Countrywide Commercial Online casino and Racino Gaming Earnings Analysis

A Period of time of Adjustment

Oops! That giant hissing sound is the gaming balloon that experienced been expanding in excess of the many years, slowly getting rid of air. But, it has not been a tide that decreased all ships nonetheless, as some rising and increasing gaming jurisdictions showed powerful development in 2008.

General, the commercial and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.5 % decline in gaming revenues for 2008, making a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a achieve of almost $1 billion in 2008, thereby bringing the Business sector market place decrease to $one.8 billion, or per cent. Nevada was the greatest loser in 2008, dropping almost $1.3 billion, much more than 50 percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, on line casino operators ended up caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not until the third and fourth quarters when it genuinely nosedived. Riding the crest of yr over yr market progress throughout the nation and the availability of ample credit and fairness funds, new construction and growth proliferated in latest years. These days, confronted with the realities of declining, or at greatest stagnant desire, numerous of these assignments are now considered more than-leveraged and/or more than-sized. As a consequence a lot of gaming firms are attempting to renegotiate their personal debt – made far more hard by reduce valuations – while also paring down operational fees. The latter has turn out to be a very problematic conundrum when dealing with the opposition, especially in individuals jurisdictions that are now vying for marketplace shares with new emerging casino assignments in neighboring places. A subject matter we go over much more totally in the Point out by Point out investigation part of this publication.

As a result of these problems the gaming sector landscape is now strewn with impending fatalities. Amongst the a lot more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows every single week.

“How lengthy will these economic problems persist, and are we at the bottom but?” are questions no a single seems to be answering however. What is distinct nonetheless is that most gaming jurisdictions will have to find out how to offer with a scaled-down pie.

Be aware:
This investigation includes only gaming revenues of licensed casinos and pari-mutuel shops that provide on line casino video games, and not Indian gaming operations, card rooms, or tiny non-on line casino type slot areas. The entire report, such as earnings tables is available on our web website page.

Enter/Output Design

A key aspect that seems to have arisen from the ashes of this present trend is that numerous casino initiatives had been just as well large to support themselves. The input, in conditions of investment dollars, was not proportional to the output, in terms of web revenue following credit card debt service, in comparison to beforehand reached final results. More and/or greater is not constantly much better. Observing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of more complete amenities in numerous other jurisdictions. The flaw in this technique nevertheless is that the charges related with widening market place penetration and occasioned-use, are considerably greater than individuals incurred to appeal to the foundation marketplace.

As daytripper marketplaces become more competitive, on line casino venues will have to count far more and a lot more on their in-home hotel patrons, and dimensions their properties (and anticipations) appropriately. Whilst Steve Wynn began a key development in generating up-marketplace mega-places, there just was not enough desire on the Strip to warrant the a lot of other equivalent initiatives that followed that aimed at the exact same area of interest.

The trick is to strike a satisfied medium in venture configurations which of program demand much less of a ‘seat-of-pants’ approach, and one particular that is more researched. A shameless plug for advancement consultants like ourselves.

Other Gaming Routines

Although there are no printed comprehensive data of American Indian gaming revenues, anecdotal evidence appears to recommend that this segment has been as hard hit as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, symbolizing a fall of about 7 per cent, or practically $114 million, much more than doubling the 3.five % drop from the year prior to. This industry is evidently nevertheless 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 Section of Gaming stories that contributions based mostly on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the prior calendar year reducing .8 percent in the first quarter, seven.five p.c in the 2nd quarter, 9.five p.c in the 3rd quarter, and percent in the fourth quarter.

Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reviews that even though calendar calendar year 2008 showed an nearly 2 p.c development rate in gaming revenues, there was an p.c decline in the third quarter and an nearly ten per cent drop in the fourth quarter of 2008, in contrast with 2007. Gaming earnings tendencies at close by Niagara Falls, Ontario were down one.five% in 2008 compared with 2007.

It is been a blended-bag for point out lotteries across the country. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries generated a complete of $sixty.6 billion in income in fiscal 2008, up about 3 % from the prior 12 months nevertheless some jurisdictions described decreases, most notably California, which showed an 8 per cent fall. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would appear that the data does not replicate the impact of 3rd and/or fourth quarter results.

According to knowledge offered by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven p.c to $ billion in 2008, vs . $ billion in 2007.

Planned & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned significantly of the progress in yearly on line casino/racino revenues more than the a long time, and their affect is apt to proceed into the near potential.

Miami Dade voters approved a ballot issue that permits every single of three pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Canine Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has however to declared its strategies. There are several other proposals being regarded that would additional increase on line casino improvement all through the state.

The point out ultimately got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ game casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open until finally 2010. There has also been some discussion about enabling an boost in for each spot gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

The state’s expanded lottery program that permits for the improvement of four casino gaming zones and slots at current horse and canine tracks appears mired, as only one facility is presently underneath development, even though 3 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 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 10 desk game titles, alongside with a second phase because of to open in 2011 with 875 slots and twenty desk game titles. The condition has extended the software method for the other three zones until finally April, 2009.

There is still a great deal of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back again on the entrance-burner, but likely not resolved throughout the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most current currently being the 390 space M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Challenging Rock and new hotels contain two elements of the Metropolis Center project, and the Fountainebleau.

Pinnacle Entertainment’s new casino development assignments in Baton Rouge and Lake Charles, whilst delayed, are noted to even now be on-monitor for opening this yr and/or early 2010.

There is a invoice beneath consideration that could a lot more than double Penn National’s slot machines to three,000, as properly as a proposal that would take away the restriction that slots be found in five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to permit slots, may possibly be considering transferring to a far more hospitable city.

A referendum was accepted in November, 2008 that enables for the advancement 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 predicted.

Grand Soleil Casino Resort in Natchez had been slated to open in 2008, but has operate into different financing problems and although the lodge part is open up, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back somewhat, is even now on keep track of to open up this 12 months.

New England
Massachusetts, a sleeping-giant in phrases of market place possible, is nonetheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to muster the political assistance. A modern review concluded by Dartmouth University estimates that Massachusetts resident spent far more than $920 million very last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an choice to create casinos, nevertheless the matter is likely to be revisited, especially if Massachusetts decides to go ahead. There are also tries 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 just lately agreeing to carry on augmenting purses with an further tax. The governor even so, has appointed a new panel to review the state’s sagging racing software which ironically, can only be preserved by allowing the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would ultimately be created, the successful bidder indicated an incapability to make the required $370 million charge, citing the present lending climate, and throwing the task back again into the lap of the governor. Despite the fact that the marketplace need in the area could be deemed fairly strong, the prospect of additional competitors from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, specially considering that marginally less than thirty% of the web get is retained by the operator.

Programs to relocate Monticello Raceway into a resort complicated are currently being reconsidered perhaps owing to equally the probable opening of at least one or maybe two racino functions in the NY metro area, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

Nevertheless an additional gaming proposal is getting place forth in Ohio, after last year’s variation was turned down by the voters. This strategy phone calls for a single casino every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure required of $250 million, as effectively as an original licensing fee of $fifty million, and a 33 percent tax on gaming earnings.

The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 whilst Philadelphia’s two slot facilities even now wallow in a political mire, but are predicted to commence building this calendar year.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and include 300 game titles, one hundred forty rooms and a broad variety of features.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. Point out authorities has proffered the idea of making it possible for the vacation resort to offer you on line casino video games, but this work is in as well early a phase to have any traction one way or yet another.

Indian Gaming
A recent Supreme Court docket 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 Course III gaming tasks across the region. Furthermore, there ended up eleven Indian on line casino projects turned down by the DOI very last year because of its new rule that casinos need to be in close proximity to adequate to a reservation that tribal associates can perform at them. It has been advised that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming tasks, but this situation has yet to be tackled.

Meanwhile, there are other Course III initiatives in the various levels of advancement. The Seneca casino venture in Buffalo, NY, even though working a modest short-term facility, has delayed an already under construction everlasting facility right up until the marketplace rebounds. They have also expressed an desire in establishing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could effect their plans for larger tasks. There are new Indian gaming tasks set to open in Michigan and Oklahoma this 12 months, and others are in the organizing stage. Texas may enable the reopening of Indian gaming facilities and allow other location and there are programs afoot by the Navajos in Arizona to build extra casinos. California is poised to open two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic Metropolis has declined seven.6 per cent, from $4.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining alone in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were situated in Atlantic City, where it seemed as if it may well actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Little by little nevertheless its industry share was becoming encroached upon, 1st by the advancement of a massive Course III gaming operation in Connecticut, and then yet another slots functions in Rhode Island, and then video clip 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 casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening close to Atlantic City’s potential potential customers. It really is reliance on working day-trippers lulled it into a false sense of protection, and it now finds by itself having to redefine its mission statement to “destination resort.”

The only issue with this technique even so is that it is unwell-geared up to pull it off. For all intents and purposes, Atlantic Metropolis is underneath-roomed and/or above-gamed. There is just not sufficient working day-tripper industry to go around, and their successful investing region is tightening, as the peripheral populations northward now/will have much more ready entry to a widened supply in New York (Yonkers, and before long 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 genuine aggressive rewards are its hotel ability and the availability of table video games, despite the fact that the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In purchase to sufficiently compete as a location resort the city wants to produce further guest rooms and not automatically gaming ability. By comparison, the Las Vegas Strip homes – correct gaming locations, in that they do not have a lot of a day-vacation market place, besides for the ‘locals’ – have an average of .87 gaming positions per guest area while Atlantic City’s typical is 2.seventy four positions for every guest room.

It is not a coincidence that Atlantic City’s two biggest lodges, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, were the minimum impacted by the newest downturn. The Borgata knowledgeable a gaming earnings fall of 1.6 percent, whilst Harrah’s Marina described a 4.9 p.c boost compared to 2007. Moreover, the hardest strike venues, particularly 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, like the the Trump properties 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 through 2006, the metropolis appeared primary for additional advancement, which precipitated arranging for 4 new resort assignments, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion undertaking continues to be an iron skeleton, Pinnacle Leisure has announced it may well seek to market its razed Sands site, MGM Mirage has shelved its on line casino programs, and Penn National seems to have stopped its pursuit of the Bader Field airport internet site.

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