2008 Countrywide Business Casino & Racino Gaming Revenue Evaluation

A Time period of Adjustment

Oops! That giant hissing seem is the gaming balloon that experienced been growing over the several years, little by little shedding air. But, it has not been a tide that lowered all ships however, as some rising and expanding gaming jurisdictions confirmed robust expansion in 2008.

Total, the business and racetrack on line casino sectors (excluding Indian gaming), experienced a three.5 percent decrease in gaming revenues for 2008, producing 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, therefore bringing the Commercial sector industry decrease to $1.8 billion, or 6.7 p.c. Nevada was the greatest loser in 2008, dropping almost $one.3 billion, far more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, casino operators have been caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not until the 3rd and fourth quarters when it truly nosedived. Using the crest of calendar year in excess of calendar year market place progress across the country and the availability of sufficient credit and fairness funds, new design and enlargement proliferated in current years. Nowadays, confronted with the realities of declining, or at very best stagnant need, many of these initiatives are now regarded as over-leveraged and/or more than-sized. As a end result many gaming firms are trying to renegotiate their debt – made more challenging by reduce valuations – even though also paring down operational expenses. The latter has become a extremely problematic conundrum when dealing with the competitiveness, specifically in individuals jurisdictions that are now vying for market shares with new rising on line casino initiatives in neighboring locations. A subject matter we discuss more totally in the Point out by State examination segment of this publication.

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

“How lengthy will these financial circumstances persist, and are we at the base however?” are questions no one particular seems to be answering but. What is very clear nonetheless is that most gaming jurisdictions will have to learn how to offer with a smaller sized pie.

Notice:
This investigation includes only gaming revenues of accredited casinos and pari-mutuel retailers that offer you on line casino game titles, and not Indian gaming operations, card rooms, or modest non-casino kind slot areas. The entire article, such as income tables is offered on our world wide web webpage.

Input/Output Model

A important factor that looks to have arisen from the ashes of this present trend is that a lot of on line casino initiatives have been just also huge to support them selves. The enter, in terms of investment pounds, was not proportional to the output, in phrases of net income soon after credit card debt provider, in comparison to earlier accomplished results. Far more and/or bigger is not usually greater. Observing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more complete facilities in many other jurisdictions. The flaw in this approach nevertheless is that the costs linked with widening marketplace penetration and occasioned-use, are drastically increased than individuals incurred to attract the foundation market place.

As daytripper markets become far more aggressive, casino venues will have to depend a lot more and far more on their in-house resort patrons, and dimensions their houses (and anticipations) accordingly. Although Steve Wynn started out a main development in making up-market place mega-places, there simply was not adequate desire on the Strip to warrant the a lot of other related initiatives that adopted that aimed at the identical market.

The trick is to strike a satisfied medium in undertaking configurations which of system require considerably less of a ‘seat-of-pants’ strategy, and one particular that is more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Even though there are no released in depth info of American Indian gaming revenues, anecdotal proof appears to recommend that this segment has been as difficult strike as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $one.six billion in 2008, symbolizing a drop of about 7 percent, or almost $114 million, a lot more than doubling the three.5 per cent fall from the calendar year prior to. This market place is seemingly still reeling from the ripple-result of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming studies that contributions primarily based on a gaming earnings formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the earlier yr lowering .8 percent in the very first quarter, 7.5 p.c in the next quarter, 9.5 % in the 3rd quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming properties report related decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, studies that while calendar calendar year 2008 confirmed an practically two p.c development fee in gaming revenues, there was an 8.seven per cent decrease in the 3rd quarter and an almost ten p.c decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings trends at close by Niagara Falls, Ontario were down one.five% in 2008 compared with 2007.

It is been a mixed-bag for state lotteries throughout the region. The North American Affiliation of State & Provincial Lotteries stories that U.S. lotteries generated a overall of $60.6 billion in product sales in fiscal 2008, up about three percent from the previous year however some jurisdictions described decreases, most notably California, which showed an 8 p.c fall. Inasmuch as some of these states are on a variety of fiscal yr finishes, it would look that the info does not replicate the affect of third and/or fourth quarter benefits.

According to knowledge presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 per cent to $13.seven billion in 2008, as opposed to $14.7 billion in 2007.

Prepared & Proposed New Expansions

As earlier famous, it has been new gaming jurisdictions that have spawned significantly of the development in yearly on line casino/racino revenues above the years, and their influence is apt to carry on into the close to long term.

Florida
Miami Dade voters accredited a ballot situation that allows every of 3 pari-mutuels to have a casino facility of up to 2,000 slot devices. The Flagler Dog Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has nevertheless to announced its ideas. There are several other proposals being deemed that would further broaden on line casino improvement during the point out.

Illinois
The point out lastly obtained all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ game casino found in Des Plaines just east of O’Hare. The new facility is not likely to open till 2010. There has also been some dialogue about allowing an improve in per place gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery program that makes it possible for for the growth of four on line casino gaming zones and slots at existing horse and dog tracks seems mired, as only 1 facility is presently underneath design, while three other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is positioned so shut to the condition line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk game titles, alongside with a 2nd phase thanks to open up in 2011 with 875 slots and 20 table game titles. The condition has extended the application method for the other three zones until finally 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 appears to be back on the entrance-burner, but probably not resolved during the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most current being the 390 room M Resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new accommodations consist of two components of the Town Heart undertaking, and the Fountainebleau.

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

Maine
There is a monthly bill beneath thought that could more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would take away the restriction that slots be positioned within 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional residents to enable slots, may possibly be contemplating moving to a more hospitable city.

Maryland
A referendum was authorized 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 powerful as the point out had anticipated.

Mississippi
Grand Soleil Casino Vacation resort in Natchez had been slated to open up in 2008, but has operate into different funding troubles and although the resort part is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back again somewhat, is even now on keep track of to open up this yr.

New England
Massachusetts, a sleeping-huge in terms of market place prospective, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot look to muster the political help. A current review concluded by Dartmouth University estimates that Massachusetts resident invested a lot more than $920 million very last yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to create casinos, nevertheless the matter is most likely to be revisited, especially if Massachusetts decides to go forward. 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 just lately agreeing to carry on augmenting purses with an extra tax. free bonus no deposit , has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would last but not least be produced, the profitable bidder indicated an incapacity to make the required $370 million charge, citing the recent lending weather, and throwing the venture back again into the lap of the governor. Even though the market need in the spot could be considered fairly powerful, the prospect of added competitiveness from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially thinking about that marginally considerably less than 30% of the internet get is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort sophisticated are getting reconsidered perhaps owing to both the probable opening of at the very least 1 or possibly two racino operations in the NY metro region, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
Yet yet another gaming proposal is being put forth in Ohio, following final year’s version was turned down by the voters. This program calls for one particular on line casino every single in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure necessary of $250 million, as well as an initial licensing payment of $fifty million, and a 33 percent tax on gaming revenue.

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

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and include 300 online games, a hundred and forty rooms and a wide selection of amenities.

Texas
Legislators are proposing a voter referendum that would amend the condition constitution to let casino gambling in designated places, as properly as let gambling on American Indian lands in Texas and at existing 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 offer you. Point out government has proffered the notion of permitting the resort to offer on line casino game titles, but this hard work is in too early a phase to have any traction a single way or an additional.

Indian Gaming
A current Supreme Court docket ruling that restricts the getting of lands into believe in on behalf of federally regarded American Indian tribes has further stymied some new Course III gaming tasks throughout the place. Additionally, there had been eleven Indian casino projects rejected by the DOI last year since of its new rule that casinos should be around sufficient to a reservation that tribal members can operate at them. It has been proposed that the new Obama administration may well be much more sympathetic to the improvement of Indian gaming assignments, but this problem has but to be addressed.

In the meantime, there are other Course III initiatives in the a variety of phases of improvement. The Seneca on line casino venture in Buffalo, NY, although working a tiny temporary facility, has delayed an already under design everlasting facility right up until the marketplace rebounds. They have also expressed an fascination in creating a casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could impact their strategies for larger tasks. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this calendar year, and other people are in the planning stage. Texas might enable the reopening of Indian gaming amenities and let other venue and there are ideas afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming revenue in Atlantic Town has declined 7.6 %, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining alone in an extreme comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast had been situated in Atlantic Town, in which it appeared as if it may well truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually nevertheless its industry share was getting encroached upon, initial by the improvement of a huge Class III gaming procedure in Connecticut, and then an additional slots operations in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s potential prospects. It’s reliance on working day-trippers lulled it into a untrue perception of security, and it now finds alone having to redefine its mission statement to “spot resort.”

The only issue with this approach even so is that it is unwell-equipped to pull it off. For all intents and functions, Atlantic City is below-roomed and/or above-gamed. There is simply not ample working day-tripper market to go about, and their successful investing location is tightening, as the peripheral populations northward now/will have much more prepared entry to a widened provide in New York (Yonkers, and quickly 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 true competitive positive aspects are its resort ability and the availability of table game titles, despite the fact that the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In order to adequately compete as a location resort the city needs to produce further guest rooms and not essentially gaming capability. By comparison, the Las Vegas Strip houses – correct gaming places, in that they do not have a lot of a working day-journey market place, apart from for the ‘locals’ – have an common of .87 gaming positions per visitor space while Atlantic City’s typical is 2.74 positions per visitor room.

It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata skilled a gaming earnings fall of one.6 p.c, even though Harrah’s Marina reported a 4.9 p.c enhance in comparison to 2007. In addition, the most difficult strike venues, namely 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 even more delayed, and shedding valuation.

With a constant rise in gaming revenues through 2006, the metropolis appeared primary for further improvement, which precipitated preparing for four new vacation resort tasks, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $2.5 billion project continues to be an iron skeleton, Pinnacle Entertainment has declared it may seek out to offer its razed Sands internet site, MGM Mirage has shelved its casino strategies, and Penn National appears to have stopped its pursuit of the Bader Area airport website.

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