2008 National Professional On line casino & Racino Gaming Revenue Investigation

A Interval of Adjustment

Oops! That large hissing seem is the gaming balloon that had been developing over the several years, little by little dropping air. But, it has not been a tide that reduced all ships nevertheless, as some emerging and growing gaming jurisdictions confirmed strong expansion in 2008.

General, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a three.five p.c decrease in gaming revenues for 2008, making a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a obtain of virtually $one billion in 2008, thus bringing the Industrial sector industry decrease to $1.8 billion, or six.7 %. Nevada was the greatest loser in 2008, dropping virtually $1.three billion, more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators have been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Using the crest of yr in excess of 12 months market place development throughout the country and the availability of sufficient credit history and fairness funds, new development and growth proliferated in current a long time. Today, faced with the realities of declining, or at best stagnant desire, many of these projects are now deemed in excess of-leveraged and/or in excess of-sized. As a end result many gaming companies are attempting to renegotiate their financial debt – manufactured much more difficult by reduce valuations – although also paring down operational expenses. The latter has become a extremely problematic conundrum when dealing with the competition, particularly in people jurisdictions that are now vying for market place shares with new rising casino initiatives in neighboring regions. A subject we discuss more entirely in the Condition by State evaluation segment of this publication.

As a end result of these circumstances the gaming business landscape is now strewn with impending fatalities. Among the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the checklist grows every single week.

“How prolonged will these economic situations persist, and are we at the bottom however?” are questions no one particular seems to be answering but. What is clear even so is that most gaming jurisdictions will have to discover how to deal with a smaller sized pie.

Observe:
This investigation includes only gaming revenues of accredited casinos and pari-mutuel retailers that offer on line casino game titles, and not Indian gaming operations, card rooms, or small non-casino variety slot locations. The whole report, which includes earnings tables is accessible on our web webpage.

Enter/Output Model

A key aspect that seems to have arisen from the ashes of this current development is that a lot of on line casino assignments had been just as well large to help them selves. The enter, in terms of expenditure pounds, was not proportional to the output, in terms of net revenue after financial debt support, when compared to beforehand attained benefits. More and/or even bigger is not usually far better. Viewing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of a lot more complete facilities in several other jurisdictions. The flaw in this technique nevertheless is that the fees associated with widening industry penetration and occasioned-use, are drastically larger than people incurred to draw in the base industry.

As daytripper markets turn into a lot more competitive, on line casino venues will have to count more and far more on their in-residence resort patrons, and dimension their houses (and expectations) accordingly. While Steve Wynn started out a significant development in creating up-marketplace mega-places, there simply was not enough desire on the Strip to warrant the many other related assignments that followed that aimed at the exact same market.

The trick is to strike a content medium in undertaking configurations which of course demand less of a ‘seat-of-pants’ method, and one particular that is far more studied. A shameless plug for advancement consultants like ourselves.

Other Gaming Activities

Though there are no revealed comprehensive information of American Indian gaming revenues, anecdotal evidence appears to suggest that this segment has been as challenging hit as the Business sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, representing a drop of about 7 per cent, or almost $114 million, much more than doubling the three.5 per cent fall from the yr before. This industry is seemingly still reeling from the ripple-influence of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming stories that contributions dependent on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the prior calendar year reducing .8 % in the very first quarter, seven.five p.c in the 2nd quarter, 9.five p.c in the third quarter, and sixteen.1 percent in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, studies that while calendar calendar year 2008 confirmed an nearly two p.c expansion charge in gaming revenues, there was an eight.7 p.c decline in the 3rd quarter and an practically ten per cent drop in the fourth quarter of 2008, in contrast with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario have been down one.five% in 2008 in comparison with 2007.

It is been a mixed-bag for state lotteries across the nation. The North American Association of Condition & Provincial Lotteries reports that U.S. lotteries generated a complete of $60.six billion in sales in fiscal 2008, up about three % from the prior yr however some jurisdictions described decreases, most notably California, which showed an 8 percent drop. Inasmuch as some of these states are on numerous fiscal 12 months finishes, it would appear that the information does not reflect the effect of third and/or fourth quarter benefits.

According to information supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven per cent to $thirteen.seven billion in 2008, vs . $14.7 billion in 2007.

Planned & Proposed New Expansions

As previously observed, it has been new gaming jurisdictions that have spawned significantly of the progress in once-a-year casino/racino revenues above the many years, and their influence is apt to proceed into the in close proximity to future.

Florida
Miami Dade voters accepted a ballot issue that allows every of three pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Dog Monitor and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has however to introduced its strategies. There are numerous other proposals getting considered that would further expand on line casino advancement through the point out.

Illinois
The condition lastly acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ sport casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open up until 2010. There has also been BKWooriCasino about making it possible for an increase in for every place gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that allows for the growth of 4 on line casino gaming zones and slots at current horse and puppy tracks appears mired, as only one particular facility is presently under construction, while a few other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so close to the point out line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 desk game titles, alongside with a next period due to open in 2011 with 875 slots and twenty table games. The state has prolonged the application method for the other 3 zones until finally April, 2009.

Kentucky
There is nonetheless a lot of ‘jockeying’ going on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back again on the front-burner, but probably not fixed throughout the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most latest becoming the 390 space M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new hotels consist of two parts of the City Centre project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino advancement projects in Baton Rouge and Lake Charles, although delayed, are noted to still be on-keep track of for opening this calendar year and/or early 2010.

Maine
There is a monthly bill under consideration that could far more than double Penn National’s slot devices to three,000, as properly as a proposal that would eliminate the restriction that slots be situated within five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local residents to allow slots, might be considering transferring to a a lot more hospitable city.

Maryland
A referendum was approved in November, 2008 that enables for the improvement of five casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the state had anticipated.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has operate into numerous funding concerns and even though the resort part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled again relatively, is still on keep track of to open this calendar year.

New England
Massachusetts, a sleeping-large in terms of marketplace likely, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political assist. A modern review finished by Dartmouth University estimates that Massachusetts resident put in much more than $920 million previous year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to produce casinos, however the subject is most likely to be revisited, specifically if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by recently agreeing to proceed augmenting purses with an further tax. The governor however, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would lastly be designed, the winning bidder indicated an incapability to make the essential $370 million price, citing the recent lending weather, and throwing the task back again into the lap of the governor. Even though the market place demand in the area could be regarded as quite strong, the prospect of additional competitors from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly taking into consideration that marginally significantly less than thirty% of the net win is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort complex are being reconsidered maybe owing to equally the possible opening of at minimum one or probably two racino operations in the NY metro region, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
However another gaming proposal is getting place forth in Ohio, after final year’s model was turned down by the voters. This program calls for one casino each in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expense necessary of $250 million, as effectively as an initial licensing payment of $fifty million, and a 33 % tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is expected to be operational in August, ’09 although Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are predicted to start development this year.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and include three hundred games, one hundred forty rooms and a extensive assortment of facilities.

Texas
Legislators are proposing a voter referendum that would amend the state constitution to enable on line casino gambling in selected regions, as effectively as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an provide. State federal government has proffered the idea of enabling the resort to offer you on line casino games, but this effort is in way too early a stage to have any traction one particular way or another.

Indian Gaming
A recent Supreme Court ruling that restricts the using of lands into believe in on behalf of federally identified American Indian tribes has additional stymied some new Class III gaming tasks throughout the place. Moreover, there had been eleven Indian on line casino initiatives turned down by the DOI final 12 months because of its new rule that casinos should be around enough to a reservation that tribal members can operate at them. It has been recommended that the new Obama administration may be much more sympathetic to the advancement of Indian gaming projects, but this concern has however to be tackled.

Meanwhile, there are other Course III tasks in the numerous stages of improvement. The Seneca casino task in Buffalo, NY, while working a tiny short-term facility, has delayed an previously beneath construction long term facility till the market place rebounds. They have also expressed an fascination in creating a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could influence their strategies for bigger assignments. There are new Indian gaming tasks set to open in Michigan and Oklahoma this yr, and other people are in the organizing phase. Texas may permit the reopening of Indian gaming services and let other venue and there are ideas afoot by the Navajos in Arizona to construct added casinos. California is poised to open two to a few new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming income in Atlantic Metropolis has declined 7.6 percent, from $four.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining itself in an intense comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast were situated in Atlantic Town, in which it seemed as if it may possibly really even eclipse the Las Vegas Strip’s annual gaming revenues.

Little by little even so its industry share was currently being encroached upon, first by the growth of a huge Course III gaming procedure in Connecticut, and then yet another slots operations in Rhode Island, and then video 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 around Atlantic City’s future potential customers. It’s reliance on day-trippers lulled it into a untrue sense of security, and it now finds alone obtaining to redefine its mission statement to “destination vacation resort.”

The only issue with this approach however is that it is sick-equipped to pull it off. For all intents and functions, Atlantic Town is beneath-roomed and/or more than-gamed. There is just not enough working day-tripper market place to go around, and their powerful trading region is tightening, as the peripheral populations northward now/will have much more completely ready entry to a widened supply in New York (Yonkers, and quickly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only actual competitive advantages are its hotel capacity and the availability of table game titles, even though the latter is likely to eventuate in Pennsylvania, and perhaps Delaware. In get to sufficiently compete as a vacation spot vacation resort the city needs to develop additional visitor rooms and not essentially gaming capability. By comparison, the Las Vegas Strip houses – correct gaming locations, in that they do not have much of a working day-vacation industry, other than for the ‘locals’ – have an average of .87 gaming positions for each visitor space while Atlantic City’s typical is 2.74 positions per guest room.

It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, were the minimum impacted by the latest downturn. The Borgata seasoned a gaming income fall of 1.six percent, even though Harrah’s Marina noted a 4.9 per cent boost when compared to 2007. Additionally, the hardest strike venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest amount of rooms. In the meantime some of the venues are teetering on viability, like the the Trump homes and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a continual increase in gaming revenues via 2006, the town seemed prime for even more growth, which precipitated organizing for four new vacation resort projects, every single of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion venture stays an iron skeleton, Pinnacle Amusement has declared it may look for to promote its razed Sands internet site, MGM Mirage has shelved its casino plans, and Penn National appears to have stopped its pursuit of the Bader Subject airport internet site.

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