Countrywide Industrial On line casino plus Racino Gaming Revenue Analysis

A Interval of Adjustment

Oops! That giant hissing seem is the gaming balloon that had been increasing above the years, gradually shedding air. But, it has not been a tide that reduced all ships however, as some rising and expanding gaming jurisdictions confirmed strong expansion in 2008.

All round, the commercial and racetrack casino sectors (excluding Indian gaming), experienced a 3.five percent drop in gaming revenues for 2008, generating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a acquire of practically $1 billion in 2008, thus bringing the Commercial sector market place decline to $1.8 billion, or six.7 percent. Nevada was the most significant loser in 2008, dropping virtually $one.3 billion, far more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, casino operators have been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it truly nosedived. Driving the crest of 12 months more than yr marketplace development throughout the region and the availability of ample credit history and fairness funds, new construction and expansion proliferated in modern many years. These days, confronted with the realities of declining, or at greatest stagnant need, several of these projects are now deemed in excess of-leveraged and/or more than-sized. As a end result a lot of gaming companies are making an attempt to renegotiate their financial debt – manufactured much more tough by lower valuations – even though also paring down operational charges. The latter has grow to be a quite problematic conundrum when working with the competitiveness, particularly in individuals jurisdictions that are now vying for market shares with new rising casino projects in neighboring areas. A matter we examine more fully in the State by Point out examination segment of this publication.

As a consequence of these situations the gaming business landscape is now strewn with impending fatalities. Between the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows each week.

“How lengthy will these financial problems persist, and are we at the base nevertheless?” are questions no one particular seems to be answering however. What is clear nonetheless is that most gaming jurisdictions will have to find out how to deal with a more compact pie.

Note:
This investigation contains only gaming revenues of accredited casinos and pari-mutuel stores that offer you on line casino video games, and not Indian gaming functions, card rooms, or little non-casino variety slot places. The entire post, such as income tables is available on our world wide web webpage.

Input/Output Design

A essential facet that would seem to have arisen from the ashes of this existing trend is that a lot of casino tasks had been just as well large to support themselves. The input, in conditions of expense dollars, was not proportional to the output, in phrases of internet income soon after credit card debt service, compared to beforehand accomplished final results. Much more and/or larger is not often greater. Seeing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of a lot more extensive features in many other jurisdictions. The flaw in this approach nevertheless is that the costs connected with widening market place penetration and occasioned-use, are considerably higher than people incurred to attract the base market place.

As daytripper markets turn out to be a lot more aggressive, casino venues will have to count much more and much more on their in-property hotel patrons, and measurement their qualities (and expectations) accordingly. While Steve Wynn began a major craze in creating up-industry mega-places, there basically was not sufficient demand from customers on the Strip to warrant the many other comparable assignments that followed that aimed at the same market.

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

Other Gaming Actions

Although there are no revealed comprehensive information of American Indian gaming revenues, anecdotal proof appears to propose that this segment has been as challenging hit as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, representing a fall of about 7 p.c, or almost $114 million, a lot more than doubling the 3.five % fall from the year just before. This industry is seemingly still 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 Section of Gaming studies that contributions based on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in comparison to the prior year lowering .eight percent in the 1st quarter, seven.5 per cent in the next quarter, 9.five p.c in the third quarter, and sixteen.1 percent in the fourth quarter.

Some SEC reporting Indian gaming qualities report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that although calendar 12 months 2008 showed an almost 2 % development charge in gaming revenues, there was an 8.7 p.c decrease in the third quarter and an practically ten per cent drop in the fourth quarter of 2008, in contrast with 2007. Gaming profits traits at nearby Niagara Falls, Ontario ended up down one.5% in 2008 in comparison with 2007.

It really is been a blended-bag for point out lotteries throughout the region. The North American Association of Point out & Provincial Lotteries stories that U.S. lotteries generated a whole of $sixty.6 billion in income in fiscal 2008, up about three % from the prior year but some jurisdictions noted decreases, most notably California, which confirmed an eight % drop. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would seem to be that the information does not reflect the influence of third and/or fourth quarter results.

In accordance to knowledge supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling seven p.c to $13.7 billion in 2008, versus $14.7 billion in 2007.

Prepared & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned considerably of the development in annual on line casino/racino revenues over the years, and their impact is apt to keep on into the near foreseeable future.

Florida
Miami Dade voters approved a ballot concern that allows each of 3 pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Pet Observe and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has yet to declared its plans. There are quite a few other proposals getting regarded that would even more broaden on line casino advancement during the point out.

Illinois
The condition finally received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ match casino located in Des Plaines just east of O’Hare. The new facility is not probably to open up until 2010. There has also been some discussion about making it possible for an improve in for each spot gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery program that makes it possible for for the advancement of four casino gaming zones and slots at present horse and pet tracks appears mired, as only one particular facility is presently below building, even though 3 other proposals ended up rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the point out line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table game titles, alongside with a 2nd phase due to open up in 2011 with 875 slots and 20 table game titles. The state has extended the application process for the other a few zones right up until April, 2009.

Kentucky
There is nonetheless a good deal of ‘jockeying’ likely on, but the prospect of as numerous as 8 slot parlors and racinos seems to be again on the front-burner, but very likely not solved in the course of the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most current becoming the 390 place M Resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new resorts consist of two parts of the Metropolis Centre task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino growth projects in Baton Rouge and Lake Charles, even though delayed, are documented to even now be on-keep track of for opening this yr and/or early 2010.

Maine
There is a monthly bill under thought that could more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would remove the restriction that slots be situated inside of 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to allow slots, might be considering relocating to a much more hospitable city.

Maryland
A referendum was accepted in November, 2008 that makes it possible for for the improvement of 5 casinos with a overall of fifteen,000 slots, and now the bidding war is afoot even though it is not as extreme as the condition experienced expected.

Mississippi
Grand Soleil Casino Resort in Natchez had been slated to open up in 2008, but has operate into various funding issues and even though the resort part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled again somewhat, is even now on monitor to open this yr.

New England
Massachusetts, a sleeping-large in conditions of market potential, is still maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t look to muster the political support. A modern review finished by Dartmouth University estimates that Massachusetts resident put in far more than $920 million final year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to produce casinos, even so the subject matter is probably to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by not too long ago agreeing to carry on augmenting purses with an extra tax. The governor however, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by making it possible for the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it appeared as if Aqueduct’s four,500 VLT facility would lastly be created, the winning bidder indicated an inability to make the required $370 million charge, citing the current lending local climate, and throwing the task back again into the lap of the governor. Even though the marketplace desire in the region could be considered really strong, the prospect of extra competition from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, specifically considering that marginally significantly less than thirty% of the web win is retained by the operator.

Ideas to relocate Monticello Raceway into a resort sophisticated are being reconsidered possibly owing to both the possible opening of at the very least one particular or possibly two racino operations in the NY metro location, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
But another gaming proposal is becoming put forth in Ohio, after very last year’s model was turned down by the voters. This program phone calls for one particular casino each and every in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure essential of $250 million, as properly as an preliminary licensing payment of $50 million, and a 33 p.c tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers task in Pittsburgh is envisioned to be operational in August, ’09 whilst Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to begin design this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and incorporate three hundred games, 140 rooms and a wide selection of facilities.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to permit on line casino gambling in designated places, as well as allow gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. State authorities has proffered the notion of allowing the vacation resort to offer you casino online games, but this work is in way too early a phase to have any traction one way or another.

Indian Gaming
A modern Supreme Court docket ruling that restricts the getting of lands into believe in on behalf of federally acknowledged American Indian tribes has more stymied some new Course III gaming tasks across the place. Moreover, there had been eleven Indian casino initiatives turned down by the DOI final yr due to the fact of its new rule that casinos need to be near ample to a reservation that tribal users can operate at them. It has been advised that the new Obama administration may be more sympathetic to the development of Indian gaming tasks, but this concern has however to be tackled.

Meanwhile, there are other Class III tasks in the various phases of growth. The Seneca casino project in Buffalo, NY, even though running a small temporary facility, has delayed an currently underneath construction everlasting facility right up until the marketplace rebounds. They have also expressed an fascination in building a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could influence their strategies for larger projects. There are new Indian gaming projects set to open in Michigan and Oklahoma this calendar year, and other people are in the planning phase. Texas might enable the reopening of Indian gaming services and permit other location and there are programs afoot by the Navajos in Arizona to construct extra casinos. California is poised to open two to 3 new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming income in Atlantic City has declined 7.6 percent, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding by itself in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were positioned in Atlantic Town, the place it seemed as if it may well really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Little by little however its market place share was getting encroached on, very first by the growth of a huge Class III gaming operation in Connecticut, and then yet another slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening around Atlantic City’s long term prospective customers. It is reliance on day-trippers lulled it into a false feeling of safety, and it now finds by itself possessing to redefine its mission statement to “spot vacation resort.”

The only dilemma with this strategy however is that it is unwell-outfitted to pull it off. For all intents and functions, Atlantic City is under-roomed and/or above-gamed. There is merely Woori Casinoda -tripper market to go around, and their efficient trading region is tightening, as the peripheral populations northward now/will have a lot more completely ready access to a widened source 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 access, the city’s only real aggressive positive aspects are its resort ability and the availability of desk video games, despite the fact that the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In get to adequately contend as a spot vacation resort the metropolis requirements to produce additional visitor rooms and not always gaming capacity. By comparison, the Las Vegas Strip homes – real gaming places, in that they do not have much of a working day-vacation market, other than for the ‘locals’ – have an average of .87 gaming positions per visitor room while Atlantic City’s regular is 2.seventy four positions for each guest area.

It is not a coincidence that Atlantic City’s two premier resorts, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, ended up the the very least impacted by the latest downturn. The Borgata skilled a gaming earnings fall of 1.6 percent, even though Harrah’s Marina documented a 4.9 percent enhance when compared to 2007. Moreover, the most difficult 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, which includes the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been even more delayed, and shedding valuation.

With a steady rise in gaming revenues by means of 2006, the town seemed key for even more growth, which precipitated arranging for 4 new resort initiatives, every of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion task stays an iron skeleton, Pinnacle Leisure has declared it may look for to promote its razed Sands website, MGM Mirage has shelved its on line casino strategies, and Penn National seems to have stopped its pursuit of the Bader Area airport web site.

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