2008 National Business Casino and Racino Video games Income Analysis

A Period of time of Adjustment

Oops! That giant hissing seem is the gaming balloon that had been expanding in excess of the years, gradually getting rid of air. But, it has not been a tide that lowered all ships even so, as some emerging and increasing gaming jurisdictions confirmed powerful expansion in 2008.

Overall, the commercial and racetrack casino sectors (excluding Indian gaming), skilled a three.five p.c 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 showed a achieve of nearly $1 billion in 2008, thus bringing the Professional sector marketplace decline to $1.eight billion, or 6.seven p.c. Nevada was the most significant loser in 2008, dropping virtually $1.3 billion, more than 50 % of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most component, casino operators were 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 actually nosedived. Driving the crest of year more than yr marketplace progress across the nation and the availability of sufficient credit and fairness money, new construction and enlargement proliferated in latest a long time. Nowadays, confronted with the realities of declining, or at best stagnant demand from customers, a lot of of these tasks are now regarded as in excess of-leveraged and/or over-sized. As a consequence many gaming companies are trying to renegotiate their debt – created 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 opposition, specifically in these jurisdictions that are now vying for industry shares with new emerging casino initiatives in neighboring places. A matter we go over more entirely in the Point out by Condition analysis segment of this publication.

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

“How extended will these financial conditions persist, and are we at the base yet?” are queries no one particular seems to be answering nevertheless. What is very clear nonetheless is that most gaming jurisdictions will have to find out how to offer with a smaller pie.

This investigation consists of only gaming revenues of accredited casinos and pari-mutuel retailers that offer casino video games, and not Indian gaming operations, card rooms, or small non-on line casino type slot places. The entire post, which includes profits tables is obtainable on our internet page.

Input/Output Model

A crucial aspect that appears to have arisen from the ashes of this current pattern is that a lot of casino assignments had been just as well huge to assistance by themselves. The input, in conditions of expenditure pounds, was not proportional to the output, in terms of net income following personal debt provider, in contrast to previously attained benefits. More and/or even bigger is not always greater. Seeing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of more extensive facilities in several other jurisdictions. The flaw in this technique even so is that the fees related with widening market place penetration and occasioned-use, are substantially greater than individuals incurred to draw in the foundation industry.

As daytripper markets turn out to be far more aggressive, casino venues will have to depend more and a lot more on their in-property resort patrons, and dimensions their properties (and anticipations) appropriately. Although Steve Wynn commenced a main pattern in generating up-market mega-locations, there merely was not enough demand on the Strip to warrant the many other related projects that adopted that aimed at the exact same area of interest.

The trick is to strike a satisfied medium in project configurations which of training course need much less of a ‘seat-of-pants’ technique, and one that is far more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Pursuits

Even though there are no published thorough info of American Indian gaming revenues, anecdotal proof seems to propose that this segment has been as tough hit as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, symbolizing a fall of about 7 %, or virtually $114 million, much more than doubling the three.five percent drop from the year prior to. This market is seemingly even now reeling from the ripple-result of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming reviews that contributions dependent on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the preceding 12 months lowering .eight percent in the 1st quarter, 7.5 percent in the next quarter, 9.five per cent in the third quarter, and sixteen.one per cent in the fourth quarter.

Some SEC reporting Indian gaming houses report similar decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reviews that while calendar yr 2008 confirmed an virtually two percent growth price in gaming revenues, there was an 8.seven percent decrease in the third quarter and an practically ten per cent drop in the fourth quarter of 2008, when compared with 2007. Gaming profits trends at close by Niagara Falls, Ontario ended up down one.5% in 2008 when compared with 2007.

It really is been a mixed-bag for state lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries stories that U.S. lotteries created a total of $60.six billion in income in fiscal 2008, up about three % from the prior year yet some jurisdictions described decreases, most notably California, which confirmed an eight percent drop. Inasmuch as some of these states are on a variety of fiscal yr ends, it would appear that the data does not mirror the affect of third and/or fourth quarter benefits.

According to info supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven % to $13.seven billion in 2008, compared to $14.7 billion in 2007.

Prepared & Proposed New Expansions

As previously famous, it has been new gaming jurisdictions that have spawned much of the growth in once-a-year on line casino/racino revenues above the years, and their influence is apt to continue into the around foreseeable future.

Miami Dade voters accepted a ballot problem that permits every of three 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 preparing opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has however to announced its programs. There are many other proposals being considered that would even more expand casino improvement all through the condition.

The condition finally got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,two hundred+ sport casino situated 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 making it possible for an improve in for every location gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

The state’s expanded lottery program that enables for the growth of four casino gaming zones and slots at current horse and puppy tracks seems mired, as only one particular facility is presently under design, while three other proposals were rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is positioned so near to the condition line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table game titles, together with a next section due to open in 2011 with 875 slots and twenty desk games. The condition has prolonged the application process for the other a few zones until finally April, 2009.

There is even now a great deal of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos appears to be back again on the front-burner, but probably not solved in the course of the present legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most recent currently being the 390 place M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Hard Rock and new lodges consist of two factors of the Metropolis Center task, and the Fountainebleau.

Pinnacle Entertainment’s new casino advancement projects in Baton Rouge and Lake Charles, although delayed, are noted to still be on-monitor for opening this 12 months and/or early 2010.

There is a monthly bill underneath consideration that could a lot more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would eliminate the restriction that slots be positioned inside five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local people to allow slots, could be thinking about shifting to a more hospitable city.

A referendum was approved in November, 2008 that permits for the advancement of five casinos with a total of 15,000 slots, and now the bidding war is afoot though it is not as powerful as the state had anticipated.

Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has run into different funding problems and while the resort portion is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back somewhat, is even now on monitor to open up this yr.

New England
Massachusetts, a sleeping-big in terms of marketplace possible, is still maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t appear to muster the political help. A modern review accomplished by Dartmouth College estimates that Massachusetts resident spent more than $920 million last year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to develop casinos, however the subject is probably to be revisited, particularly if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its choices.

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 keep on augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would last but not least be created, the winning bidder indicated an incapacity to make the required $370 million charge, citing the existing lending weather, and throwing the project back again into the lap of the governor. Even though the industry demand from customers in the area could be deemed really strong, the prospect of extra competition from close by Belmont could have an affect on Aqueduct’s underlining financial feasibility, especially thinking about that slightly significantly less than thirty% of the internet win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered maybe owing to each the probable opening of at the very least one or perhaps two racino functions in the NY metro area, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Yet yet another gaming proposal is being set forth in Ohio, soon after final year’s model was turned down by the voters. This plan phone calls for 1 on line casino every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure required of $250 million, as nicely as an first licensing price of $fifty million, and a 33 percent tax on gaming profits.

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

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and consist of 300 online games, a hundred and forty rooms and a vast selection of features.

Legislators are proposing a voter referendum that would amend the point out constitution to permit on line casino gambling in specified regions, as well as let gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Point out authorities has proffered the idea of enabling the vacation resort to supply on line casino video games, but this hard work is in way too early a phase to have any traction 1 way or another.

Indian Gaming
A latest Supreme Court docket ruling that restricts the getting of lands into have confidence in on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming projects throughout the region. Furthermore, there ended up eleven Indian casino assignments rejected by the DOI final yr since of its new rule that casinos must be close to enough to a reservation that tribal users can function at them. It has been recommended that the new Obama administration may well be far more sympathetic to the improvement of Indian gaming assignments, but this issue has yet to be addressed.

Meanwhile, there are ufabet in the different levels of growth. The Seneca on line casino undertaking in Buffalo, NY, while functioning a modest momentary facility, has delayed an presently under building long term facility right up until the industry rebounds. They have also expressed an fascination in creating a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could impact their ideas for bigger initiatives. There are new Indian gaming assignments established to open in Michigan and Oklahoma this yr, and others are in the planning stage. Texas might permit the reopening of Indian gaming facilities and let other venue and there are strategies afoot by the Navajos in Arizona to assemble added casinos. California is poised to open two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming income in Atlantic Town has declined 7.six %, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is discovering alone in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were positioned in Atlantic Town, exactly where it seemed as if it may possibly in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly nevertheless its market place share was becoming encroached upon, 1st by the growth of a big Class III gaming procedure in Connecticut, and then another slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned 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 potential potential clients. It truly is reliance on working day-trippers lulled it into a bogus perception of security, and it now finds by itself having to redefine its mission statement to “spot resort.”

The only problem with this strategy nonetheless is that it is unwell-equipped to pull it off. For all intents and needs, Atlantic City is beneath-roomed and/or in excess of-gamed. There is merely not ample working day-tripper industry to go about, and their powerful buying and selling region is tightening, as the peripheral populations northward now/will have far more all set access to a widened supply in New York (Yonkers, and soon at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only true competitive positive aspects are its hotel capacity and the availability of desk online games, though the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In order to sufficiently compete as a vacation spot vacation resort the metropolis demands to produce additional guest rooms and not always gaming potential. By comparison, the Las Vegas Strip properties – real gaming places, in that they do not have a lot of a working day-excursion industry, other than for the ‘locals’ – have an common of .87 gaming positions for each guest area while Atlantic City’s typical is two.74 positions for every guest space.

It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, both of which included new rooms in 2008, ended up the the very least impacted by the latest downturn. The Borgata experienced a gaming profits fall of one.six per cent, while Harrah’s Marina documented a four.9 p.c enhance compared to 2007. Moreover, the toughest hit venues, namely 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, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a regular increase in gaming revenues via 2006, the city appeared key for more growth, which precipitated organizing for 4 new resort initiatives, every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.five billion task remains an iron skeleton, Pinnacle Amusement has announced it may possibly look for to promote its razed Sands web site, MGM Mirage has shelved its casino programs, and Penn Countrywide seems to have stopped its pursuit of the Bader Discipline airport website.