2008 Countrywide Business Casino & Racino Gaming Income Evaluation

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A Interval of Adjustment

Oops! That giant hissing audio is the gaming balloon that had been increasing over the a long time, slowly and gradually getting rid of air. But, it has not been a tide that decreased all ships however, as some rising and increasing gaming jurisdictions confirmed sturdy progress in 2008.

Overall, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a three.5 per cent decrease in gaming revenues for 2008, creating a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a acquire of practically $1 billion in 2008, thus bringing the Business sector marketplace decline to $one.eight billion, or per cent. Nevada was the largest loser in 2008, dropping practically $1.3 billion, a lot more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, casino operators had been caught relatively flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Using the crest of 12 months in excess of yr industry growth across the place and the availability of enough credit rating and fairness funds, new building and expansion proliferated in latest a long time. These days, faced with the realities of declining, or at greatest stagnant demand from customers, a lot of of these assignments are now deemed over-leveraged and/or over-sized. As a consequence several gaming firms are trying to renegotiate their debt – made more challenging by lower valuations – although also paring down operational charges. The latter has become a extremely problematic conundrum when dealing with the competitors, specially in people jurisdictions that are now vying for market place shares with new emerging on line casino assignments in neighboring places. A subject we examine more totally in the Point out by Condition examination part of this publication.

As a end result of these problems the gaming market landscape is now strewn with impending fatalities. Among the much more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the record grows each week.

“How lengthy will these economic conditions persist, and are we at the base but?” are questions no one seems to be answering yet. What is very clear even so is that most gaming jurisdictions will have to find out how to offer with a scaled-down pie.

This examination includes only gaming revenues of licensed casinos and pari-mutuel shops that supply casino game titles, and not Indian gaming operations, card rooms, or small non-on line casino type slot spots. The entire article, such as profits tables is offered on our web page.

Enter/Output Product

A key element that looks to have arisen from the ashes of this present trend is that a lot of on line casino initiatives had been just way too large to support on their own. The input, in conditions of expenditure pounds, was not proportional to the output, in phrases of net income after personal debt support, in contrast to beforehand accomplished results. More and/or larger is not always better. Viewing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more extensive facilities in a lot of other jurisdictions. The flaw in this technique however is that the charges linked with widening marketplace penetration and occasioned-use, are significantly larger than these incurred to draw in the base marketplace.

As daytripper marketplaces turn into far more aggressive, casino venues will have to rely far more and much more on their in-house resort patrons, and dimensions their qualities (and anticipations) appropriately. Whilst Steve Wynn began a significant development in generating up-marketplace mega-destinations, there simply was not ample demand on the Strip to warrant the a lot of other comparable assignments that followed that aimed at the exact same specialized niche.

The trick is to strike a pleased medium in task configurations which of course call for significantly less of a ‘seat-of-pants’ approach, and one particular that is more researched. A shameless plug for advancement consultants like ourselves.

Other Gaming Actions

Although there are no revealed detailed knowledge of American Indian gaming revenues, anecdotal proof appears to advise that this phase has been as hard strike as the Professional sector. gaming installations report slot profits of $1.six billion in 2008, representing a fall of about seven %, or practically $114 million, much more than doubling the 3.five percent drop from the calendar year prior to. This market place is seemingly nonetheless reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions dependent on a gaming profits method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in comparison to the previous 12 months lowering .8 per cent in the 1st quarter, seven.five per cent in the next quarter, 9.5 per cent in the third quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reports that whilst calendar calendar year 2008 confirmed an virtually two per cent development charge in gaming revenues, there was an per cent drop in the 3rd quarter and an almost 10 % decline in the fourth quarter of 2008, when compared with 2007. Gaming revenue trends at close by Niagara Falls, Ontario had been down one.five% in 2008 in contrast with 2007.

It really is been a combined-bag for point out lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries created a overall of $60.six billion in product sales in fiscal 2008, up about 3 per cent from the prior yr however some jurisdictions reported decreases, most notably California, which showed an eight percent fall. Inasmuch as some of these states are on various fiscal calendar year finishes, it would seem to be that the knowledge does not reflect the influence of 3rd and/or fourth quarter outcomes.

According to information offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 per cent to $13.7 billion in 2008, as opposed to $ billion in 2007.

Planned & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned significantly of the progress in once-a-year casino/racino revenues above the a long time, and their influence is apt to continue into the near future.

Miami Dade voters authorized a ballot problem that enables every single of three pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Pet Monitor and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has nevertheless to announced its plans. There are numerous other proposals being regarded that would more increase on line casino growth during the point out.

The point out last but not least got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,200+ game on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open till 2010. There has also been some dialogue about enabling an enhance in for each 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 program that allows for the improvement of 4 casino gaming zones and slots at current horse and pet tracks seems mired, as only one particular facility is presently underneath design, while a few other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so close to the state line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table video games, alongside with a 2nd section because of to open up in 2011 with 875 slots and 20 table games. The point out has prolonged the application method for the other three zones until April, 2009.

There is nonetheless a whole lot of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos seems to be back again on the front-burner, but most likely not solved for the duration of the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most current currently being the 390 room M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Difficult Rock and new accommodations incorporate two parts of the City Center venture, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino advancement initiatives in Baton Rouge and Lake Charles, while delayed, are reported to even now be on-monitor for opening this yr and/or early 2010.

There is a bill beneath thing to consider that could more than double Penn National’s slot equipment to three,000, as properly as a proposal that would eliminate the restriction that slots be situated inside five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional residents to allow slots, may be contemplating relocating to a far more hospitable town.

A referendum was approved in November, 2008 that makes it possible for for the growth of five casinos with a overall of 15,000 slots, and now the bidding war is afoot even though it is not as intensive as the condition experienced anticipated.

Grand Soleil Casino Vacation resort in Natchez had been slated to open in 2008, but has operate into various funding concerns and although the hotel part is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back again somewhat, is nevertheless on monitor to open up this year.

New England
Massachusetts, a sleeping-huge in phrases of marketplace possible, is still maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not appear to muster the political assistance. A latest study finished by Dartmouth University estimates that Massachusetts resident invested a lot more than $920 million very last calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to produce casinos, even so the matter is likely to be revisited, specially if Massachusetts decides to go forward. There are also attempts in Maine to rethink its options.

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 keep on augmenting purses with an extra tax. The governor however, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would finally be developed, the successful bidder indicated an lack of ability to make the essential $370 million fee, citing the current lending climate, and throwing the venture back into the lap of the governor. Despite the fact that the marketplace need in the spot could be regarded as very strong, the prospect of additional opposition from close by Belmont could have an affect on Aqueduct’s underlining financial feasibility, specially taking into consideration that slightly less than 30% of the internet acquire is retained by the operator.

Plans to relocate Monticello Raceway into a resort intricate are becoming reconsidered perhaps owing to equally the probable opening of at minimum one or possibly two racino operations in the NY metro location, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

However yet another gaming proposal is getting set forth in Ohio, right after very last year’s edition was turned down by the voters. This program calls for a single casino each and every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment needed of $250 million, as effectively as an first licensing fee of $fifty million, and a 33 per cent tax on gaming profits.

The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot amenities even now wallow in a political mire, but are expected to start building this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and consist of 300 game titles, 140 rooms and a wide variety of amenities.

Legislators are proposing a voter referendum that would amend the point out constitution to enable casino gambling in selected places, as effectively 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 Hotels, who have reportedly tendered an offer you. Condition government has proffered the notion of enabling the resort to supply on line casino games, but this work is in as well early a stage to have any traction 1 way or an additional.

Indian Gaming
A latest Supreme Court docket ruling that restricts the having of lands into have faith in on behalf of federally acknowledged American Indian tribes has further stymied some new Class III gaming tasks across the nation. Moreover, there have been eleven Indian casino initiatives turned down by the DOI very last calendar year because of its new rule that casinos must be close to adequate to a reservation that tribal members can operate at them. It has been recommended that the new Obama administration may be a lot more sympathetic to the improvement of Indian gaming tasks, but this concern has but to be addressed.

Meanwhile, there are other Class III tasks in the different levels of improvement. The Seneca casino task in Buffalo, NY, whilst working a tiny short-term facility, has delayed an currently underneath design permanent facility until finally the market rebounds. They have also expressed an desire in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could affect their plans for greater assignments. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this calendar year, and other people are in the organizing phase. Texas may allow the reopening of Indian gaming facilities and allow other venue and there are ideas afoot by the Navajos in Arizona to assemble added casinos. California is poised to open two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming profits in Atlantic Metropolis has declined seven.six %, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is locating itself in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were located in Atlantic Town, exactly where it seemed as if it may well in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly nonetheless its industry share was getting encroached upon, initial by the development of a huge Class III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then online 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 eventually two functions in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future potential customers. It really is reliance on day-trippers lulled it into a false sense of protection, and it now finds alone having to redefine its mission assertion to “spot vacation resort.”

The only issue with this method nonetheless is that it is unwell-outfitted to pull it off. For all intents and needs, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is merely not sufficient day-tripper market to go all around, and their effective buying and selling location is tightening, as the peripheral populations northward now/will have much more ready entry to a widened provide in New York (Yonkers, and quickly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only actual aggressive advantages are its hotel capacity and the availability of table games, even though the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In purchase to adequately compete as a spot vacation resort the town wants to build additional guest rooms and not automatically gaming potential. By comparison, the Las Vegas Strip homes – true gaming destinations, in that they do not have a lot of a working day-trip market place, except for the ‘locals’ – have an average of .87 gaming positions for every visitor area even though Atlantic City’s average is two.74 positions for each visitor place.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, each of which extra new rooms in 2008, ended up the the very least impacted by the most recent downturn. The Borgata skilled a gaming profits drop of 1.6 %, whilst Harrah’s Marina reported a 4.9 per cent boost in contrast to 2007. In addition, the toughest strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity of rooms. In the meantime some of the venues are teetering on viability, which includes the the Trump properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.

With a regular increase in gaming revenues via 2006, the metropolis appeared prime for even more growth, which precipitated planning for four new resort assignments, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion undertaking remains an iron skeleton, Pinnacle Entertainment has declared it might look for to promote its razed Sands web site, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport web site.

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