National Commercial Gambling casino & Racino Gambling Income Examination

A Time period of Adjustment

Oops! That large hissing seem is the gaming balloon that experienced been growing in excess of the years, slowly losing air. But, it has not been a tide that decreased all ships nonetheless, as some rising and growing gaming jurisdictions confirmed powerful progress in 2008.

General, the professional and racetrack casino sectors (excluding Indian gaming), experienced a 3.5 per cent drop in gaming revenues for 2008, creating a whole of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of practically $1 billion in 2008, thus bringing the Professional sector market drop to $1.eight billion, or 6.seven p.c. Nevada was the largest loser in 2008, dropping almost $1.3 billion, far more than half of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, casino operators have been caught fairly flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it actually nosedived. Driving the crest of yr over calendar year marketplace growth throughout the nation and the availability of enough credit score and fairness funds, new building and growth proliferated in current several years. Nowadays, faced with the realities of declining, or at ideal stagnant demand from customers, several of these initiatives are now regarded as more than-leveraged and/or in excess of-sized. As a consequence numerous gaming firms are making an attempt to renegotiate their credit card debt – made much more tough by decrease valuations – although also paring down operational fees. The latter has turn out to be a extremely problematic conundrum when working with the competition, particularly in individuals jurisdictions that are now vying for industry shares with new rising on line casino tasks in neighboring regions. A subject matter we go over more completely in the Condition by Point out examination section of this publication.

As a result of these problems the gaming sector landscape is now strewn with impending fatalities. Between the far more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows every single 7 days.

“How extended will these economic problems persist, and are we at the base yet?” are concerns no 1 appears to be answering nevertheless. What is very clear nevertheless is that most gaming jurisdictions will have to find out how to offer with a smaller sized pie.

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This evaluation contains only gaming revenues of licensed casinos and pari-mutuel stores that supply casino game titles, and not Indian gaming operations, card rooms, or little non-on line casino type slot places. The total write-up, such as earnings tables is available on our net page.

Input/Output Product

A key facet that looks to have arisen from the ashes of this recent trend is that several casino initiatives have been just as well massive to assistance by themselves. The input, in phrases of expenditure dollars, was not proportional to the output, in terms of net earnings after debt provider, compared to beforehand achieved outcomes. Much more and/or greater is not often far better. Looking at the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of more thorough features in many other jurisdictions. The flaw in this approach nonetheless is that the costs related with widening market penetration and occasioned-use, are considerably larger than these incurred to appeal to the foundation marketplace.

As daytripper markets become much more competitive, on line casino venues will have to depend much more and more on their in-property hotel patrons, and size their properties (and expectations) accordingly. While Steve Wynn started out a major craze in making up-industry mega-locations, there basically was not enough demand on the Strip to warrant the a lot of other related tasks that followed that aimed at the exact same niche.

The trick is to strike a happy medium in project configurations which of system need significantly less of a ‘seat-of-pants’ technique, and 1 that is a lot more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Despite the fact that there are no released thorough data of American Indian gaming revenues, anecdotal proof appears to propose that this segment has been as tough hit as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, symbolizing a fall of about 7 %, or virtually $114 million, more than doubling the 3.five p.c drop from the year prior to. This marketplace is apparently even now reeling from the ripple-result of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming stories that contributions based mostly on a gaming profits method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the prior 12 months decreasing .8 % in the 1st quarter, 7.5 percent in the second quarter, 9.5 p.c in the 3rd quarter, and 16.one per cent in the fourth quarter.

Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reviews that whilst calendar 12 months 2008 showed an virtually two per cent expansion fee in gaming revenues, there was an 8.7 per cent drop in the 3rd quarter and an virtually 10 percent decrease in the fourth quarter of 2008, in contrast with 2007. Gaming profits tendencies at close by Niagara Falls, Ontario have been down 1.five% in 2008 in comparison with 2007.

It truly is been a mixed-bag for point out lotteries throughout the region. The North American Association of Condition & Provincial Lotteries reports that U.S. lotteries generated a total of $60.six billion in sales in fiscal 2008, up about three percent from the preceding year yet some jurisdictions described decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on numerous fiscal yr finishes, it would seem to be that the knowledge does not mirror the effect of third and/or fourth quarter benefits.

In accordance to information supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven per cent to $13.7 billion in 2008, as opposed to $14.seven billion in 2007.

Planned & Proposed New Expansions

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

Florida
Miami Dade voters accepted a ballot concern that makes it possible for each of 3 pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has but to announced its plans. There are quite a few other proposals currently being deemed that would even more increase on line casino growth all through the state.

Illinois
The point out ultimately received about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,200+ game on line casino found in Des Plaines just east of O’Hare. The new facility is not most likely to open right up until 2010. There has also been some dialogue about enabling an boost in for each location gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery software that permits for the advancement of 4 on line casino gaming zones and slots at present horse and pet tracks appears mired, as only 1 facility is presently under construction, even though three other proposals ended up 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 situated so shut to the state line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk games, together with a second phase owing to open in 2011 with 875 slots and twenty desk games. The state has prolonged the application method for the other a few zones until finally April, 2009.

Kentucky
There is nevertheless a good deal of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos appears to be back on the front-burner, but most likely not fixed in the course of the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most modern currently being the 390 place M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new accommodations contain two factors of the Town Middle task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino advancement tasks in Baton Rouge and Lake Charles, whilst delayed, are described to nevertheless be on-monitor for opening this year and/or early 2010.

Maine
There is a bill under consideration that could much more than double Penn National’s slot equipment to 3,000, as effectively as a proposal that would get rid of the restriction that slots be positioned within 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional citizens to allow slots, might be thinking about moving to a far more hospitable city.

Maryland
A referendum was authorized in November, 2008 that enables for the growth of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot although it is not as extreme as the condition had anticipated.

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open in 2008, but has operate into different funding troubles and although the resort part is open up, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again considerably, is nonetheless on observe to open this calendar year.

New England
Massachusetts, a sleeping-giant in terms of market place potential, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot appear to muster the political help. A modern study concluded by Dartmouth College estimates that Massachusetts resident invested much more than $920 million previous yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an selection to create casinos, even so the topic is likely to be revisited, especially if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by just lately agreeing to carry on augmenting purses with an further tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would last but not least be designed, the successful bidder indicated an lack of ability to make the needed $370 million charge, citing the present lending weather, and throwing the task back into the lap of the governor. Although the marketplace demand in the spot could be considered fairly sturdy, the prospect of extra competitiveness from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, specially thinking about that marginally significantly less than 30% of the web win is retained by the operator.

Plans to relocate Monticello Raceway into a resort intricate are being reconsidered maybe owing to the two the probable opening of at least a single or perhaps two racino operations in the NY metro location, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

Ohio
However another gaming proposal is getting put forth in Ohio, right after previous year’s version was turned down by the voters. This plan phone calls for one casino each and every in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure needed of $250 million, as effectively as an preliminary licensing charge of $fifty million, and a 33 per cent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot services even now wallow in a political mire, but are anticipated to start off design this year.

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

Texas
Legislators are proposing a voter referendum that would amend the state constitution to let 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 personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an provide. Point out federal government has proffered the idea of permitting the resort to supply casino video games, but this hard work is in also early a phase to have any traction a single way or one more.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the using of lands into have faith in on behalf of federally acknowledged American Indian tribes has more stymied some new Course III gaming initiatives throughout the country. Additionally, there had been eleven Indian on line casino projects turned down by the DOI previous year due to the fact of its new rule that casinos need to be near sufficient to a reservation that tribal customers can function at them. It has been recommended that the new Obama administration might be far more sympathetic to the development of Indian gaming projects, but this concern has nevertheless to be resolved.

In the meantime, there are other Course III projects in the different levels of development. The Seneca on line casino venture in Buffalo, NY, although functioning a tiny temporary facility, has delayed an currently beneath design everlasting facility until the industry rebounds. They have also expressed an interest in developing a casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could impact their programs for larger initiatives. There are new Indian gaming assignments set to open in Michigan and Oklahoma this 12 months, and other folks are in the organizing phase. Texas may possibly let the reopening of Indian gaming amenities and let other location and there are programs afoot by the Navajos in Arizona to build added casinos. California is poised to open two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Town has declined 7.six %, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is discovering by itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been found in Atlantic City, exactly where it seemed as if it may well really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Little by little however its market share was becoming encroached on, first by the improvement of a large Course III gaming operation in Connecticut, and then yet another slots operations in Rhode Island, and then online video 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 casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening close to Atlantic City’s potential potential customers. It is reliance on day-trippers lulled it into a bogus perception of security, and it now finds alone possessing to redefine its mission assertion to “location resort.”

The only problem with this method even so is that it is unwell-geared up to pull it off. For all intents and reasons, Atlantic City is below-roomed and/or over-gamed. There is just not enough working day-tripper marketplace to go around, and their efficient buying and selling area is tightening, as the peripheral populations northward now/will have much more completely ready access to a widened supply in New York (Yonkers, and shortly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only actual competitive benefits are its lodge capability and the availability of table games, even though the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In get to sufficiently compete as a vacation spot vacation resort the town wants to build additional visitor rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip properties – accurate gaming locations, in that they do not have considerably of a working day-vacation marketplace, except for the ‘locals’ – have an regular of .87 gaming positions for every guest area although Atlantic City’s average is two.74 positions for every guest room.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, had been the least impacted by the newest downturn. The Borgata knowledgeable a gaming income drop of one.6 per cent, while Harrah’s Marina documented a 4.9 percent enhance in contrast to 2007. Moreover, the most difficult strike 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, like the the Trump houses and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.

With a continual increase in gaming revenues through 2006, the city seemed primary for more development, which precipitated planning for four new resort initiatives, every of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion task continues to be an iron skeleton, Pinnacle Enjoyment has announced it may well seek out to promote its razed Sands internet site, MGM Mirage has shelved its on line casino programs, and Penn Nationwide seems to have stopped its pursuit of the Bader Subject airport website.

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