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2008 Nationwide Business Casino & Racino Gaming Income Evaluation

A Time period of Adjustment

Oops! That big hissing audio is the gaming balloon that had been growing more than the years, slowly and gradually dropping air. But, it has not been a tide that reduced all ships however, as some rising and increasing gaming jurisdictions showed sturdy development in 2008.

All round, the business and racetrack casino sectors (excluding Indian gaming), seasoned a 3.5 per cent decline in gaming revenues for 2008, making a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a obtain of nearly $1 billion in 2008, thereby bringing the Business sector marketplace decline to $one.8 billion, or 6.7 per cent. Nevada was the most significant loser in 2008, dropping virtually $1.3 billion, far more than fifty percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, on line casino operators have been caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not until finally the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of yr above calendar year industry growth across the place and the availability of enough credit rating and equity money, new design and growth proliferated in current a long time. Today, faced with the realities of declining, or at best stagnant demand from customers, a lot of of these projects are now regarded over-leveraged and/or over-sized. As a outcome a lot of gaming companies are making an attempt to renegotiate their credit card debt – produced more hard by reduce valuations – while also paring down operational costs. The latter has turn out to be a quite problematic conundrum when working with the competition, particularly in those jurisdictions that are now vying for marketplace shares with new rising casino tasks in neighboring locations. A topic we talk about more entirely in the Point out by Point out analysis segment of this publication.

As a end result of these situations the gaming business landscape is now strewn with impending fatalities. Among the a lot more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the checklist grows each and every 7 days.

“How prolonged will these economic conditions persist, and are we at the bottom but?” are inquiries no 1 seems to be answering but. What is clear even so is that most gaming jurisdictions will have to find out how to offer with a more compact pie.

Observe:
This examination consists of only gaming revenues of certified casinos and pari-mutuel shops that offer on line casino online games, and not Indian gaming functions, card rooms, or little non-on line casino kind slot locations. The whole article, including revenue tables is available on our internet page.

Input/Output Design

A important facet that seems to have arisen from the ashes of this recent development is that many on line casino initiatives had been just also massive to assistance on their own. The enter, in terms of expense dollars, was not proportional to the output, in phrases of internet profit after credit card debt services, in contrast to earlier attained outcomes. Much more and/or even bigger is not constantly much better. Looking at the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of far more comprehensive amenities in several other jurisdictions. The flaw in this technique however is that the costs connected with widening industry penetration and occasioned-use, are considerably greater than these incurred to draw in the base marketplace.

As daytripper marketplaces become far more competitive, on line casino venues will have to count more and much more on their in-property resort patrons, and measurement their houses (and expectations) appropriately. Although Steve Wynn started a significant pattern in creating up-market mega-places, there merely was not sufficient desire on the Strip to warrant the several other related initiatives that followed that aimed at the identical market.

The trick is to strike a satisfied medium in project configurations which of system need much less of a ‘seat-of-pants’ strategy, and one particular that is a lot more studied. A shameless plug for development consultants like ourselves.

Other Gaming Routines

Although there are no revealed comprehensive knowledge of American Indian gaming revenues, anecdotal evidence appears to suggest that this segment has been as tough strike as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a drop of about 7 %, or almost $114 million, more than doubling the 3.5 per cent fall from the 12 months prior to. This market place is seemingly still reeling from the ripple-influence of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming studies that contributions dependent on a gaming income method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the preceding year reducing .8 p.c in the 1st quarter, 7.five per cent in the next quarter, 9.5 p.c in the 3rd quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, stories that whilst calendar 12 months 2008 confirmed an virtually 2 p.c progress price in gaming revenues, there was an 8.seven percent decline in the 3rd quarter and an almost 10 per cent decrease in the fourth quarter of 2008, compared with 2007. Gaming income trends at nearby Niagara Falls, Ontario had been down 1.five% in 2008 compared with 2007.

It truly is been a combined-bag for state lotteries throughout the place. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries generated a overall of $sixty.six billion in product sales in fiscal 2008, up about 3 percent from the earlier calendar year however some jurisdictions described decreases, most notably California, which showed an eight percent drop. Inasmuch as some of these states are on various fiscal 12 months finishes, it would look that the information does not reflect the affect of 3rd and/or fourth quarter outcomes.

In accordance to data presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven p.c to $13.7 billion in 2008, as opposed to $14.seven billion in 2007.

Planned & Proposed New Expansions

As earlier observed, 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 affect is apt to continue into the near potential.

Florida
Miami Dade voters authorized a ballot situation that permits each of 3 pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Pet Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has nevertheless to declared its programs. There are quite a few other proposals getting regarded that would more increase on line casino development all through the state.

Illinois
The state last but not least received about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ game casino located in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some dialogue about making it possible for an improve in for every place 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 four on line casino gaming zones and slots at existing horse and pet tracks appears mired, as only one facility is presently under design, even though three other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so shut to the state line that its parking great deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk video games, along with a 2nd phase because of to open in 2011 with 875 slots and twenty desk online games. The state has extended the software approach for the other 3 zones right up until April, 2009.

Kentucky
There is still a great deal of ‘jockeying’ going on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be again on the entrance-burner, but likely not solved for the duration of the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most modern getting the 390 place M Resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new accommodations include two factors of the City Heart undertaking, and the Fountainebleau.

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

Maine
There is a invoice below thing to consider that could a lot more than double Penn National’s slot machines to three,000, as nicely as a proposal that would get rid of the restriction that slots be located in 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood residents to enable slots, may be thinking about moving to a much more hospitable city.

Maryland
A referendum was accredited in November, 2008 that makes it possible for for the growth of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as intensive as the condition had expected.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has operate into a variety of funding problems and while the lodge part is open, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back again somewhat, is even now on track to open this yr.

New England
Massachusetts, a sleeping-large in terms of market possible, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to be to muster the political assistance. A current examine concluded by Dartmouth University estimates that Massachusetts resident expended much more than $920 million previous yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to produce casinos, nevertheless the subject matter is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider 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 keep on augmenting purses with an added tax. The governor nonetheless, 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 machines especially at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would lastly be produced, the winning bidder indicated an lack of ability to make the needed $370 million charge, citing the existing lending local weather, and throwing the venture back again into the lap of the governor. Even though the industry desire in the region could be deemed very strong, the prospect of further opposition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly contemplating that somewhat considerably less than thirty% of the net earn is retained by the operator.

Strategies to relocate Monticello Raceway into a resort complicated are becoming reconsidered perhaps owing to each the possible opening of at minimum one particular or perhaps two racino functions in the NY metro location, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
Nevertheless another gaming proposal is becoming set forth in Ohio, soon after last year’s model was turned down by the voters. This plan phone calls for one casino each and every in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment decision required of $250 million, as well as an initial licensing fee of $fifty million, and a 33 % tax on gaming income.

Pennsylvania
The Sands in Bethlehem is due to open up 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 nevertheless wallow in a political mire, but are expected to start design this calendar year.

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

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

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer you. State federal government has proffered the notion of enabling the vacation resort to supply on line casino games, but this effort is in too early a phase to have any traction 1 way or one more.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the getting of lands into have confidence in on behalf of federally regarded American Indian tribes has more stymied some new Class III gaming tasks across the nation. Additionally, there were eleven Indian on line casino initiatives turned down by the DOI very last yr due to the fact of its new rule that casinos must be close to enough to a reservation that tribal members can operate at them. 바카라 has been recommended that the new Obama administration may well be a lot more sympathetic to the improvement of Indian gaming assignments, but this concern has yet to be tackled.

In the meantime, there are other Course III assignments in the a variety of phases of development. The Seneca on line casino task in Buffalo, NY, even though functioning a little momentary facility, has delayed an currently beneath development permanent facility until the industry rebounds. They have also expressed an interest in creating a casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could effect their strategies for larger tasks. There are new Indian gaming projects established to open in Michigan and Oklahoma this calendar year, and other individuals are in the arranging phase. Texas may permit the reopening of Indian gaming facilities and enable other location and there are strategies afoot by the Navajos in Arizona to build further casinos. California is poised to open two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming profits in Atlantic City has declined seven.six percent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is discovering by itself in an intense comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast have been found in Atlantic City, in which it appeared as if it may possibly in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually however its market share was becoming encroached on, very first by the growth of a massive 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 not too long ago Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening all around Atlantic City’s potential potential clients. It really is reliance on working day-trippers lulled it into a untrue sense of protection, and it now finds itself getting to redefine its mission statement to “destination resort.”

The only issue with this method however is that it is ill-equipped to pull it off. For all intents and reasons, Atlantic Town is below-roomed and/or above-gamed. There is basically not enough day-tripper marketplace to go all around, and their efficient trading region is tightening, as the peripheral populations northward now/will have more all set entry to a widened supply in New York (Yonkers, and before long at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only real competitive positive aspects are its resort capacity and the availability of table games, even though the latter is likely to eventuate in Pennsylvania, and probably Delaware. In buy to sufficiently contend as a vacation spot vacation resort the metropolis demands to create added guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip properties – real gaming places, in that they do not have considerably of a working day-journey industry, other than for the ‘locals’ – have an common of .87 gaming positions for each visitor space even though Atlantic City’s typical is 2.seventy four positions for each visitor room.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, ended up the minimum impacted by the most current downturn. The Borgata experienced a gaming revenue drop of one.6 per cent, while Harrah’s Marina reported a 4.9 % increase compared to 2007. Furthermore, the toughest strike venues, specifically 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 houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.

With a regular rise in gaming revenues by means of 2006, the city appeared primary for further growth, which precipitated planning for 4 new vacation resort initiatives, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion undertaking remains an iron skeleton, Pinnacle Entertainment has declared it may well seek to promote its razed Sands web site, MGM Mirage has shelved its on line casino programs, and Penn Nationwide seems to have stopped its pursuit of the Bader Field airport site.

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