National Industrial On line casino & Racino Gaming Earnings Investigation

A Period of time of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been increasing over the a long time, slowly and gradually dropping air. But, it has not been a tide that decreased all ships nevertheless, as some rising and increasing gaming jurisdictions confirmed strong growth in 2008.

Total, the industrial and racetrack casino sectors (excluding Indian gaming), seasoned a 3.5 percent decline in gaming revenues for 2008, making a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of almost $one billion in 2008, therefore bringing the Industrial sector industry drop to $1.eight billion, or 6.7 percent. Nevada was the most significant loser in 2008, dropping practically $1.three billion, more than 50 % of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, casino operators ended up caught fairly flat-footed by the extent of the 2008 profits downturn, as it was not until the third and fourth quarters when it truly nosedived. Riding the crest of calendar year in excess of calendar year market place development throughout the place and the availability of enough credit history and fairness money, new building and expansion proliferated in current many years. Right now, faced with the realities of declining, or at very best stagnant demand, a lot of of these assignments are now regarded as over-leveraged and/or above-sized. As a result many gaming firms are trying to renegotiate their personal debt – created more difficult by reduce valuations – even though also paring down operational charges. The latter has become a quite problematic conundrum when dealing with the competitors, especially in individuals jurisdictions that are now vying for industry shares with new emerging casino tasks in neighboring locations. A matter we examine more entirely in the State by Condition examination part of this publication.

As a consequence of these situations the gaming industry landscape is now strewn with impending fatalities. Between the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows every single week.

“How lengthy will these economic conditions persist, and are we at the base however?” are concerns no a single seems to be answering but. What is obvious however is that most gaming jurisdictions will have to learn how to deal with a more compact pie.

This examination includes only gaming revenues of accredited casinos and pari-mutuel retailers that offer you casino video games, and not Indian gaming operations, card rooms, or little non-casino type slot locations. The total write-up, such as income tables is offered on our net website page.

Enter/Output Model

A key element that appears to have arisen from the ashes of this recent development is that numerous casino tasks have been just way too large to assist them selves. The input, in conditions of expenditure dollars, was not proportional to the output, in terms of net earnings after credit card debt provider, in contrast to earlier accomplished results. Far more and/or larger is not always better. Seeing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of far more thorough features in several other jurisdictions. The flaw in this method however is that the expenses connected with widening market penetration and occasioned-use, are considerably increased than individuals incurred to attract the base market.

As daytripper markets become far more competitive, on line casino venues will have to rely more and much more on their in-house lodge patrons, and measurement their homes (and anticipations) accordingly. Although Steve Wynn started out a main craze in making up-market mega-places, there just was not enough desire on the Strip to warrant the several other related initiatives that followed that aimed at the exact same niche.

The trick is to strike a happy medium in task configurations which of training course require less of a ‘seat-of-pants’ technique, and one that is far more analyzed. A shameless plug for advancement consultants like ourselves.

Other Gaming Actions

Although there are no printed detailed data of American Indian gaming revenues, anecdotal proof appears to advise that this phase has been as tough strike as the Business sector. The two Connecticut Indian gaming installations report slot income of $one.six billion in 2008, representing a fall of about 7 p.c, or almost $114 million, more than doubling the three.five p.c drop from the calendar year ahead of. This marketplace is apparently nonetheless reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania. of Gaming reviews that contributions primarily based 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 preceding yr reducing .8 % in the initial quarter, seven.five percent in the next quarter, 9.5 p.c in the 3rd quarter, and sixteen.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming properties report comparable decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that while calendar year 2008 showed an practically 2 per cent progress price in gaming revenues, there was an % decline in the 3rd quarter and an almost 10 p.c decline in the fourth quarter of 2008, compared with 2007. Gaming income tendencies at close by Niagara Falls, Ontario ended up down one.five% in 2008 when compared with 2007.

It really is been a mixed-bag for point out lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries generated a whole of $sixty.6 billion in sales in fiscal 2008, up about 3 percent from the earlier 12 months however some jurisdictions documented decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on a variety of fiscal yr ends, it would look that the info does not reflect the affect of 3rd and/or fourth quarter outcomes.

According to knowledge supplied by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 p.c to $13.7 billion in 2008, compared to $ billion in 2007.

Prepared & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned much of the progress in yearly on line casino/racino revenues over the years, and their impact is apt to keep on into the in close proximity to long term.

Miami Dade voters authorized a ballot problem that allows each and every of 3 pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Canine Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has however to announced its plans. There are numerous other proposals being considered that would even more broaden casino improvement through the condition.

The condition last but not least got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,200+ sport casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open until 2010. There has also been some discussion about enabling an enhance in for each area gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

The state’s expanded lottery software that makes it possible for for the development of four casino gaming zones and slots at present horse and dog tracks appears mired, as only one facility is presently beneath building, whilst three other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so shut to the point out 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 ten table game titles, alongside with a second phase owing to open up in 2011 with 875 slots and twenty desk video games. The condition has prolonged the software process for the other a few zones right up until April, 2009.

There is even now a great deal of ‘jockeying’ heading on, but the prospect of as a lot of as 8 slot parlors and racinos appears to be back on the entrance-burner, but very likely not resolved for the duration of the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most modern becoming the 390 area M Resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new resorts incorporate two factors of the Town Centre undertaking, and the Fountainebleau.

Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, even though delayed, are reported to still be on-track for opening this yr and/or early 2010.

There is a bill underneath thing to consider that could far more than double Penn National’s slot devices to three,000, as properly as a proposal that would take away the restriction that slots be situated in 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby inhabitants to enable slots, could be considering relocating to a a lot more hospitable town.

A referendum was authorized in November, 2008 that enables for the development of five casinos with a complete of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the point out experienced anticipated.

Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into a variety of financing issues and whilst the lodge portion is open up, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back fairly, is nevertheless on track to open up this 12 months.

New England
Massachusetts, a sleeping-huge in terms of market possible, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to look to muster the political assist. A latest study completed by Dartmouth University estimates that Massachusetts resident expended far more than $920 million previous year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an selection to create casinos, nonetheless the matter is likely to be revisited, especially if Massachusetts decides to go ahead. There are also makes an attempt in Maine to reconsider its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by not too long ago agreeing to continue augmenting purses with an added 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 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 appeared as if Aqueduct’s four,500 VLT facility would last but not least be produced, the successful bidder indicated an incapacity to make the needed $370 million charge, citing the present lending local weather, and throwing the project back into the lap of the governor. Even though the market place demand from customers in the location could be regarded as quite sturdy, the prospect of further opposition from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specifically taking into consideration that marginally significantly less than thirty% of the net win is retained by the operator.

Programs to relocate Monticello Raceway into a resort sophisticated are currently being reconsidered possibly owing to the two the possible opening of at least one or perhaps two racino functions in the NY metro area, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

But one more gaming proposal is getting place forth in Ohio, right after final year’s edition was turned down by the voters. This plan phone calls for one on line casino every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment required of $250 million, as nicely as an preliminary licensing payment of $50 million, and a 33 % tax on gaming earnings.

The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot services nonetheless wallow in a political mire, but are expected to commence development this year.

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

Legislators are proposing a voter referendum that would amend the point out constitution to allow on line casino gambling in designated locations, as nicely as enable 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 personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an provide. State federal government has proffered the notion of permitting the vacation resort to offer casino video games, but this hard work is in also early a phase to have any traction a single way or an additional.

Indian Gaming
A recent Supreme Court docket ruling that restricts the having of lands into have confidence in on behalf of federally recognized American Indian tribes has further stymied some new Course III gaming tasks across the place. Moreover, there had been eleven Indian casino initiatives rejected by the DOI previous yr since of its new rule that casinos need to be in close proximity to sufficient to a reservation that tribal users can work at them. It has been advised that the new Obama administration may well be more sympathetic to the improvement of Indian gaming tasks, but this problem has however to be tackled.

In the meantime, there are other Course III initiatives in the a variety of phases of advancement. The Seneca on line casino project in Buffalo, NY, even though working a modest short term facility, has delayed an previously underneath building permanent facility until the market rebounds. They have also expressed an curiosity in developing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is getting challenged, and could influence their strategies for more substantial initiatives. There are new Indian gaming initiatives established to open in Michigan and Oklahoma this year, and other folks are in the organizing stage. Texas could permit the reopening of Indian gaming services and permit other location and there are programs afoot by the Navajos in Arizona to assemble additional casinos. California is poised to open up two to 3 new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming income in Atlantic City has declined seven.six p.c, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining alone in an intensive comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast ended up situated in Atlantic Town, where it looked as if it may really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly however its marketplace share was currently being encroached upon, very first by the growth of a large Course III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then video clip 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 sooner or later two operations in Philadelphia, the noose is tightening about Atlantic City’s long term potential clients. It really is reliance on working day-trippers lulled it into a false perception of stability, and it now finds itself obtaining to redefine its mission assertion to “location resort.”

The only issue with this strategy however is that it is ill-outfitted to pull it off. For all intents and functions, Atlantic City is beneath-roomed and/or over-gamed. There is basically not ample day-tripper market place to go close to, and their effective trading location is tightening, as the peripheral populations northward now/will have far more all set 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 actual competitive benefits are its lodge ability and the availability of desk games, even though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In purchase to adequately compete as a destination resort the town demands to develop further guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip properties – accurate gaming locations, in that they do not have considerably of a working day-excursion market place, other than for the ‘locals’ – have an common of .87 gaming positions for every guest room although Atlantic City’s typical is 2.seventy four positions for each visitor space.

It is not a coincidence that Atlantic City’s two largest lodges, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, ended up the least impacted by the latest downturn. The Borgata experienced a gaming income fall of one.six p.c, whilst Harrah’s Marina noted a four.9 % enhance in comparison to 2007. Additionally, the toughest strike venues, particularly 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, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and losing valuation.

With a steady increase in gaming revenues via 2006, the city appeared primary for even more advancement, which precipitated preparing for 4 new vacation resort tasks, every single of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion project remains an iron skeleton, Pinnacle Entertainment has declared it may well look for to offer its razed Sands web site, MGM Mirage has shelved its casino programs, and Penn National seems to have stopped its pursuit of the Bader Subject airport website.