Countrywide Industrial Online casino & Racino Gaming Earnings Analysis


A Interval of Adjustment

Oops! That huge hissing audio is the gaming balloon that experienced been growing in excess of the many years, slowly and gradually getting rid of air. But, it has not been a tide that reduced all ships even so, as some emerging and increasing gaming jurisdictions showed powerful growth in 2008.

Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.5 p.c decline in gaming revenues for 2008, creating a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a achieve of virtually $1 billion in 2008, thus bringing the Industrial sector marketplace decline to $one.8 billion, or percent. Nevada was the largest loser in 2008, dropping virtually $one.3 billion, a lot more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, on line casino operators had been caught relatively flat-footed by the extent of the 2008 revenue downturn, as it was not until finally the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of calendar year over 12 months marketplace expansion across the nation and the availability of enough credit history and equity money, new development and expansion proliferated in current several years. Nowadays, faced with the realities of declining, or at ideal stagnant desire, numerous of these assignments are now considered above-leveraged and/or more than-sized. As a outcome many gaming companies are attempting to renegotiate their credit card debt – created much more hard by decrease valuations – while also paring down operational costs. The latter has turn into a extremely problematic conundrum when working with the opposition, specifically in those jurisdictions that are now vying for marketplace shares with new emerging on line casino initiatives in neighboring areas. A topic we go over far more fully in the Condition by Condition analysis area of this publication.

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

“How prolonged will these financial conditions persist, and are we at the base but?” are inquiries no one seems to be answering but. What is obvious nonetheless is that most gaming jurisdictions will have to understand how to deal with a smaller pie.

This analysis involves only gaming revenues of licensed casinos and pari-mutuel retailers that offer you on line casino video games, and not Indian gaming operations, card rooms, or modest non-on line casino sort slot spots. The entire report, including income tables is obtainable on our internet webpage.

Enter/Output Product

A crucial factor that appears to have arisen from the ashes of this recent craze is that numerous on line casino initiatives were just also big to help them selves. The enter, in phrases of expenditure dollars, was not proportional to the output, in terms of web profit right after personal debt provider, in comparison to beforehand accomplished results. Much more and/or bigger is not always greater. Viewing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of much more thorough features in several other jurisdictions. The flaw in this technique nevertheless is that the fees associated with widening market penetration and occasioned-use, are substantially higher than people incurred to attract the base marketplace.

As daytripper markets turn out to be more aggressive, on line casino venues will have to depend much more and far more on their in-home hotel patrons, and dimensions their properties (and anticipations) accordingly. Although Steve Wynn started a major trend in generating up-marketplace mega-destinations, there just was not adequate demand on the Strip to warrant the a lot of other related assignments that followed that aimed at the identical niche.

The trick is to strike a happy medium in project configurations which of system require much less of a ‘seat-of-pants’ method, and 1 that is a lot more studied. A shameless plug for development consultants like ourselves.

Other Gaming Pursuits

Though there are no printed comprehensive data of American Indian gaming revenues, anecdotal evidence appears to recommend that this section has been as tough strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, symbolizing a fall of about seven %, or nearly $114 million, a lot more than doubling the three.5 percent drop from the 12 months just before. This marketplace is apparently nevertheless reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions primarily based on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 compared to the earlier year reducing .8 p.c in the initial quarter, seven.5 % in the 2nd quarter, nine.5 percent in the 3rd quarter, and % in the fourth quarter.

Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, studies that whilst calendar yr 2008 showed an almost 2 per cent growth fee in gaming revenues, there was an eight.7 p.c drop in the 3rd quarter and an nearly ten p.c decline in the fourth quarter of 2008, in contrast with 2007. Gaming profits trends at close by Niagara Falls, Ontario have been down 1.5% in 2008 compared with 2007.

It really is been a mixed-bag for point out lotteries throughout the country. huaylottovip of Point out & Provincial Lotteries stories that U.S. lotteries created a total of $sixty.six billion in product sales in fiscal 2008, up about three per cent from the prior year nevertheless some jurisdictions noted decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on a variety of fiscal calendar year finishes, it would seem to be that the info does not reflect the influence of 3rd and/or fourth quarter benefits.

In accordance to knowledge offered by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 percent to $13.7 billion in 2008, versus $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned significantly of the growth in once-a-year casino/racino revenues in excess of the many years, and their influence is apt to continue into the near potential.

Miami Dade voters approved a ballot problem that permits every of 3 pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Dog Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has nevertheless to introduced its plans. There are numerous other proposals getting considered that would additional increase casino development through the point out.

The point out lastly obtained about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ match on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open up right up until 2010. There has also been some dialogue about allowing an increase in for every spot gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

The state’s expanded lottery plan that permits for the development of four on line casino gaming zones and slots at present horse and pet tracks seems mired, as only one facility is presently below building, although a few other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is situated so near to the state line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 desk games, together with a 2nd stage because of to open in 2011 with 875 slots and twenty table online games. The point out has extended the application approach for the other 3 zones till April, 2009.

There is still a whole lot of ‘jockeying’ heading on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be again on the front-burner, but most likely not fixed throughout the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most recent being the 390 room M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Challenging Rock and new hotels include two components of the Metropolis Heart task, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino growth initiatives in Baton Rouge and Lake Charles, even though delayed, are described to nevertheless be on-track for opening this year and/or early 2010.

There is a invoice beneath thought that could more than double Penn National’s slot equipment to 3,000, as effectively as a proposal that would remove the restriction that slots be positioned within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood residents to allow slots, may possibly be considering relocating to a much more hospitable town.

A referendum was authorized in November, 2008 that makes it possible for for the improvement of 5 casinos with a complete of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the state had expected.

Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into various funding troubles and whilst 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, even though scaled again fairly, is even now on keep track of to open this 12 months.

New England
Massachusetts, a sleeping-giant in conditions of market place possible, is nonetheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to be to muster the political assist. A modern research finished by Dartmouth University estimates that Massachusetts resident spent far more than $920 million last calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to develop casinos, however the subject matter is most likely to be revisited, specifically if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its alternatives.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by not too long ago agreeing to proceed augmenting purses with an additional tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it looked as if Aqueduct’s four,500 VLT facility would lastly be developed, the successful bidder indicated an lack of ability to make the necessary $370 million fee, citing the present lending local climate, and throwing the project back again into the lap of the governor. Though the marketplace need in the area could be regarded fairly sturdy, the prospect of added competitors from close by Belmont could have an affect on Aqueduct’s underlining financial feasibility, specifically thinking about that a bit significantly less than 30% of the internet get is retained by the operator.

Strategies to relocate Monticello Raceway into a resort sophisticated are being reconsidered probably owing to the two the possible opening of at minimum one particular or perhaps two racino operations in the NY metro area, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Yet one more gaming proposal is becoming put forth in Ohio, following last year’s model was turned down by the voters. This plan phone calls for 1 casino each and every in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision needed of $250 million, as properly as an preliminary licensing charge of $fifty million, and a 33 percent tax on gaming earnings.

The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot amenities even now wallow in a political mire, but are expected to commence design this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and consist of 300 video games, a hundred and forty rooms and a extensive assortment of amenities.

Legislators are proposing a voter referendum that would amend the point out constitution to allow casino gambling in specified regions, as effectively 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 filed for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Condition govt has proffered the notion of enabling the resort to provide on line casino games, but this energy is in also early a stage to have any traction a single way or another.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the having of lands into have confidence in on behalf of federally identified American Indian tribes has further stymied some new Class III gaming initiatives across the nation. Additionally, there have been eleven Indian on line casino initiatives turned down by the DOI very last year due to the fact of its new rule that casinos should be close to sufficient to a reservation that tribal members can operate at them. It has been suggested that the new Obama administration may well be more sympathetic to the growth of Indian gaming projects, but this situation has nevertheless to be tackled.

Meanwhile, there are other Course III tasks in the a variety of levels of advancement. The Seneca casino undertaking in Buffalo, NY, while operating a tiny temporary facility, has delayed an currently under construction permanent facility right up until the marketplace rebounds. They have also expressed an interest in developing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could affect their strategies for greater tasks. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this calendar year, and other individuals are in the preparing phase. Texas may let the reopening of Indian gaming amenities and permit other location and there are plans afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to three new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming income in Atlantic City has declined 7.6 p.c, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is locating by itself in an extreme comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up found in Atlantic Town, where it appeared as if it may actually even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly even so its market share was currently being encroached on, first by the advancement of a large Class III gaming procedure in Connecticut, and then one more slots operations in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the prepared 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 close to Atlantic City’s future potential clients. It truly is reliance on day-trippers lulled it into a false perception of security, and it now finds by itself possessing to redefine its mission assertion to “vacation spot vacation resort.”

The only dilemma with this approach even so is that it is ill-equipped to pull it off. For all intents and reasons, Atlantic Metropolis is under-roomed and/or over-gamed. There is just not enough working day-tripper market to go about, and their powerful trading area is tightening, as the peripheral populations northward now/will have a lot more ready accessibility to a widened source in New York (Yonkers, and soon at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only genuine competitive advantages are its resort capability and the availability of desk online games, although the latter is likely to eventuate in Pennsylvania, and probably Delaware. In purchase to adequately contend as a location resort the metropolis needs to produce added guest rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip qualities – correct gaming locations, in that they do not have much of a day-journey marketplace, except for the ‘locals’ – have an average of .87 gaming positions per guest room whilst Atlantic City’s average is 2.seventy four positions per visitor space.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, had been the the very least impacted by the most current downturn. The Borgata knowledgeable a gaming income fall of one.6 per cent, whilst Harrah’s Marina noted a 4.9 percent increase in comparison to 2007. Moreover, the most difficult hit venues, specifically 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, including the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.

With a steady rise in gaming revenues through 2006, the metropolis appeared prime for further growth, which precipitated arranging for four new resort projects, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion project stays an iron skeleton, Pinnacle Amusement has announced it may possibly find to promote its razed Sands website, MGM Mirage has shelved its on line casino ideas, and Penn National appears to have stopped its pursuit of the Bader Area airport web site.

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