National Business Casino and Racino Game playing Earnings Investigation

A Period of time of Adjustment

Oops! That giant hissing seem is the gaming balloon that had been increasing above the many years, little by little shedding air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and growing gaming jurisdictions confirmed robust growth in 2008.

pussy888 , the professional and racetrack casino sectors (excluding Indian gaming), knowledgeable a three.5 p.c drop in gaming revenues for 2008, producing a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a acquire of almost $1 billion in 2008, thereby bringing the Industrial sector industry decrease to $1.8 billion, or p.c. Nevada was the most significant loser in 2008, dropping practically $1.three billion, much more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most part, on line casino operators ended up caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not till the third and fourth quarters when it genuinely nosedived. Riding the crest of 12 months more than calendar year marketplace progress throughout the nation and the availability of enough credit and fairness cash, new construction and enlargement proliferated in recent several years. These days, faced with the realities of declining, or at ideal stagnant demand, many of these tasks are now deemed above-leveraged and/or in excess of-sized. As a end result numerous gaming firms are making an attempt to renegotiate their debt – produced a lot more difficult by reduced valuations – while also paring down operational costs. The latter has turn out to be a really problematic conundrum when dealing with the competition, specially in individuals jurisdictions that are now vying for marketplace shares with new rising on line casino tasks in neighboring locations. A matter we go over far more totally in the Point out by State analysis area of this publication.

As a consequence of these circumstances the gaming sector landscape is now strewn with impending fatalities. Between the much more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows each 7 days.

“How lengthy will these financial circumstances persist, and are we at the base however?” are questions no 1 appears to be answering nevertheless. What is very clear even so is that most gaming jurisdictions will have to discover how to offer with a scaled-down pie.

This examination contains only gaming revenues of certified casinos and pari-mutuel stores that supply casino games, and not Indian gaming functions, card rooms, or tiny non-casino type slot places. The whole report, including earnings tables is available on our web page.

Input/Output Model

A important factor that seems to have arisen from the ashes of this recent trend is that several on line casino assignments have been just way too large to assistance themselves. The enter, in terms of expenditure pounds, was not proportional to the output, in terms of internet revenue after personal debt provider, compared to formerly reached benefits. A lot more and/or larger is not usually far better. Viewing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of more complete facilities in several other jurisdictions. The flaw in this strategy however is that the fees related with widening industry penetration and occasioned-use, are drastically greater than individuals incurred to appeal to the base market.

As daytripper marketplaces turn into far more aggressive, on line casino venues will have to count more and a lot more on their in-residence hotel patrons, and measurement their qualities (and expectations) accordingly. Even though Steve Wynn began a key trend in generating up-marketplace mega-places, there basically was not adequate demand on the Strip to warrant the a lot of other equivalent projects that followed that aimed at the same market.

The trick is to strike a pleased medium in task configurations which of training course require less of a ‘seat-of-pants’ approach, and a single that is far more examined. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Even though there are no printed in depth data of American Indian gaming revenues, anecdotal proof appears to advise that this section has been as hard strike as the Business sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, symbolizing a fall of about 7 per cent, or practically $114 million, far more than doubling the 3.five percent drop from the yr just before. This market is apparently even now reeling from the ripple-impact of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming studies that contributions primarily based on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the preceding yr reducing .eight p.c in the 1st quarter, seven.5 percent in the second quarter, nine.5 % in the third quarter, and % in the fourth quarter.

Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, stories that although calendar yr 2008 confirmed an almost 2 per cent development rate in gaming revenues, there was an eight.7 per cent decrease in the third quarter and an practically 10 percent decrease in the fourth quarter of 2008, in comparison with 2007. Gaming earnings tendencies at close by Niagara Falls, Ontario ended up down 1.5% in 2008 compared with 2007.

It is been a combined-bag for state lotteries throughout the region. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries produced a whole of $60.six billion in revenue in fiscal 2008, up about 3 percent from the preceding yr however some jurisdictions described decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would appear that the knowledge does not replicate the impact of 3rd and/or fourth quarter results.

In accordance to knowledge presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven percent to $ billion in 2008, compared to $ billion in 2007.

Prepared & Proposed New Expansions

As beforehand observed, it has been new gaming jurisdictions that have spawned significantly of the progress in yearly casino/racino revenues above the years, and their impact is apt to proceed into the close to long term.

Miami Dade voters authorized a ballot situation that allows every single of 3 pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Dog Observe and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has but to declared its strategies. There are numerous other proposals getting regarded as that would additional increase casino growth during the point out.

The state last but not least got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,two hundred+ match casino located in Des Plaines just east of O’Hare. The new facility is not likely to open up until finally 2010. There has also been some discussion about permitting an improve in for each location gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

The state’s expanded lottery plan that makes it possible for for the improvement of 4 on line casino gaming zones and slots at current horse and canine tracks seems mired, as only one particular facility is presently beneath construction, even though 3 other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is found so close to the point out line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk online games, alongside with a next period due to open up in 2011 with 875 slots and 20 desk video games. The state has prolonged the application approach for the other 3 zones till April, 2009.

There is nonetheless a lot of ‘jockeying’ going on, but the prospect of as numerous as eight slot parlors and racinos seems to be back again on the entrance-burner, but probably not settled in the course of the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most latest becoming the 390 room M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new accommodations incorporate two components of the City Centre task, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino development projects in Baton Rouge and Lake Charles, while delayed, are documented to even now be on-keep track of for opening this calendar year and/or early 2010.

There is a invoice under consideration that could a lot more than double Penn National’s slot machines to three,000, as nicely as a proposal that would take away the restriction that slots be positioned within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby people to enable slots, may be contemplating relocating to a far more hospitable city.

A referendum was authorized in November, 2008 that permits for the improvement of five casinos with a whole of 15,000 slots, and now the bidding war is afoot though it is not as intensive as the condition had anticipated.

Grand Soleil Casino Resort in Natchez had been slated to open in 2008, but has run into different financing problems and while the lodge 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 somewhat, is even now on observe to open this yr.

New England
Massachusetts, a sleeping-giant in terms of industry prospective, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to be to muster the political assistance. A latest examine finished by Dartmouth University estimates that Massachusetts resident invested more than $920 million previous calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to create casinos, however the subject is most likely to be revisited, specifically if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its options.

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 nevertheless, has appointed a new panel to research the state’s sagging racing software which ironically, can only be preserved by making it possible for the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would finally be produced, the successful bidder indicated an incapacity to make the necessary $370 million payment, citing the present lending local climate, and throwing the task back into the lap of the governor. Even though the industry desire in the spot could be regarded really sturdy, the prospect of extra competitiveness from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, particularly thinking about that a bit significantly less than 30% of the web win is retained by the operator.

Ideas to relocate Monticello Raceway into a resort intricate are becoming reconsidered maybe owing to each the possible opening of at least a single or maybe two racino operations in the NY metro location, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Nevertheless yet another gaming proposal is getting put forth in Ohio, after final year’s model was turned down by the voters. This prepare phone calls for one particular on line casino every in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure necessary of $250 million, as nicely as an original licensing payment of $50 million, and a 33 percent tax on gaming profits.

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

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and contain three hundred game titles, 140 rooms and a wide assortment of facilities.

Legislators are proposing a voter referendum that would amend the state structure to allow casino gambling in designated 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 bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer you. Condition federal government has proffered the notion of permitting the vacation resort to supply on line casino game titles, but this hard work is in way too early a phase to have any traction one particular way or another.

Indian Gaming
A recent Supreme Court ruling that restricts the taking of lands into have confidence in on behalf of federally identified American Indian tribes has additional stymied some new Class III gaming projects throughout the nation. Furthermore, there were eleven Indian casino initiatives turned down by the DOI previous 12 months due to the fact of its new rule that casinos should be near adequate to a reservation that tribal associates can operate at them. It has been suggested that the new Obama administration may be much more sympathetic to the improvement of Indian gaming projects, but this situation has nevertheless to be resolved.

Meanwhile, there are other Course III tasks in the various phases of development. The Seneca casino task in Buffalo, NY, even though operating a tiny short term facility, has delayed an presently underneath building long term facility until finally the marketplace rebounds. They have also expressed an fascination in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could influence their ideas for more substantial tasks. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this year, and other individuals are in the organizing phase. Texas may possibly allow the reopening of Indian gaming amenities and let other location and there are ideas 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/ten.

The Nor’easter Squeeze

Overall gaming profits in Atlantic Town has declined seven.6 percent, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining itself in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been situated in Atlantic Town, exactly where it looked as if it may possibly really even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly nevertheless its industry share was currently being encroached on, first by the growth of a large Course III gaming procedure in Connecticut, and then an additional slots operations in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned 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 about Atlantic City’s foreseeable future prospective customers. It is reliance on working day-trippers lulled it into a false feeling of stability, and it now finds alone obtaining to redefine its mission statement to “destination vacation resort.”

The only problem with this approach however is that it is ill-equipped to pull it off. For all intents and needs, Atlantic Metropolis is beneath-roomed and/or more than-gamed. There is just not adequate working day-tripper market place to go around, and their successful trading spot is tightening, as the peripheral populations northward now/will have a lot more all set accessibility 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 accessibility, the city’s only actual competitive benefits are its resort ability and the availability of desk games, even though the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In get to sufficiently contend as a location resort the metropolis requirements to build further guest rooms and not always gaming ability. By comparison, the Las Vegas Strip homes – correct gaming destinations, in that they do not have significantly of a working day-trip market, other than for the ‘locals’ – have an common of .87 gaming positions for each visitor area while Atlantic City’s common is 2.74 positions per guest area.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, were the minimum impacted by the most recent downturn. The Borgata seasoned a gaming income fall of one.6 per cent, although Harrah’s Marina noted a four.9 percent increase when compared to 2007. In addition, the toughest hit venues, particularly 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, including the the Trump properties and Resorts with the hoped for sale of the Tropicana has been even more delayed, and shedding valuation.

With a constant increase in gaming revenues by way of 2006, the metropolis appeared prime for additional growth, which precipitated preparing for four new vacation resort projects, every single of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion undertaking stays an iron skeleton, Pinnacle Amusement has declared it might seek out to promote its razed Sands web site, MGM Mirage has shelved its casino strategies, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport internet site.


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