National Professional Casino plus Racino Gaming Earnings Evaluation

A Interval of Adjustment

Oops! That large hissing sound is the gaming balloon that experienced been increasing above the many years, gradually losing air. But, it has not been a tide that lowered all ships even so, as some emerging and expanding gaming jurisdictions showed strong growth in 2008.

General, the professional and racetrack casino sectors (excluding Indian gaming), experienced a 3.5 per cent decline in gaming revenues for 2008, generating a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of virtually $one billion in 2008, thus bringing the Professional sector marketplace drop to $1.eight billion, or %. Nevada was the greatest loser in 2008, dropping practically $1.three billion, much more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, casino operators were caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not until finally the third and fourth quarters when it genuinely nosedived. Using the crest of calendar year more than calendar year market place development across the nation and the availability of enough credit score and equity cash, new design and expansion proliferated in modern years. Right now, faced with the realities of declining, or at very best stagnant need, numerous of these initiatives are now considered over-leveraged and/or in excess of-sized. As a end result several gaming businesses are trying to renegotiate their personal debt – created much more hard by lower valuations – even though also paring down operational expenses. The latter has turn into a extremely problematic conundrum when dealing with the competitors, specifically in these jurisdictions that are now vying for market shares with new emerging casino projects in neighboring regions. A matter we go over much more completely in the Condition by State evaluation area of this publication.

As a end result of these situations the gaming sector landscape is now strewn with impending fatalities. Amid the more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows every week.

“How lengthy will these financial circumstances persist, and are we at the base however?” are inquiries no 1 seems to be answering yet. What is obvious nonetheless is that most gaming jurisdictions will have to discover how to offer with a more compact pie.

This evaluation involves only gaming revenues of licensed casinos and pari-mutuel outlets that offer on line casino online games, and not Indian gaming functions, card rooms, or modest non-casino variety slot areas. The whole article, like revenue tables is obtainable on our world wide web webpage.

Enter/Output Model

A crucial facet that seems to have arisen from the ashes of this current development is that numerous casino tasks ended up just way too big to support themselves. The input, in conditions of expense dollars, was not proportional to the output, in phrases of net income right after financial debt services, when compared to formerly attained benefits. A lot more and/or even bigger is not often far better. Looking at the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of much more comprehensive amenities in numerous other jurisdictions. The flaw in this technique however is that the expenses related with widening marketplace penetration and occasioned-use, are significantly larger than those incurred to appeal to the foundation marketplace.

As daytripper marketplaces become more aggressive, on line casino venues will have to rely far more and far more on their in-property hotel patrons, and dimensions their properties (and anticipations) accordingly. Whilst Steve Wynn started a significant pattern in producing up-marketplace mega-places, there basically was not adequate demand from customers on the Strip to warrant the a lot of other equivalent assignments that adopted that aimed at the same specialized niche.

The trick is to strike a content medium in venture configurations which of course require significantly less of a ‘seat-of-pants’ technique, and 1 that is more analyzed. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Even though there are no revealed thorough data of American Indian gaming revenues, anecdotal evidence seems to suggest that this section has been as tough hit as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, representing a drop of about seven p.c, or practically $114 million, far more than doubling the 3.five percent fall from the calendar year before. This market place is apparently nonetheless reeling from the ripple-influence of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming reports that contributions based mostly on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the previous year decreasing .8 per cent in the 1st quarter, seven.5 % in the next quarter, nine.5 percent in the 3rd quarter, and 16.1 % in the fourth quarter.

Some SEC reporting Indian gaming houses report related decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reports that even though calendar 12 months 2008 confirmed an almost two p.c progress price in gaming revenues, there was an 8.7 per cent decrease in the third quarter and an nearly 10 p.c drop in the fourth quarter of 2008, compared with 2007. Gaming profits traits at close by Niagara Falls, Ontario ended up down 1.5% in 2008 when compared with 2007.

It is been a blended-bag for point out lotteries across the region. The North American Association of State & Provincial Lotteries studies that U.S. lotteries created a total of $sixty.6 billion in sales in fiscal 2008, up about 3 p.c from the prior year nevertheless some jurisdictions documented decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would seem to be that the info does not reflect the effect of third and/or fourth quarter final results.

According to data provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 % to $ billion in 2008, as opposed to $ billion in 2007.

Prepared & Proposed New Expansions

As beforehand noted, it has been new gaming jurisdictions that have spawned much of the progress in annual casino/racino revenues in excess of the years, and their affect is apt to keep on into the close to future.

Miami Dade voters approved a ballot concern that allows every single of three pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Puppy Observe and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has however to declared its programs. There are several other proposals being regarded that would further broaden casino growth throughout the state.

The condition lastly acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ recreation casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open right up until 2010. There has also been some dialogue about permitting an boost in for every spot 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 system that allows for the advancement of 4 on line casino gaming zones and slots at existing horse and puppy tracks appears mired, as only 1 facility is presently under construction, whilst a few other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so shut to the state line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk game titles, alongside with a 2nd section thanks to open in 2011 with 875 slots and 20 table games. The condition has extended the application approach for the other a few zones until April, 2009.

There is nonetheless a lot of ‘jockeying’ going on, but the prospect of as many as eight slot parlors and racinos appears to be again on the front-burner, but most likely not settled for the duration of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most latest getting the 390 place M Resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new resorts include two parts of the Town Middle task, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino improvement assignments in Baton Rouge and Lake Charles, although delayed, are reported to nonetheless be on-keep track of for opening this yr and/or early 2010.

There is a invoice beneath thing to consider that could more than double Penn National’s slot equipment to 3,000, as properly as a proposal that would take away the restriction that slots be situated inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing regional residents to permit slots, may be contemplating shifting to a far more hospitable town.

A referendum was authorized in November, 2008 that makes it possible for for the development of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as intensive as the state experienced expected.

Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has operate into numerous financing concerns and even though the resort portion is open up, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again somewhat, is nonetheless on monitor to open this calendar year.

New England
Massachusetts, a sleeping-giant in conditions of industry likely, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can’t seem to muster the political help. A recent review accomplished by Dartmouth University estimates that Massachusetts resident expended more than $920 million previous yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to create casinos, even so the topic is likely to be revisited, especially if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its alternatives.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by not too long ago agreeing to continue augmenting purses with an extra tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing software 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 ultimately be developed, the winning bidder indicated an inability to make the essential $370 million payment, citing the present lending local climate, and throwing the task back into the lap of the governor. Even though the industry demand from customers in the location could be regarded very strong, the prospect of further competitiveness from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, specifically thinking about that somewhat less than thirty% of the web acquire is retained by the operator.

Plans to relocate Monticello Raceway into a resort complicated are being reconsidered perhaps owing to each the possible opening of at minimum one or perhaps two racino functions in the NY metro area, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

But another gaming proposal is getting place forth in Ohio, right after last year’s variation was turned down by the voters. This strategy phone calls for one particular on line casino every in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment decision required of $250 million, as well as an initial licensing fee of $fifty million, and a 33 percent tax on gaming profits.

The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 although Philadelphia’s two slot amenities still wallow in a political mire, but are predicted to start off development this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and consist of 300 game titles, a hundred and forty rooms and a extensive selection of facilities.

Legislators are proposing a voter referendum that would amend the point out structure to let on line casino gambling in designated places, as effectively as let gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an provide. State authorities has proffered the idea of enabling the vacation resort to provide on line casino games, but this effort is in as well early a stage to have any traction a single way or an additional.

Indian Gaming
A current Supreme Court docket ruling that restricts the taking of lands into believe in on behalf of federally acknowledged American Indian tribes has additional stymied some new Class III gaming tasks across the place. Moreover, there were eleven Indian casino assignments turned down by the DOI very last calendar year due to the fact of its new rule that casinos have to be near ample to a reservation that tribal members can operate at them. It has been advised that the new Obama administration might be much more sympathetic to the advancement of Indian gaming initiatives, but this problem has yet to be tackled.

Meanwhile, there are other Course III projects in the numerous levels of development. The Seneca casino task in Buffalo, NY, although functioning a modest short term facility, has delayed an presently beneath development long term facility till the market place rebounds. They have also expressed an fascination in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could influence their plans for more substantial initiatives. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this calendar year, and other individuals are in the planning phase. Texas may let the reopening of Indian gaming amenities and permit other location and there are strategies afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming earnings in Atlantic Town has declined seven.six per cent, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding itself in an powerful comp-war with the Pennsylvania venues. At canlı casino siteleri in the Northeast were found in Atlantic City, where it appeared as if it may well in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.

Little by little even so its marketplace share was being encroached upon, initial by the growth of a huge Course III gaming procedure in Connecticut, and then another slots operations in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s long term potential clients. It is reliance on working day-trippers lulled it into a bogus perception of stability, and it now finds by itself possessing to redefine its mission statement to “spot vacation resort.”

The only difficulty with this method nonetheless is that it is sick-equipped to pull it off. For all intents and functions, Atlantic Town is under-roomed and/or over-gamed. There is basically not ample day-tripper market place to go about, and their effective buying and selling location is tightening, as the peripheral populations northward now/will have more all set obtain to a widened supply in New York (Yonkers, and before long at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only actual competitive positive aspects are its hotel ability and the availability of table game titles, though the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In purchase to sufficiently compete as a vacation spot resort the metropolis demands to produce extra visitor rooms and not always gaming capability. By comparison, the Las Vegas Strip houses – real gaming destinations, in that they do not have much of a day-excursion marketplace, apart from for the ‘locals’ – have an typical of .87 gaming positions for each visitor space while Atlantic City’s regular is two.74 positions for every visitor room.

It is not a coincidence that Atlantic City’s two biggest lodges, the Borgata and Harrah’s Marina, both of which additional new rooms in 2008, have been the minimum impacted by the most current downturn. The Borgata experienced a gaming revenue drop of one.six p.c, while Harrah’s Marina documented a 4.9 per cent improve when compared to 2007. In addition, the toughest hit venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, which includes the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a steady rise in gaming revenues through 2006, the metropolis appeared key for even more improvement, which precipitated organizing for four new vacation resort initiatives, every of which have now been indefinitely delayed. Revel Amusement Group’s $two.five billion venture remains an iron skeleton, Pinnacle Entertainment has declared it may seek out to promote its razed Sands website, MGM Mirage has shelved its casino ideas, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport web site.

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