2008 Nationwide Professional Casino & Racino Gaming Income Evaluation

A Time period of Adjustment

Oops! That huge hissing audio is the gaming balloon that had been developing in excess of the several years, gradually getting rid of air. But, it has not been a tide that lowered all ships nonetheless, as some rising and expanding gaming jurisdictions confirmed powerful growth in 2008.

General, the professional and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.five percent decline in gaming revenues for 2008, making a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a obtain of almost $1 billion in 2008, therefore bringing the Industrial sector marketplace decline to $one.8 billion, or six.seven %. Nevada was the greatest loser in 2008, dropping practically $1.3 billion, much more than 50 percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, on line casino operators ended up caught comparatively flat-footed by the extent of the 2008 revenue downturn, as it was not until the third and fourth quarters when it truly nosedived. Driving the crest of yr above 12 months market growth across the country and the availability of sufficient credit rating and fairness money, new construction and enlargement proliferated in modern years. These days, confronted with the realities of declining, or at greatest stagnant need, several of these projects are now deemed in excess of-leveraged and/or in excess of-sized. As a consequence several gaming businesses are attempting to renegotiate their credit card debt – created a lot more hard by reduce valuations – while also paring down operational expenses. The latter has turn into a very problematic conundrum when dealing with the competition, specially in people jurisdictions that are now vying for marketplace shares with new emerging on line casino initiatives in neighboring locations. A matter we discuss more fully in the Condition by Condition investigation section of this publication.

As a end result of these problems the gaming business landscape is now strewn with impending fatalities. Among the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows each and every 7 days.

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

Note:
This investigation includes only gaming revenues of licensed casinos and pari-mutuel shops that provide on line casino game titles, and not Indian gaming functions, card rooms, or little non-casino kind slot places. The total post, including revenue tables is accessible on our web web page.

Input/Output Design

A key facet that looks to have arisen from the ashes of this recent pattern is that a lot of on line casino initiatives were just as well huge to assistance them selves. The input, in terms of investment pounds, was not proportional to the output, in phrases of web earnings after debt provider, in comparison to earlier accomplished final results. A lot more and/or bigger is not often far better. Observing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of much more complete features in many other jurisdictions. The flaw in this method nevertheless is that the costs associated with widening market penetration and occasioned-use, are considerably greater than these incurred to attract the base market place.

As daytripper markets turn into more competitive, on line casino venues will have to depend a lot more and far more on their in-residence lodge patrons, and measurement their qualities (and anticipations) accordingly. While Steve Wynn started out a major pattern in generating up-market place mega-places, there basically was not ample desire on the Strip to warrant the many other related initiatives that followed that aimed at the exact same niche.

The trick is to strike a satisfied medium in venture configurations which of program demand considerably less of a ‘seat-of-pants’ technique, and a single that is a lot more analyzed. A shameless plug for improvement consultants like ourselves.

Other Gaming Actions

Though there are no released comprehensive info of American Indian gaming revenues, anecdotal evidence appears to recommend that this phase has been as difficult hit as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, representing a drop of about seven percent, or virtually $114 million, far more than doubling the three.five p.c fall from the yr before. This market place is seemingly even now reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming stories that contributions dependent on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the prior year reducing .eight p.c in the very first quarter, 7.5 p.c in the second quarter, nine.5 per cent in the 3rd quarter, and 16.one per cent in the fourth quarter.

Some SEC reporting Indian gaming houses report related decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, studies that whilst calendar calendar year 2008 showed an virtually 2 p.c development fee in gaming revenues, there was an eight.seven % drop in the 3rd quarter and an practically ten p.c decline in the fourth quarter of 2008, when compared with 2007. Gaming profits developments at nearby Niagara Falls, Ontario ended up down 1.five% in 2008 in contrast with 2007.

It really is been a combined-bag for state lotteries throughout the nation. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries produced a complete of $sixty.six billion in income in fiscal 2008, up about 3 p.c from the prior calendar year yet some jurisdictions reported decreases, most notably California, which confirmed an 8 percent fall. Inasmuch as some of these states are on various fiscal year ends, it would seem to be that the data does not mirror the effect of 3rd and/or fourth quarter outcomes.

In accordance to data offered by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling 7 p.c to $13.seven billion in 2008, as opposed to $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned a lot of the growth in yearly casino/racino revenues over the several years, and their influence is apt to proceed into the around foreseeable future.

Florida
Miami Dade voters accredited a ballot problem that permits each of a few pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Dog Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has however to declared its plans. There are many other proposals getting deemed that would further grow casino improvement during the condition.

Illinois
The point out lastly acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,two hundred+ game casino found in Des Plaines just east of O’Hare. The new facility is not probably to open up till 2010. There has also been some dialogue about enabling an improve 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 plan that enables for the growth of 4 casino gaming zones and slots at existing horse and canine tracks appears mired, as only one facility is presently beneath design, even though three other proposals ended up 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 On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table online games, together with a next period thanks to open up in 2011 with 875 slots and 20 desk game titles. The point out has prolonged the application procedure for the other 3 zones till April, 2009.

Kentucky
There is nevertheless a great deal of ‘jockeying’ likely on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be again on the entrance-burner, but likely not resolved throughout the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most recent becoming the 390 room M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Challenging Rock and new lodges contain two factors of the Town Middle venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino improvement assignments in Baton Rouge and Lake Charles, whilst delayed, are described to still be on-observe for opening this yr and/or early 2010.

Maine
There is a invoice beneath thought that could more than double Penn National’s slot machines to 3,000, as properly as a proposal that would get rid of the restriction that slots be situated within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to permit slots, may be thinking about transferring to a far more hospitable city.

Maryland
A referendum was approved in November, 2008 that allows for the improvement of five casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the point out experienced expected.

Mississippi
Grand Soleil Casino Resort in Natchez had been slated to open up in 2008, but has run into a variety of financing concerns and even though the hotel portion is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back fairly, is nevertheless on monitor to open up this calendar year.

New England
Massachusetts, a sleeping-big in terms of industry likely, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to be to muster the political assistance. A latest review accomplished by Dartmouth College estimates that Massachusetts resident spent a lot more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an alternative to create casinos, nevertheless the subject matter is likely to be revisited, especially if Massachusetts decides to go forward. 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 just lately agreeing to continue augmenting purses with an extra tax. The governor even so, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would lastly be produced, the profitable bidder indicated an lack of ability to make the required $370 million payment, citing the present lending local weather, and throwing the undertaking back into the lap of the governor. Even though the market place need in the region could be regarded quite robust, the prospect of extra competitiveness from close by Belmont could have an impact on Aqueduct’s underlining economic feasibility, particularly considering that marginally less than 30% of the net earn is retained by the operator.

www.ponte16.co.kr to relocate Monticello Raceway into a resort complex are becoming reconsidered maybe owing to each the possible opening of at the very least one particular or maybe two racino operations in the NY metro area, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Ohio
But yet another gaming proposal is being set forth in Ohio, soon after very last year’s variation was turned down by the voters. This program calls for one particular on line casino each and every in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment essential of $250 million, as nicely as an initial licensing price of $fifty million, and a 33 % tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot facilities still wallow in a political mire, but are anticipated to commence design this calendar year.

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

Texas
Legislators are proposing a voter referendum that would amend the state structure to allow casino gambling in specified locations, as well as allow gambling on American Indian lands in Texas and at present 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 supply. State authorities has proffered the idea of allowing the vacation resort to supply casino games, but this energy is in too early a phase to have any traction one particular way or yet another.

Indian Gaming
A current Supreme Court ruling that restricts the using of lands into believe in on behalf of federally acknowledged American Indian tribes has further stymied some new Class III gaming assignments throughout the place. Moreover, there were eleven Indian casino tasks turned down by the DOI final year because of its new rule that casinos should be close to sufficient to a reservation that tribal customers can work at them. It has been advised that the new Obama administration might be a lot more sympathetic to the improvement of Indian gaming tasks, but this situation has yet to be dealt with.

In the meantime, there are other Course III tasks in the various stages of development. The Seneca on line casino task in Buffalo, NY, whilst operating a tiny momentary facility, has delayed an currently under construction everlasting facility until finally the market place rebounds. They have also expressed an curiosity in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could effect their strategies for more substantial initiatives. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this yr, and other individuals are in the organizing phase. Texas could allow the reopening of Indian gaming amenities and permit other location and there are strategies afoot by the Navajos in Arizona to construct extra casinos. California is poised to open two to three new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic City has declined seven.six per cent, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is discovering by itself in an intensive comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been found in Atlantic Town, in which it appeared as if it may well in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly and gradually however its industry share was currently being encroached upon, very first by the advancement of a huge Class III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then movie 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 functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening all around Atlantic City’s future prospective customers. It’s reliance on day-trippers lulled it into a fake sense of security, and it now finds by itself obtaining to redefine its mission statement to “vacation spot vacation resort.”

The only difficulty with this strategy nonetheless is that it is sick-equipped to pull it off. For all intents and needs, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is basically not ample day-tripper market place to go around, and their successful buying and selling area is tightening, as the peripheral populations northward now/will have a lot more all set access to a widened offer in New York (Yonkers, and shortly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only true competitive advantages are its hotel capacity and the availability of desk game titles, even though the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently contend as a spot vacation resort the metropolis needs to build added visitor rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip houses – accurate gaming places, in that they do not have a lot of a working day-trip industry, other than for the ‘locals’ – have an average of .87 gaming positions for each guest space whilst Atlantic City’s typical is 2.seventy four positions per guest room.

It is not a coincidence that Atlantic City’s two greatest resorts, the Borgata and Harrah’s Marina, each of which extra new rooms in 2008, had been the minimum impacted by the most current downturn. The Borgata knowledgeable a gaming revenue drop of 1.6 p.c, although Harrah’s Marina reported a four.9 per cent increase when compared to 2007. Moreover, the toughest strike venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest variety 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 continual rise in gaming revenues via 2006, the city appeared key for further advancement, which precipitated arranging for 4 new vacation resort projects, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion undertaking remains an iron skeleton, Pinnacle Amusement has introduced it might find to sell its razed Sands web site, MGM Mirage has shelved its casino plans, and Penn National appears to have stopped its pursuit of the Bader Area airport internet site.

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