Countrywide Commercial On line casino plus Racino Games Earnings Investigation

A Interval of Adjustment

Oops! That giant hissing audio is the gaming balloon that had been increasing more than the years, slowly shedding air. But, it has not been a tide that reduced all ships nevertheless, as some rising and expanding gaming jurisdictions showed strong progress in 2008.

Total, the business and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.five per cent decrease in gaming revenues for 2008, producing a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of virtually $1 billion in 2008, therefore bringing the Professional sector market decline to $1.8 billion, or 6.7 percent. Nevada was the biggest loser in 2008, dropping virtually $one.three billion, far more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators were caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it actually nosedived. Driving the crest of 12 months above year market place expansion across the place and the availability of ample credit history and equity funds, new building and growth proliferated in latest years. Today, confronted with the realities of declining, or at ideal stagnant desire, numerous of these projects are now considered in excess of-leveraged and/or in excess of-sized. As a consequence a lot of gaming companies are attempting to renegotiate their personal debt – manufactured much more tough by reduce valuations – even though also paring down operational charges. The latter has grow to be a extremely problematic conundrum when dealing with the competitors, specifically in individuals jurisdictions that are now vying for market shares with new rising casino projects in neighboring regions. A topic we discuss much more totally in the State by Point out evaluation part of this publication.

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

“How extended will these economic problems persist, and are we at the base but?” are questions no 1 seems to be answering but. What is obvious nevertheless is that most gaming jurisdictions will have to understand how to deal with a smaller sized pie.

Notice:
This examination consists of only gaming revenues of accredited casinos and pari-mutuel shops that offer casino online games, and not Indian gaming functions, card rooms, or little non-on line casino sort slot areas. The entire report, such as income tables is offered on our world wide web website page.

Input/Output Product

A important element that appears to have arisen from the ashes of this existing pattern is that numerous casino tasks have been just as well massive to assistance by themselves. The input, in conditions of expenditure pounds, was not proportional to the output, in conditions of net profit right after personal debt service, in contrast to formerly accomplished benefits. More and/or greater is not constantly far better. Seeing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of more thorough features in several other jurisdictions. The flaw in this approach nonetheless is that the expenses linked with widening industry penetration and occasioned-use, are considerably higher than individuals incurred to appeal to the base marketplace.

As daytripper marketplaces turn into a lot more competitive, on line casino venues will have to count far more and a lot more on their in-property lodge patrons, and dimensions their homes (and anticipations) accordingly. While Steve Wynn commenced a main development in generating up-industry mega-destinations, there simply was not enough need on the Strip to warrant the numerous other similar tasks that adopted that aimed at the exact same area of interest.

The trick is to strike a happy medium in project configurations which of training course demand much less of a ‘seat-of-pants’ method, and one particular that is much more studied. A shameless plug for development consultants like ourselves.

Other Gaming Actions

Despite the fact that there are no released detailed knowledge of American Indian gaming revenues, anecdotal proof seems to suggest that this section has been as hard hit as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, symbolizing a drop of about seven %, or almost $114 million, much more than doubling the 3.5 percent fall from the yr just before. This industry is seemingly nevertheless reeling from the ripple-influence of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Office of Gaming studies that contributions based mostly on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the earlier year decreasing .eight p.c in the very first quarter, 7.5 percent in the 2nd quarter, nine.five p.c in the third quarter, and sixteen.one p.c in the fourth quarter.

Some SEC reporting Indian gaming qualities report similar decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, studies that while calendar 12 months 2008 confirmed an nearly 2 p.c growth charge in gaming revenues, there was an eight.seven percent decline in the 3rd quarter and an virtually 10 percent decrease in the fourth quarter of 2008, in comparison with 2007. Gaming income traits at close by Niagara Falls, Ontario ended up down one.5% in 2008 in contrast with 2007.

It’s been a mixed-bag for point out lotteries throughout the place. The North American Affiliation of State & Provincial Lotteries reviews that U.S. lotteries produced a complete of $60.six billion in sales in fiscal 2008, up about 3 p.c from the earlier 12 months however some jurisdictions documented decreases, most notably California, which showed an eight p.c drop. Inasmuch as some of these states are on different fiscal year ends, it would seem to be that the info does not mirror the impact of 3rd and/or fourth quarter results.

In accordance to info provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven percent to $thirteen.seven billion in 2008, versus $14.7 billion in 2007.

Planned & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned significantly of the progress in annual casino/racino revenues more than the a long time, and their impact is apt to keep on into the near long term.

Florida
Miami Dade voters accredited a ballot problem that permits each of 3 pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Pet Observe and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has however to announced its strategies. There are numerous other proposals getting considered that would more broaden on line casino advancement all through the point out.

Illinois
The condition ultimately obtained about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ match casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some discussion about permitting an increase in for each location gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that allows for the development of 4 casino gaming zones and slots at current horse and pet tracks appears mired, as only one particular facility is presently under development, although a few other proposals ended up rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is situated so close to the state line that its parking good deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk video games, along with a 2nd period due to open up in 2011 with 875 slots and 20 table online games. The condition has extended the software approach for the other three zones until April, 2009.

Kentucky
There is nonetheless a great deal of ‘jockeying’ likely on, but the prospect of as many as eight slot parlors and racinos appears to be back again on the front-burner, but most likely not settled for the duration of the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most current becoming the 390 area M Resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new accommodations incorporate two elements of the Metropolis Center undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino improvement assignments in Baton Rouge and Lake Charles, even though delayed, are reported to nonetheless be on-monitor for opening this 12 months and/or early 2010.

Maine
There is a monthly bill underneath thought that could more than double Penn National’s slot devices to three,000, as well as a proposal that would get rid of the restriction that slots be situated within five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing local citizens to allow slots, may possibly be taking into consideration moving to a far more hospitable city.

Maryland
A referendum was approved in November, 2008 that makes it possible for for the development of 5 casinos with a whole of 15,000 slots, and now the bidding war is afoot though it is not as extreme as the condition experienced anticipated.

sagaming On line casino Resort in Natchez had been slated to open up in 2008, but has run into different financing problems and even though the lodge portion is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back fairly, is still on observe to open up this 12 months.

New England
Massachusetts, a sleeping-big in phrases of industry possible, is still maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to appear to muster the political support. A latest review accomplished by Dartmouth College estimates that Massachusetts resident put in more than $920 million final calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to develop casinos, however the subject matter is very likely to be revisited, specially if Massachusetts decides to go ahead. 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 recently agreeing to continue augmenting purses with an added tax. The governor however, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would finally be designed, the profitable bidder indicated an incapability to make the needed $370 million payment, citing the recent lending weather, and throwing the task again into the lap of the governor. Though the market demand in the location could be considered fairly robust, the prospect of additional competitiveness from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, specifically thinking about that marginally considerably less than thirty% of the net win is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort intricate are getting reconsidered probably owing to each the possible opening of at the very least a single or probably two racino functions in the NY metro spot, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Ohio
However another gaming proposal is getting set forth in Ohio, right after previous year’s variation was turned down by the voters. This program calls for one on line casino every single in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expense required of $250 million, as nicely as an original licensing payment of $50 million, and a 33 p.c tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 while Philadelphia’s two slot facilities even now wallow in a political mire, but are predicted to start construction this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and contain three hundred online games, one hundred forty rooms and a wide variety of features.

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

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

Indian Gaming
A modern Supreme Court ruling that restricts the getting of lands into believe in on behalf of federally recognized American Indian tribes has additional stymied some new Class III gaming projects throughout the place. Moreover, there ended up eleven Indian on line casino tasks rejected by the DOI last year because of its new rule that casinos must be near ample to a reservation that tribal associates can work at them. It has been advised that the new Obama administration might be far more sympathetic to the development of Indian gaming initiatives, but this problem has however to be resolved.

In the meantime, there are other Class III tasks in the numerous levels of improvement. The Seneca on line casino venture in Buffalo, NY, whilst working a modest temporary facility, has delayed an already underneath development permanent facility until the market rebounds. They have also expressed an curiosity in establishing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could affect their plans for larger initiatives. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this yr, and others are in the arranging stage. Texas could let the reopening of Indian gaming facilities and let other venue and there are strategies afoot by the Navajos in Arizona to build additional casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

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

Slowly and gradually even so its marketplace share was being encroached on, 1st by the improvement of a large Course III gaming procedure in Connecticut, and then another slots functions in Rhode Island, and then video 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 on line casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future potential clients. It really is reliance on day-trippers lulled it into a false sense of safety, and it now finds by itself possessing to redefine its mission assertion to “vacation spot vacation resort.”

The only problem with this method nonetheless is that it is unwell-geared up to pull it off. For all intents and purposes, Atlantic City is underneath-roomed and/or more than-gamed. There is just not sufficient day-tripper market to go close to, and their powerful buying and selling region is tightening, as the peripheral populations northward now/will have a lot more all set entry to a widened supply in New York (Yonkers, and shortly 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 aggressive rewards are its resort capacity and the availability of desk game titles, even though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In buy to adequately contend as a vacation spot vacation resort the town needs to build further visitor rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip properties – true gaming places, in that they do not have much of a working day-trip market, apart from for the ‘locals’ – have an common of .87 gaming positions for each guest place whilst Atlantic City’s common is two.seventy four positions for each guest place.

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, were the minimum impacted by the most recent downturn. The Borgata seasoned a gaming profits fall of one.six p.c, while Harrah’s Marina noted a four.9 per cent boost when compared to 2007. In addition, the hardest strike venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest number 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 further delayed, and dropping valuation.

With a continual rise in gaming revenues via 2006, the town seemed primary for additional growth, which precipitated preparing for four new vacation resort assignments, every single of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion venture remains an iron skeleton, Pinnacle Entertainment has declared it might seek to promote its razed Sands web site, MGM Mirage has shelved its on line casino strategies, and Penn National seems to have stopped its pursuit of the Bader Subject airport web site.