2008 National Commercial On line casino & Racino Gaming Profits Analysis

A Period of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been increasing above the years, slowly losing air. But, it has not been a tide that reduced all ships nevertheless, as some rising and increasing gaming jurisdictions showed powerful progress in 2008.

All round, the industrial and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.5 per cent decrease in gaming revenues for 2008, generating a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of practically $one billion in 2008, therefore bringing the Business sector market place decline to $1.8 billion, or six.seven percent. Nevada was the largest loser in 2008, dropping nearly $one.three billion, much more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, on line casino operators ended up caught reasonably flat-footed by the extent of the 2008 earnings downturn, as it was not till the 3rd and fourth quarters when it truly nosedived. Riding the crest of year over calendar year industry expansion across the nation and the availability of enough credit and equity money, new development and expansion proliferated in recent years. Nowadays, faced with the realities of declining, or at ideal stagnant desire, several of these projects are now considered more than-leveraged and/or in excess of-sized. As a result a lot of gaming businesses are attempting to renegotiate their personal debt – created far more hard by reduce valuations – while also paring down operational costs. The latter has become a extremely problematic conundrum when working with the competitors, specially in people jurisdictions that are now vying for market shares with new rising on line casino tasks in neighboring regions. A topic we go over much more fully in the Point out by Point out evaluation area of this publication.

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

“How extended will these financial circumstances persist, and are we at the base but?” are inquiries no one seems to be answering however. What is distinct however is that most gaming jurisdictions will have to discover how to deal with a more compact pie.

This analysis contains only gaming revenues of licensed casinos and pari-mutuel stores that offer you on line casino games, and not Indian gaming operations, card rooms, or modest non-on line casino type slot locations. The entire report, like profits tables is obtainable on our net web page.

Enter/Output Model

A essential facet that looks to have arisen from the ashes of this present craze is that a lot of casino tasks were just too massive to help by themselves. The input, in phrases of expense bucks, was not proportional to the output, in terms of web profit after credit card debt provider, when compared to formerly reached outcomes. Much more and/or greater is not constantly greater. Observing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more thorough features in many other jurisdictions. The flaw in this approach however is that the expenses connected with widening industry penetration and occasioned-use, are substantially greater than individuals incurred to appeal to the base marketplace.

As daytripper markets become much more aggressive, on line casino venues will have to rely far more and a lot more on their in-home hotel patrons, and size their homes (and anticipations) appropriately. Even though Steve Wynn started out a significant pattern in making up-market place mega-destinations, there merely was not ample demand from customers on the Strip to warrant the several other similar projects that adopted that aimed at the identical niche.

The trick is to strike a content medium in project configurations which of system call for less of a ‘seat-of-pants’ method, and 1 that is a lot more analyzed. A shameless plug for development consultants like ourselves.

Other Gaming Pursuits

Though there are no printed in depth knowledge of American Indian gaming revenues, anecdotal proof seems 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, representing a fall of about seven p.c, or practically $114 million, far more than doubling the three.five percent fall from the year prior to. This industry is evidently nonetheless reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Division of Gaming reports that contributions primarily based on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in comparison to the earlier calendar year decreasing .8 % in the first quarter, 7.5 p.c in the second quarter, 9.five % in the 3rd quarter, and 16.one per cent in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that although calendar yr 2008 showed an almost 2 % growth rate in gaming revenues, there was an 8.7 per cent drop in the 3rd quarter and an practically ten % drop in the fourth quarter of 2008, when compared with 2007. Gaming revenue traits at nearby Niagara Falls, Ontario were down one.5% in 2008 in comparison with 2007.

It’s been a mixed-bag for state lotteries across the region. The North American Affiliation of State & Provincial Lotteries reports that U.S. lotteries generated a total of $sixty.six billion in sales in fiscal 2008, up about 3 percent from the preceding yr nevertheless some jurisdictions documented decreases, most notably California, which confirmed an eight p.c fall. Inasmuch as some of these states are on different fiscal yr finishes, it would seem to be that the data does not mirror the influence of 3rd and/or fourth quarter outcomes.

In accordance to data supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping seven % to $13.seven billion in 2008, vs . $14.7 billion in 2007.

Prepared & Proposed New Expansions

As beforehand famous, it has been new gaming jurisdictions that have spawned much of the growth in annual casino/racino revenues over the many years, and their influence is apt to carry on into the in close proximity to potential.

Miami Dade voters accredited a ballot problem that makes it possible for each of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Puppy Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has yet to declared its strategies. There are numerous other proposals being regarded that would further expand on line casino advancement through the state.

The state ultimately received about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ sport on line casino found in Des Plaines just east of O’Hare. The new facility is not probably to open until finally 2010. There has also been some dialogue about enabling an increase in for every 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 system that allows for the advancement of 4 on line casino gaming zones and slots at present horse and pet tracks appears mired, as only one facility is presently beneath design, even though a few other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so near to the condition line that its parking great deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table games, together with a second section thanks to open up in 2011 with 875 slots and 20 table games. The condition has extended the application process for the other 3 zones right up until April, 2009.

There is nonetheless a great deal of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos appears to be back on the front-burner, but probably not settled 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 currently being the 390 area M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new resorts include two parts of the Metropolis Center undertaking, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino improvement tasks in Baton Rouge and Lake Charles, even though delayed, are noted to nonetheless be on-monitor for opening this yr and/or early 2010.

There is a monthly bill beneath thing to consider that could far more than double Penn National’s slot machines to three,000, as effectively as a proposal that would get rid of the restriction that slots be found in 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood people to permit slots, might be thinking about transferring to a a lot more hospitable town.

A referendum was accredited in November, 2008 that enables for the advancement of five casinos with a complete of 15,000 slots, and now the bidding war is afoot though it is not as intensive as the state experienced anticipated.

www.wooricasinoda.com in Natchez had been slated to open in 2008, but has run into different financing concerns and while the hotel part is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back considerably, is still on keep track of to open up this calendar year.

New England
Massachusetts, a sleeping-large in terms of market place likely, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t seem to be to muster the political support. A recent study finished by Dartmouth College estimates that Massachusetts resident expended a lot more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to produce casinos, even so the subject is probably to be revisited, specially if Massachusetts decides to go ahead. 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 devices at racetracks by recently agreeing to proceed augmenting purses with an extra tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would lastly be designed, the profitable bidder indicated an incapacity to make the necessary $370 million fee, citing the recent lending weather, and throwing the task again into the lap of the governor. Despite the fact that the market demand in the area could be regarded as really powerful, the prospect of added opposition from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, especially thinking about that somewhat less than thirty% of the web acquire is retained by the operator.

Programs to relocate Monticello Raceway into a resort intricate are getting reconsidered maybe owing to equally the probable opening of at minimum 1 or possibly two racino operations in the NY metro region, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

However another gaming proposal is currently being put forth in Ohio, soon after final year’s variation was turned down by the voters. This strategy phone calls for 1 on line casino each and every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision necessary of $250 million, as nicely as an preliminary licensing price of $50 million, and a 33 per cent tax on gaming revenue.

The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 while Philadelphia’s two slot amenities even now wallow in a political mire, but are anticipated to start off development this year.

South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and contain 300 video games, a hundred and forty rooms and a extensive selection of amenities.

Legislators are proposing a voter referendum that would amend the state constitution to allow on line casino gambling in specified regions, as nicely as let gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. State authorities has proffered the notion of making it possible for the vacation resort to offer on line casino online games, but this effort is in also early a phase to have any traction one particular way or yet another.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the taking of lands into trust on behalf of federally identified American Indian tribes has further stymied some new Course III gaming initiatives throughout the country. Moreover, there have been eleven Indian casino projects rejected by the DOI very last yr because of its new rule that casinos have to be close to sufficient to a reservation that tribal customers can function at them. It has been recommended that the new Obama administration may well be a lot more sympathetic to the development of Indian gaming tasks, but this problem has but to be tackled.

Meanwhile, there are other Class III projects in the a variety of levels of development. The Seneca casino undertaking in Buffalo, NY, whilst operating a modest momentary facility, has delayed an already beneath construction long lasting facility until the market place rebounds. They have also expressed an desire in developing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could influence their ideas for larger tasks. There are new Indian gaming projects established to open up in Michigan and Oklahoma this calendar year, and other folks are in the planning stage. Texas may possibly enable the reopening of Indian gaming services and let other venue and there are strategies afoot by the Navajos in Arizona to build added casinos. California is poised to open two to three new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Metropolis has declined seven.6 %, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is discovering by itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were located in Atlantic City, the place it looked as if it might really even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly nonetheless its market place share was getting encroached on, first by the improvement of a large Class III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.

Now, with the prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening around Atlantic City’s foreseeable future potential customers. It truly is reliance on day-trippers lulled it into a false feeling of security, and it now finds itself having to redefine its mission assertion to “destination resort.”

The only dilemma with this method even so is that it is ill-outfitted to pull it off. For all intents and purposes, Atlantic City is below-roomed and/or over-gamed. There is merely not sufficient working day-tripper marketplace to go close to, and their successful trading location is tightening, as the peripheral populations northward now/will have more completely ready entry to a widened offer 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 obtain, the city’s only genuine competitive advantages are its resort potential and the availability of table video games, though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In order to sufficiently contend as a destination resort the town wants to develop added guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip houses – true gaming places, in that they do not have significantly of a working day-vacation marketplace, apart from for the ‘locals’ – have an common of .87 gaming positions for every visitor place even though Atlantic City’s common is 2.74 positions per visitor area.

It is not a coincidence that Atlantic City’s two biggest hotels, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata experienced a gaming income fall of 1.six percent, whilst Harrah’s Marina documented a four.9 % boost in comparison to 2007. Moreover, the hardest hit venues, particularly 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, such as the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a steady increase in gaming revenues via 2006, the town seemed primary for even more growth, which precipitated preparing for four new vacation resort tasks, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion task continues to be an iron skeleton, Pinnacle Leisure has announced it might find to market its razed Sands internet site, MGM Mirage has shelved its casino plans, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport internet site.


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