National Professional Casino plus Racino Game playing Earnings Examination

A Period of Adjustment

Oops! That huge hissing audio is the gaming balloon that experienced been increasing over the several years, slowly and gradually dropping air. But, it has not been a tide that lowered all ships however, as some rising and growing gaming jurisdictions showed strong progress in 2008.

General, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.5 per cent drop in gaming revenues for 2008, creating a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of almost $1 billion in 2008, thereby bringing the Commercial sector industry drop to $1.eight billion, or per cent. Nevada was the largest loser in 2008, dropping almost $1.3 billion, far more than 50 % of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, casino operators have been caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not until the 3rd and fourth quarters when it truly nosedived. Riding the crest of calendar year over 12 months industry growth across the region and the availability of sufficient credit and equity resources, new design and expansion proliferated in current several years. Nowadays, faced with the realities of declining, or at best stagnant demand, several of these tasks are now regarded as in excess of-leveraged and/or over-sized. As a result numerous gaming companies are making an attempt to renegotiate their financial debt – made more hard by lower valuations – although also paring down operational costs. The latter has grow to be a extremely problematic conundrum when dealing with the competitiveness, specifically in these jurisdictions that are now vying for industry shares with new rising on line casino tasks in neighboring regions. A subject we discuss a lot more completely in the Point out by Point out analysis segment of this publication.

As a consequence of these circumstances the gaming sector landscape is now strewn with impending fatalities. Amid the much more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows every 7 days.

“How lengthy will these financial conditions persist, and are we at the bottom however?” are questions no a single appears to be answering but. What is very clear however is that most gaming jurisdictions will have to learn how to deal with a smaller sized pie.

This examination includes only gaming revenues of accredited casinos and pari-mutuel retailers that provide on line casino games, and not Indian gaming functions, card rooms, or little non-casino sort slot areas. The whole report, which includes profits tables is accessible on our net web page.

Enter/Output Design

A crucial aspect that looks to have arisen from the ashes of this current craze is that many casino projects ended up just as well massive to assistance themselves. The enter, in terms of expenditure bucks, was not proportional to the output, in terms of internet profit after personal debt provider, compared to formerly attained benefits. Much more and/or bigger is not constantly greater. Looking at the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of much more comprehensive facilities in many other jurisdictions. The flaw in this technique even so is that the expenses linked with widening market place penetration and occasioned-use, are considerably higher than those incurred to attract the foundation market.

As daytripper markets turn out to be much more competitive, casino venues will have to rely a lot more and much more on their in-property lodge patrons, and size their qualities (and anticipations) appropriately. Even though Steve Wynn began a major trend in making up-industry mega-places, there merely was not enough need on the Strip to warrant the many other similar projects that followed that aimed at the very same area of interest.

The trick is to strike a content medium in project configurations which of system call for considerably less of a ‘seat-of-pants’ technique, and 1 that is far more examined. A shameless plug for development consultants like ourselves.

Other Gaming Routines

Even though there are no released comprehensive knowledge of American Indian gaming revenues, anecdotal proof seems to suggest that this phase has been as hard hit as the Professional sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, symbolizing a drop of about seven per cent, or virtually $114 million, much more than doubling the three.5 percent drop from the 12 months ahead of. This industry is seemingly nevertheless reeling from the ripple-effect of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Office of Gaming reviews that contributions dependent on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the preceding year lowering .eight % in the very first quarter, 7.5 p.c in the second quarter, 9.five percent in the third quarter, and 16.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reports that whilst calendar calendar year 2008 confirmed an nearly two percent expansion rate in gaming revenues, there was an p.c decline in the 3rd quarter and an practically ten p.c decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings trends at nearby Niagara Falls, Ontario had been down one.five% in 2008 when compared with 2007.

It is been a blended-bag for state lotteries across the country. The North American Affiliation of Point out & Provincial Lotteries stories that U.S. lotteries produced a whole of $sixty.6 billion in sales in fiscal 2008, up about three per cent from the previous year yet some jurisdictions documented decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on different fiscal yr finishes, it would appear that the info does not replicate the affect of 3rd and/or fourth quarter final results.

According to knowledge provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 % to $ billion in 2008, compared to $ billion in 2007.

Planned & Proposed New Expansions

As earlier observed, it has been new gaming jurisdictions that have spawned much of the progress in annual on line casino/racino revenues more than the a long time, and their effect is apt to continue into the around potential.

Miami Dade voters approved a ballot issue that makes it possible for every of three pari-mutuels to have a on line casino facility of up to 2,000 slot equipment. The Flagler Puppy Track and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has however to declared its strategies. There are quite a few other proposals getting regarded as that would even more broaden casino improvement through the state.

The point out lastly acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ game casino positioned in Des Plaines just east of O’Hare. The new facility is not probably to open up until 2010. There has also been some dialogue about enabling an increase in for every place gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

The state’s expanded lottery software that permits for the growth of four casino gaming zones and slots at present horse and canine tracks appears mired, as only 1 facility is presently below development, whilst 3 other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is found so close to the point out line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten table game titles, alongside with a 2nd stage owing to open in 2011 with 875 slots and twenty table games. The point out has extended the software procedure for the other 3 zones until April, 2009.

There is even now a lot of ‘jockeying’ likely on, but the prospect of as numerous as eight slot parlors and racinos appears to be back again on the front-burner, but probably not resolved in the course of the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most modern getting the 390 space M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new resorts include two factors of the City Middle task, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino advancement initiatives in Baton Rouge and Lake Charles, even though delayed, are reported to nonetheless be on-observe for opening this calendar year and/or early 2010.

There is a bill beneath thought that could much more than double Penn National’s slot equipment to 3,000, as properly as a proposal that would eliminate the restriction that slots be situated inside 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local residents to permit slots, could be thinking about relocating to a far more hospitable city.

A referendum was accredited in November, 2008 that allows for the improvement of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot although it is not as powerful as the point out experienced anticipated.

Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has run into different financing problems and whilst the lodge portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back again somewhat, is nevertheless on observe to open up this year.

New England
Massachusetts, a sleeping-large in phrases of market place prospective, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political assistance. A current review concluded by Dartmouth College estimates that Massachusetts resident expended much more than $920 million final calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to develop casinos, nevertheless the subject is probably to be revisited, specially if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by just lately agreeing to continue augmenting purses with an further tax. The governor however, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by permitting the tracks to have slot machines specifically at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would finally be produced, the successful bidder indicated an incapacity to make the essential $370 million fee, citing the current lending local weather, and throwing the task again into the lap of the governor. Although the market place demand from customers in the region could be considered really powerful, the prospect of added competition from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, specially considering that marginally significantly less than thirty% of the internet win is retained by the operator.

Ideas to relocate Monticello Raceway into a resort complicated are getting reconsidered perhaps owing to each the probable opening of at the very least one or perhaps two racino operations in the NY metro area, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

Nevertheless yet another gaming proposal is becoming put forth in Ohio, after very last year’s model was turned down by the voters. This plan calls for one casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment decision essential of $250 million, as effectively as an preliminary licensing price of $fifty million, and a 33 per cent tax on gaming income.

The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 while Philadelphia’s two slot services nonetheless wallow in a political mire, but are anticipated to start design this calendar year.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and incorporate 300 online games, 140 rooms and a broad variety of amenities.

Legislators are proposing a voter referendum that would amend the condition constitution to enable on line casino gambling in specified places, as properly as permit gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Condition federal government has proffered the idea of allowing the resort to offer you on line casino online games, but this effort is in as well early a phase to have any traction one particular way or yet another.

Indian Gaming
A recent Supreme Court docket ruling that restricts the having of lands into believe in on behalf of federally recognized American Indian tribes has even more stymied some new Course III gaming initiatives throughout the nation. Moreover, there have been eleven Indian casino projects turned down by the DOI very last year simply because of its new rule that casinos must be in close proximity to enough to a reservation that tribal customers can perform at them. It has been advised that the new Obama administration may possibly be a lot more sympathetic to the improvement of Indian gaming projects, but this situation has but to be addressed.

In the meantime, there are other Class III assignments in the numerous stages of improvement. The Seneca on line casino venture in Buffalo, NY, whilst working a small short-term facility, has delayed an previously below building permanent facility until finally the industry rebounds. They have also expressed an interest in creating a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could affect their plans for more substantial projects. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this 12 months, and other people are in the preparing stage. Texas may let the reopening of Indian gaming facilities and allow other venue and there are strategies afoot by the Navajos in Arizona to assemble further casinos. California is poised to open up two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming income in Atlantic Town has declined seven.six %, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding by itself in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast were situated in Atlantic Metropolis, where it looked as if it may well actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually nonetheless its market place share was becoming encroached on, very first by the improvement of a big Course III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening about Atlantic City’s long term potential customers. It really is reliance on working day-trippers lulled it into a false sense of security, and it now finds alone getting to redefine its mission assertion to “location resort.”

The only difficulty with this strategy however is that it is unwell-equipped to pull it off. For all intents and purposes, Atlantic City is under-roomed and/or over-gamed. There is just not ample day-tripper industry to go about, and their successful buying and selling area is tightening, as the peripheral populations northward now/will have much more ready accessibility to a widened provide in New York (Yonkers, and soon at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only true competitive benefits are its resort ability and the availability of desk online games, despite the fact that the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In purchase to adequately contend as a spot vacation resort the city requirements to develop further visitor rooms and not essentially gaming ability. By comparison, the Las Vegas Strip qualities – real gaming places, in that they do not have much of a day-trip industry, apart from for the ‘locals’ – have an regular of .87 gaming positions for each guest place whilst Atlantic City’s typical is 2.seventy four positions per guest area.

It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, have been the the very least impacted by the most recent downturn. The Borgata seasoned a gaming revenue drop of 1.6 %, while Harrah’s Marina documented a 4.9 p.c increase compared to 2007. Additionally, the most difficult strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest number of rooms. In of the venues are teetering on viability, including the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.

With a continual rise in gaming revenues by means of 2006, the town seemed primary for even more improvement, which precipitated organizing for 4 new vacation resort initiatives, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion task remains an iron skeleton, Pinnacle Amusement has announced it may possibly seek out to promote its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn National appears to have stopped its pursuit of the Bader Field airport website.


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