Countrywide Professional Internet casino plus Racino Gaming Income Investigation

A Time period of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been growing over the several years, little by little losing air. But, it has not been a tide that lowered all ships however, as some rising and expanding gaming jurisdictions showed robust progress in 2008.

General, the industrial and racetrack casino sectors (excluding Indian gaming), seasoned a 3.5 % decrease in gaming revenues for 2008, generating a total of $36.two 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 Business sector marketplace drop to $1.eight billion, or 6.seven %. Nevada was the largest loser in 2008, dropping almost $1.three billion, more than fifty percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most component, casino operators were 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 truly nosedived. Riding the crest of yr over yr industry expansion across the nation and the availability of sufficient credit history and fairness money, new design and enlargement proliferated in modern a long time. These days, confronted with the realities of declining, or at greatest stagnant need, a lot of of these projects are now regarded as more than-leveraged and/or more than-sized. As a consequence many gaming organizations are making an attempt to renegotiate their debt – created more tough by reduced valuations – even though also paring down operational fees. The latter has turn out to be a quite problematic conundrum when working with the competitors, especially in these jurisdictions that are now vying for market shares with new rising casino initiatives in neighboring locations. A subject matter we go over a lot more entirely in the State by State examination section of this publication.

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

“How long will these economic situations persist, and are we at the base yet?” are inquiries no 1 seems to be answering nevertheless. What is clear however is that most gaming jurisdictions will have to understand how to deal with a smaller pie.

Notice:
This evaluation 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 modest non-on line casino type slot locations. The total write-up, such as income tables is offered on our web web page.

Input/Output Design

A essential aspect that looks to have arisen from the ashes of this present trend is that many on line casino projects had been just way too large to assist on their own. The input, in terms of expenditure pounds, was not proportional to the output, in terms of web profit after debt provider, in comparison to previously attained outcomes. Far more and/or even bigger is not constantly much better. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of far more comprehensive features in a lot of other jurisdictions. The flaw in this technique nonetheless is that the expenses associated with widening market penetration and occasioned-use, are substantially greater than these incurred to draw in the foundation market place.

As daytripper marketplaces turn out to be more aggressive, on line casino venues will have to rely more and a lot more on their in-property hotel patrons, and dimensions their homes (and anticipations) appropriately. While Steve Wynn started out a major development in making up-marketplace mega-places, there just was not sufficient demand from customers on the Strip to warrant the a lot of other related projects that followed that aimed at the same specialized niche.

The trick is to strike a satisfied medium in task configurations which of system demand considerably less of a ‘seat-of-pants’ technique, and one particular that is a lot more researched. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Despite the fact that there are no revealed comprehensive information of American Indian gaming revenues, anecdotal proof seems to propose that this section has been as tough strike as the Professional sector. The two Connecticut Indian gaming installations report slot earnings of $1.six billion in 2008, symbolizing a fall of about seven %, or almost $114 million, far more than doubling the 3.five % drop from the calendar year before. This industry is seemingly still reeling from the ripple-result of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming studies that contributions primarily based on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the preceding calendar year lowering .8 percent in the 1st quarter, 7.5 % in the 2nd quarter, 9.5 % in the third quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, studies that even though calendar year 2008 showed an virtually two p.c development charge in gaming revenues, there was an 8.seven p.c drop in the third quarter and an almost 10 p.c decline in the fourth quarter of 2008, compared with 2007. Gaming revenue tendencies at close by Niagara Falls, Ontario ended up down 1.5% in 2008 in contrast with 2007.

It’s been a mixed-bag for state lotteries across the nation. The North American Association of Condition & Provincial Lotteries reports that U.S. lotteries created a total of $60.six billion in product sales in fiscal 2008, up about 3 per cent from the earlier year but some jurisdictions reported decreases, most notably California, which showed an 8 percent drop. Inasmuch as some of these states are on different fiscal yr finishes, it would seem to be that the information does not reflect the impact of third and/or fourth quarter final results.

In accordance to information provided by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 percent to $13.seven billion in 2008, versus $14.seven billion in 2007.

Planned & Proposed New Expansions

As earlier observed, it has been new gaming jurisdictions that have spawned a lot of the progress in yearly casino/racino revenues more than the years, and their effect is apt to continue into the in close proximity to future.

Florida
Miami Dade voters accepted a ballot issue that makes it possible for every single of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Dog Keep track of and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has yet to announced its programs. There are numerous other proposals being deemed that would more expand on line casino growth through the condition.

Illinois
The point out finally received around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, 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 right up until 2010. There has also been some discussion about allowing an increase 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 permits for the advancement of 4 on line casino gaming zones and slots at existing horse and canine tracks seems mired, as only a single facility is presently below design, although 3 other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is situated so shut to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table game titles, together with a 2nd section because of to open up in 2011 with 875 slots and twenty table online games. The point out has extended the application approach for the other three zones till April, 2009.

Kentucky
There is nonetheless a whole 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 likely not solved throughout the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most modern currently being the 390 place M Vacation resort in Henderson. There are ufalove at both Caesars Palace and Challenging Rock and new resorts incorporate two factors of the City Heart task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino development projects in Baton Rouge and Lake Charles, even though delayed, are noted to nonetheless be on-observe for opening this 12 months and/or early 2010.

Maine
There is a monthly bill underneath consideration that could a lot more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would eliminate the restriction that slots be situated inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby people to enable slots, may possibly be considering transferring to a a lot more hospitable town.

Maryland
A referendum was approved in November, 2008 that makes it possible for for the growth of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot even though it is not as extreme as the condition experienced predicted.

Mississippi
Grand Soleil Casino Vacation resort in Natchez had been slated to open in 2008, but has operate into numerous funding troubles and even though the hotel portion is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back again somewhat, is even now on observe to open this yr.

New England
Massachusetts, a sleeping-giant in phrases of market place potential, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to muster the political support. A latest study accomplished by Dartmouth College estimates that Massachusetts resident put in far more than $920 million last yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an choice to develop casinos, however the topic is probably to be revisited, specifically 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 machines at racetracks by not too long ago agreeing to keep on augmenting purses with an additional 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 area)

New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would lastly be produced, the profitable bidder indicated an inability to make the needed $370 million payment, citing the recent lending weather, and throwing the project back again into the lap of the governor. Despite the fact that the marketplace desire in the spot could be considered fairly strong, the prospect of added opposition from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, specially contemplating that slightly significantly less than thirty% of the web earn is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered probably owing to both the possible opening of at the very least a single or possibly two racino functions in the NY metro location, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Ohio
Nevertheless yet another gaming proposal is becoming put forth in Ohio, after very last year’s edition was turned down by the voters. This strategy calls for 1 on line casino each and every in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment essential of $250 million, as well as an initial licensing payment of $fifty million, and a 33 % tax on gaming income.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are predicted to start off construction this year.

South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and consist of 300 games, 140 rooms and a broad assortment of features.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to permit on line casino gambling in specified areas, as nicely as permit gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Condition authorities has proffered the idea of permitting the vacation resort to provide casino games, but this energy is in way too early a phase to have any traction 1 way or an additional.

Indian Gaming
A current Supreme Court docket ruling that restricts the using of lands into have confidence in on behalf of federally identified American Indian tribes has even more stymied some new Course III gaming initiatives across the country. Additionally, there ended up eleven Indian casino projects turned down by the DOI final calendar year because of its new rule that casinos must be around adequate to a reservation that tribal associates can work at them. It has been recommended that the new Obama administration may be far more sympathetic to the improvement of Indian gaming initiatives, but this issue has nevertheless to be resolved.

In the meantime, there are other Course III projects in the different phases of improvement. The Seneca on line casino project in Buffalo, NY, while working a tiny short term facility, has delayed an already beneath development permanent facility until the marketplace rebounds. They have also expressed an desire in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could affect their strategies for greater projects. There are new Indian gaming initiatives established to open in Michigan and Oklahoma this calendar year, and other people are in the arranging phase. Texas might enable the reopening of Indian gaming facilities and enable other venue and there are plans afoot by the Navajos in Arizona to construct further casinos. California is poised to open up two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming income in Atlantic Metropolis has declined seven.6 percent, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is finding by itself in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast were situated in Atlantic Metropolis, where it appeared as if it may really even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually nonetheless its industry share was being encroached on, very first by the advancement of a huge Course III gaming operation in Connecticut, and then another slots functions 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 planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening all around Atlantic City’s potential potential customers. It’s reliance on working day-trippers lulled it into a untrue feeling of safety, and it now finds itself obtaining to redefine its mission assertion to “destination resort.”

The only difficulty with this approach however is that it is unwell-outfitted to pull it off. For all intents and functions, Atlantic City is underneath-roomed and/or more than-gamed. There is basically not ample working day-tripper market to go about, and their efficient buying and selling spot is tightening, as the peripheral populations northward now/will have far more completely ready access to a widened provide in New York (Yonkers, and shortly 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 true competitive rewards are its lodge ability and the availability of desk online games, though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In purchase to sufficiently contend as a spot resort the city wants to produce added visitor rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip houses – accurate gaming places, in that they do not have considerably of a working day-trip industry, other than for the ‘locals’ – have an regular of .87 gaming positions for each visitor room while Atlantic City’s typical is two.74 positions for each guest place.

It is not a coincidence that Atlantic City’s two biggest hotels, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, were the minimum impacted by the newest downturn. The Borgata knowledgeable a gaming income fall of one.6 p.c, while Harrah’s Marina reported a four.9 per cent increase compared to 2007. Additionally, the toughest hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest number 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 additional delayed, and shedding valuation.

With a steady increase in gaming revenues by way of 2006, the metropolis seemed primary for further advancement, which precipitated arranging for four new resort tasks, every single of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion venture stays an iron skeleton, Pinnacle Amusement has introduced it may possibly find to market its razed Sands site, MGM Mirage has shelved its casino ideas, and Penn National appears to have stopped its pursuit of the Bader Field airport site.

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