Countrywide Business Online casino & Racino Gaming Income Investigation

A Period of Adjustment

Oops! That big hissing sound is the gaming balloon that had been increasing over the many years, slowly losing air. But, it has not been a tide that decreased all ships nonetheless, as some rising and expanding gaming jurisdictions confirmed powerful growth in 2008.

Overall, the commercial and racetrack casino sectors (excluding Indian gaming), skilled a three.5 percent decrease in gaming revenues for 2008, generating a complete 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 nearly $one billion in 2008, thereby bringing the Industrial sector marketplace decline to $1.eight billion, or 6.7 per cent. Nevada was the greatest loser in 2008, dropping virtually $1.three billion, much more than 50 % of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, on line casino operators were caught relatively flat-footed by the extent of the 2008 income downturn, as it was not until finally the 3rd and fourth quarters when it really nosedived. Riding the crest of year more than 12 months market place growth across the place and the availability of sufficient credit and fairness resources, new design and enlargement proliferated in modern a long time. These days, confronted with the realities of declining, or at very best stagnant desire, many of these projects are now considered more than-leveraged and/or more than-sized. As a end result numerous gaming businesses are making an attempt to renegotiate their personal debt – made much more difficult by decrease valuations – whilst also paring down operational fees. The latter has turn into a extremely problematic conundrum when working with the competitors, particularly in these jurisdictions that are now vying for industry shares with new emerging on line casino projects in neighboring locations. A subject we discuss a lot more completely in the Point out by State evaluation segment of this publication.

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

“How extended will these financial problems persist, and are we at the base however?” are inquiries no one particular seems to be answering but. What is distinct however is that most gaming jurisdictions will have to find out how to offer with a scaled-down pie.

This evaluation contains only gaming revenues of accredited casinos and pari-mutuel shops that offer you on line casino games, and not Indian gaming functions, card rooms, or modest non-casino type slot places. The total write-up, which includes income tables is accessible on our internet website page.

Enter/Output Model

A crucial aspect that looks to have arisen from the ashes of this present pattern is that numerous on line casino assignments ended up just as well large to help themselves. The enter, in terms of investment decision pounds, was not proportional to the output, in terms of net profit soon after personal debt support, in contrast to formerly reached results. Much more and/or even bigger is not often much better. Looking at the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of much more comprehensive features in many other jurisdictions. The flaw in this strategy however is that the costs linked with widening industry penetration and occasioned-use, are substantially larger than people incurred to entice the base market place.

As daytripper markets become more aggressive, casino venues will have to rely more and much more on their in-home hotel patrons, and dimension their qualities (and anticipations) accordingly. Whilst Steve Wynn started out a key pattern in creating up-market mega-places, there just was not ample need on the Strip to warrant the numerous other comparable tasks that adopted that aimed at the identical area of interest.

The trick is to strike a content medium in venture configurations which of course require significantly less of a ‘seat-of-pants’ approach, and a single that is a lot more examined. A shameless plug for improvement consultants like ourselves.

Other Gaming Routines

Despite the fact that there are no published thorough knowledge of American Indian gaming revenues, anecdotal evidence appears to suggest that this section has been as hard strike as the Industrial sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a drop of about seven per cent, or practically $114 million, more than doubling the three.5 p.c drop from the calendar year just before. This market is apparently still reeling from the ripple-impact of a on line casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming studies that contributions based mostly on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in contrast to the prior 12 months decreasing .eight p.c in the very first quarter, 7.5 per cent in the second quarter, nine.five % in the 3rd quarter, and sixteen.one % in the fourth quarter.

Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, stories that although calendar 12 months 2008 confirmed an virtually 2 % development fee in gaming revenues, there was an eight.seven percent drop in the 3rd quarter and an almost 10 per cent drop in the fourth quarter of 2008, in comparison with 2007. Gaming earnings developments at nearby Niagara Falls, Ontario were down one.5% in 2008 when compared with 2007.

It truly is been a mixed-bag for state lotteries throughout the country. The North American Affiliation of State & Provincial Lotteries stories that U.S. lotteries created a complete of $60.6 billion in income in fiscal 2008, up about 3 p.c from the prior calendar year yet some jurisdictions noted decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on different fiscal 12 months ends, it would seem that the information does not mirror the effect of third and/or fourth quarter benefits.

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

Planned & Proposed New Expansions

As beforehand observed, it has been new gaming jurisdictions that have spawned much of the expansion in yearly casino/racino revenues in excess of the several years, and their influence is apt to keep on into the around future.

Miami Dade voters approved a ballot problem that allows every 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 organizing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has nevertheless to introduced its plans. There are many other proposals being deemed that would additional broaden on line casino development during the state.

The state ultimately received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ sport casino located in Des Plaines just east of O’Hare. The new facility is not probably to open right up until 2010. There has also been some dialogue about making it possible for an improve in for every location gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.

The state’s expanded lottery plan that allows for the improvement of four on line casino gaming zones and slots at existing horse and canine tracks appears mired, as only 1 facility is presently underneath building, whilst 3 other proposals were rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is situated so close to the condition line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk video games, together with a 2nd period due to open up in 2011 with 875 slots and 20 table online games. The condition has extended the software procedure for the other three zones until finally April, 2009.

There is still a lot of ‘jockeying’ likely on, but the prospect of as a lot of as eight slot parlors and racinos appears to be back again on the entrance-burner, but likely not resolved in the course of the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most modern currently being the 390 area M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new resorts consist of two factors of the Town Heart venture, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino improvement tasks in Baton Rouge and Lake Charles, while delayed, are reported to still be on-track for opening this year and/or early 2010.

There is a invoice beneath thing to consider that could more than double Penn National’s slot machines to three,000, as nicely as a proposal that would eliminate the restriction that slots be found inside of five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional residents to enable slots, may possibly be considering shifting to a much more hospitable town.

A referendum was approved in November, 2008 that makes it possible for for the development of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot though it is not as intensive as the state experienced anticipated.

Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has operate into various financing issues and whilst the hotel part is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back fairly, is even now on keep track of to open up this yr.

New England
Massachusetts, a sleeping-large in phrases of market place potential, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to muster the political assist. A modern examine accomplished by Dartmouth University estimates that Massachusetts resident expended far more than $920 million last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to create casinos, nonetheless the matter is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also makes an attempt in Maine to reconsider its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by recently agreeing to proceed augmenting purses with an further tax. The governor however, has appointed a new panel to research the state’s sagging racing system which ironically, can only be preserved by enabling the tracks to have slot machines specifically at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would last but not least be created, the winning bidder indicated an lack of ability to make the needed $370 million payment, citing the present lending local weather, and throwing the undertaking back again into the lap of the governor. Despite the fact that the industry desire in the region could be considered quite sturdy, the prospect of additional opposition from nearby Belmont could have an influence on Aqueduct’s underlining financial feasibility, especially considering that slightly less than 30% of the net get is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort complex are becoming reconsidered perhaps owing to both the possible opening of at minimum one particular or perhaps two racino functions in the NY metro location, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

But yet another gaming proposal is becoming put forth in Ohio, following very last year’s edition was turned down by the voters. This plan phone calls for a single on line casino each and every in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure necessary of $250 million, as properly as an initial licensing charge of $fifty million, and a 33 p.c tax on gaming profits.

The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is expected to be operational in August, ’09 whilst Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to commence development this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain three hundred game titles, a hundred and forty rooms and a wide variety of features.

Legislators are proposing a voter referendum that would amend the condition constitution to permit casino gambling in specified locations, as well as enable 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 Accommodations, who have reportedly tendered an offer you. State government has proffered the notion of allowing the vacation resort to supply casino game titles, but this energy is in too early a phase to have any traction 1 way or an additional.

Indian Gaming
A current Supreme Courtroom ruling that restricts the taking of lands into have confidence in on behalf of federally regarded American Indian tribes has even more stymied some new Class III gaming initiatives across the country. Moreover, there have been more information on line casino tasks rejected by the DOI final 12 months due to the fact of its new rule that casinos should be around enough to a reservation that tribal customers can operate at them. It has been recommended that the new Obama administration may possibly be much more sympathetic to the advancement of Indian gaming initiatives, but this problem has yet to be addressed.

Meanwhile, there are other Course III initiatives in the different phases of advancement. The Seneca casino undertaking in Buffalo, NY, even though operating a little short-term facility, has delayed an previously below construction long term facility till the market rebounds. They have also expressed an interest in establishing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could impact their strategies for more substantial assignments. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this year, and other folks are in the planning phase. Texas could enable the reopening of Indian gaming facilities and enable other venue and there are plans afoot by the Navajos in Arizona to build additional casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming income in Atlantic Town has declined seven.six %, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is discovering alone in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast were found in Atlantic Metropolis, exactly where it seemed as if it may truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly however its market share was becoming encroached upon, initial by the advancement of a large Course III gaming operation in Connecticut, and then another slots operations in Rhode Island, and then video clip 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 casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s future potential clients. It’s reliance on day-trippers lulled it into a false perception of stability, and it now finds itself having to redefine its mission assertion to “destination vacation resort.”

The only difficulty with this approach even so is that it is sick-geared up to pull it off. For all intents and reasons, Atlantic Town is below-roomed and/or in excess of-gamed. There is merely not ample day-tripper marketplace to go close to, and their powerful trading region is tightening, as the peripheral populations northward now/will have a lot more completely ready entry to a widened supply in New York (Yonkers, and quickly 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 true competitive positive aspects are its hotel potential and the availability of desk online games, even though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In order to adequately compete as a vacation spot vacation resort the town needs to produce extra guest rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip homes – true gaming places, in that they do not have a lot of a working day-vacation market place, other than for the ‘locals’ – have an typical of .87 gaming positions per guest place while Atlantic City’s regular is 2.seventy four positions for every visitor area.

It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, had been the minimum impacted by the newest downturn. The Borgata seasoned a gaming profits drop of one.six %, even though Harrah’s Marina described a four.nine p.c improve in comparison 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 properties and Resorts with the hoped for sale of the Tropicana has been even more delayed, and getting rid of valuation.

With a constant rise in gaming revenues via 2006, the metropolis seemed key for more development, which precipitated arranging for 4 new resort projects, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion project remains an iron skeleton, Pinnacle Entertainment has announced it may possibly find to offer its razed Sands internet site, MGM Mirage has shelved its on line casino strategies, and Penn National seems to have stopped its pursuit of the Bader Area airport web site.


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