. And it’s really a new opportunity that’s out there and we’re really doing it to test the model, see how it works. And it’s really kind of make that small snowball first and let it roll down the hill and see how it builds, but not take the big step, see how it goes. And we’re excited about it and we’re going to look forward to it. It’s going to happen over March Madness weekend and we’ll see how it goes and see if there’ll be more opportunities. But I expect there will be, especially as that grows.“
Joe Lupo has taken over as CANJ President in November last year. “There’s a lot of new leadership here. There’s new ownership and leadership at Ocean. Eldorado has taken over Caesars last year, new leadership at their three Caesars properties here in Atlantic City. I’m new to CANJ, there’s new leadership at the CRDA, Casino Reinvestment Development Authority, who really dictates a lot of our dollars here in the city. And so we really need to work together to establish more beautification, safer atmosphere here, more growth, more reinvestment. And I think I’m excited about that, and I’m really pushing. I’m a vocal person who gets out there and I really want us to work together better again,” Lupo says. “We’re really looking at convention business coming back, which is a real key to this city. We have room availability, 15,000 rooms in midweek that we can drive business to, and we have a full slate of entertainment coming back, which last year we only had entertainment half of the year, we had COVID restrictions through five months.”
Among the current issues that affect Atlantic City’s industry today, he mentions pandemic-related effects from the supply chains that are affecting pricing and timing. But he says one on the table not to back away from is smoking. “The fact of the matter is if there’s a smoking ban in New Jersey or Atlantic City, while there’s smoking permitted in Pennsylvania, we’re going to lose revenue. That’s a fact,” he says, citing a recently released report by Spectrum Gaming Group. “There’s been multiple jurisdictions who have done this and shown declines. In 2008 Atlantic City did not have smoking for four weeks, and it went down 20%. There was one property in Atlantic City that opened nonsmoking, it was Revel Casino, they closed and went bankrupt. Our win per unit on slot machines is 50% higher. Our win per unit on blackjack games, roulette games is 50% higher on smoking versus nonsmoking. It’s not an issue about money because what will happen is, if this happens again, there’ll be a lower revenue base and then there’ll be lower labor. This is really about jobs and the economic stability of Atlantic City. After 2008, we did lay off a lot of people due to the recession, and it was a painful day, we used to be 49,000 people employed in casinos in Atlantic City, now there are 22,000 employees. We are at a 12-year low for airline traffic, a 12-year low for car traffic coming out of COVID. And there is a gas price at their all-time high. This is just the wrong time to consider this.”
Lupo explains that in Hard Rock AC, there is smoking in 10% of the property, while the rule is 25% of their casino floor. And he notes there are much better air filtration systems, which they had examined by HVAC experts for the Covid a couple of years ago. This led to a 200% better air circulation than other buildings, including hospitals in the state of New Jersey.
“I see this as an opportunity for people to have a choice to come work here. We had 50 open positions two weeks ago. We had 100 applications in 48 hours. People want to work here. Under the circumstances, all well knowing that there is smoking because it is a good environment, we do treat people well, you do earn good pay, you can pay your bills,” Lupo says. “There are some anti-smoking coalitions that I know are passionate. My mother died of lung cancer, so I understand the issue. But when you’re putting somebody out of work, you better be responsible for that, and you better be held accountable for that, and you better be prepared to say, who’s going to pay the bills and the mortgage payments for those thousands of people, which the numbers have correlated into, not by us, but by a third party independent and by all these past history situations, thousands of people will lose their jobs and move out of this area because there won’t be dealing jobs and you’ll have to go, unbelievably, to Pennsylvania, where there is smoking. Some of the people that are pushing this have been in the business a long time, have high seniority who won’t get laid off and who have had the choice to leave, but they haven’t. And I think that’s because it is a good work environment to work in.”
New Jersey Superior Court Judge Joseph Marczyk’s ruled last month that the state violated the terms of a 2018 consent order between the state and Atlantic County by enacting its new payments in lieu of taxes (PILOT) law, which gives tax relief to Atlantic City’s casinos by removing sports and online gaming revenues from the calculation of their payments. “That really doesn’t have anything to do with the casinos. We weren’t part of that lawsuit. That’s between the county and the state,” Lupo tells Yogonet. “There has never been more stability than in the last five years when we had a PILOT, payment in lieu of taxes, which really was put in place to substitute for our property taxes years ago when they went wild and it was very unstable. So having the PILOT in place will create more stability, set that tax level, especially coming out of COVID while gaming revenues have declined to 2019 levels, and I really don’t see that being a factor, but that’s really a case between the state and the county.”
Watch the full video interview with Joe Lupo on our YouTube channel.