Countrywide Industrial On line casino and Racino Game Revenue Examination

A Period of time of Adjustment

Oops! That big hissing audio is the gaming balloon that experienced been expanding more than the several years, little by little dropping air. But, it has not been a tide that decreased all ships however, as some rising and expanding gaming jurisdictions showed strong expansion in 2008.

Overall, the business and racetrack casino sectors (excluding Indian gaming), knowledgeable a three.5 per cent decrease in gaming revenues for 2008, creating a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a achieve of almost $one billion in 2008, therefore bringing the Business sector market drop to $1.eight billion, or 6.7 p.c. Nevada was the greatest loser in 2008, dropping nearly $1.3 billion, far more than 50 percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, casino operators were caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not until the third and fourth quarters when it really nosedived. Riding the crest of calendar year over 12 months marketplace growth across the nation and the availability of sufficient credit history and equity resources, new development and growth proliferated in modern many years. Right now, confronted with the realities of declining, or at ideal stagnant demand, numerous of these assignments are now considered over-leveraged and/or in excess of-sized. As a outcome many gaming organizations are attempting to renegotiate their credit card debt – created far more difficult by reduce valuations – whilst also paring down operational fees. The latter has grow to be a very problematic conundrum when working with the competitors, particularly in individuals jurisdictions that are now vying for industry shares with new rising on line casino tasks in neighboring areas. A subject we examine a lot more totally in the Condition by State investigation section of this publication.

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

“How long will these financial situations persist, and are we at the bottom however?” are concerns no one particular seems to be answering but. What is distinct nevertheless is that most gaming jurisdictions will have to understand how to offer with a smaller pie.

Notice:
This evaluation contains only gaming revenues of accredited casinos and pari-mutuel outlets that offer on line casino video games, and not Indian gaming operations, card rooms, or little non-on line casino variety slot spots. The whole report, such as income tables is available on our internet webpage.

Enter/Output Design

A crucial factor that appears to have arisen from the ashes of this recent pattern is that several casino projects were just as well massive to help them selves. The input, in terms of investment pounds, was not proportional to the output, in conditions of internet earnings following financial debt support, compared to formerly achieved results. Much more and/or bigger is not usually much better. Observing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of more comprehensive features in several other jurisdictions. The flaw in this approach nonetheless is that the fees connected with widening market place penetration and occasioned-use, are substantially greater than these incurred to draw in the base marketplace.

As daytripper markets turn out to be far more competitive, on line casino venues will have to count much more and far more on their in-home hotel patrons, and dimensions their properties (and anticipations) accordingly. Whilst Steve Wynn began a significant craze in making up-industry mega-destinations, there simply was not sufficient demand on the Strip to warrant the a lot of other similar initiatives that adopted that aimed at the same area of interest.

The trick is to strike a content medium in project configurations which of system demand less of a ‘seat-of-pants’ strategy, and one that is a lot more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Although there are no printed comprehensive knowledge of American Indian gaming revenues, anecdotal evidence appears to suggest that this phase has been as tough hit as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, representing a drop of about seven p.c, or nearly $114 million, more than doubling the 3.five % drop from the year before. This market is apparently even now reeling from the ripple-impact of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming stories that contributions based on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in comparison to the preceding year lowering .eight % in the 1st quarter, 7.5 p.c in the second quarter, 9.5 percent in the 3rd quarter, and sixteen.one p.c in the fourth quarter.

Some SEC reporting Indian gaming houses report similar decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that although calendar yr 2008 showed an almost 2 p.c growth price in gaming revenues, there was an 8.7 per cent decrease in the 3rd quarter and an virtually 10 percent decrease in the fourth quarter of 2008, in comparison with 2007. Gaming profits tendencies at close by Niagara Falls, Ontario have been down one.5% in 2008 in comparison with 2007.

It’s been a mixed-bag for point out lotteries throughout the place. The North American Association of Condition & Provincial Lotteries reviews that U.S. lotteries created a total of $60.6 billion in product sales in fiscal 2008, up about three p.c from the preceding yr nevertheless some jurisdictions described decreases, most notably California, which confirmed an 8 % fall. Inasmuch as some of these states are on different fiscal calendar year ends, it would appear that the knowledge does not mirror the influence of third and/or fourth quarter results.

In accordance to information presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling seven % to $thirteen.7 billion in 2008, compared to $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As earlier noted, it has been new gaming jurisdictions that have spawned a lot of the expansion in once-a-year on line casino/racino revenues more than the several years, and their affect is apt to carry on into the near long term.

Florida
Miami Dade voters accredited a ballot issue that permits every single of three pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Pet Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has but to declared its strategies. There are numerous other proposals becoming deemed that would even more expand casino improvement through the point out.

Illinois
The condition ultimately acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,two hundred+ match casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open up till 2010. There has also been some dialogue about enabling an enhance in per area gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery system that enables for the development of four on line casino gaming zones and slots at present horse and canine tracks appears mired, as only one facility is presently under design, while three 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 located so close to the condition line that its parking lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table video games, together with a 2nd section thanks to open in 2011 with 875 slots and twenty desk online games. The state has prolonged the software procedure for the other 3 zones right up until April, 2009.

Kentucky
There is nevertheless a good deal of ‘jockeying’ going on, but the prospect of as many as eight slot parlors and racinos appears to be back again on the entrance-burner, but probably not fixed throughout the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most recent getting the 390 place M Resort in Henderson. There are expansions underway at each Caesars Palace and Tough Rock and new resorts consist of two components of the City Center venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino development assignments in Baton Rouge and Lake Charles, although delayed, are documented to nevertheless be on-keep track of for opening this 12 months and/or early 2010.

Maine
There is a bill below thought that could much more than double Penn National’s slot equipment to three,000, as well as a proposal that would take away the restriction that slots be located in 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood residents to let slots, may possibly be contemplating moving to a much more hospitable town.

Maryland
A referendum was authorized in November, 2008 that allows for the advancement of 5 casinos with a complete of fifteen,000 slots, and now the bidding war is afoot even though it is not as powerful as the condition had anticipated.

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has operate into numerous financing problems and while the resort portion is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back again fairly, is still on observe to open up this 12 months.

New England
Massachusetts, a sleeping-giant in terms of industry possible, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t look to muster the political assistance. A latest examine concluded by Dartmouth University estimates that Massachusetts resident expended a lot more than $920 million previous 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to create casinos, nevertheless the subject matter is likely to be revisited, specially if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its alternatives.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to proceed augmenting purses with an extra tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by making it possible for the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it appeared as if Aqueduct’s four,500 VLT facility would last but not least be designed, the winning bidder indicated an incapacity to make the required $370 million charge, citing the current lending local weather, and throwing the project back into the lap of the governor. Despite the fact that the industry demand from customers in the location could be considered quite powerful, the prospect of further opposition from close by Belmont could have an impact on Aqueduct’s underlining economic feasibility, specially taking into consideration that somewhat considerably less than 30% of the web win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered possibly owing to both the probable opening of at minimum a single or maybe two racino operations in the NY metro spot, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

Ohio
But one more gaming proposal is being set forth in Ohio, following last year’s variation was turned down by the voters. This program calls for a single casino each and every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision necessary of $250 million, as properly as an preliminary licensing fee of $50 million, and a 33 percent tax on gaming profits.

Pennsylvania
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 although Philadelphia’s two slot services nevertheless wallow in a political mire, but are anticipated to begin construction this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain 300 online games, 140 rooms and a vast range of facilities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to let on line casino gambling in selected places, as effectively as let gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Point out federal government has proffered the idea of allowing the vacation resort to supply casino games, but this work is in way too early a stage to have any traction a single way or yet another.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the taking of lands into believe in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming assignments across the nation. Moreover, there were eleven Indian on line casino initiatives turned down by the DOI last 12 months due to the fact of its new rule that casinos need to be close to adequate to a reservation that tribal users can work at them. It has been proposed that the new Obama administration may well be far more sympathetic to the advancement of Indian gaming assignments, but this problem has nevertheless to be tackled.

Meanwhile, there are other Class III tasks in the various phases of growth. The Seneca on line casino venture in Buffalo, NY, although functioning a tiny short term facility, has delayed an already below building permanent facility right up until the market rebounds. They have also expressed an interest in building a on line casino in the Catskills. ku888 gaming compact with Seminoles in Florida is becoming challenged, and could effect their programs for greater projects. There are new Indian gaming tasks established to open in Michigan and Oklahoma this calendar year, and other people are in the planning stage. Texas might let the reopening of Indian gaming facilities and enable other venue and there are strategies afoot by the Navajos in Arizona to build added casinos. California is poised to open two to 3 new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Overall gaming income in Atlantic Metropolis has declined 7.6 p.c, from $four.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is finding itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up situated in Atlantic City, in which it seemed as if it may possibly actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Little by little nonetheless its marketplace share was currently being encroached upon, very first by the improvement of a big Course III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future prospects. It is reliance on working day-trippers lulled it into a bogus perception of security, and it now finds alone obtaining to redefine its mission assertion to “spot resort.”

The only issue with this approach nevertheless is that it is sick-geared up to pull it off. For all intents and needs, Atlantic Metropolis is underneath-roomed and/or above-gamed. There is basically not enough day-tripper market place to go around, and their successful buying and selling region is tightening, as the peripheral populations northward now/will have far more completely ready access to a widened offer 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 true aggressive rewards are its lodge potential and the availability of table video games, even though the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In buy to adequately compete as a location resort the metropolis demands to build additional guest rooms and not essentially gaming potential. By comparison, the Las Vegas Strip homes – true gaming places, in that they do not have much of a working day-excursion industry, other than for the ‘locals’ – have an common of .87 gaming positions per visitor place although Atlantic City’s typical is two.seventy four positions per guest space.

It is not a coincidence that Atlantic City’s two biggest lodges, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, have been the minimum impacted by the newest downturn. The Borgata experienced a gaming revenue fall of one.6 %, while Harrah’s Marina reported a four.9 % improve compared to 2007. Additionally, the toughest strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest amount of rooms. In the meantime some of the venues are teetering on viability, which includes the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been even more delayed, and losing valuation.

With a constant increase in gaming revenues by way of 2006, the city seemed primary for more development, which precipitated preparing for four new vacation resort initiatives, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.five billion project stays an iron skeleton, Pinnacle Amusement has announced it may seek out to market its razed Sands internet site, MGM Mirage has shelved its casino strategies, and Penn Countrywide seems to have stopped its pursuit of the Bader Subject airport site.

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