Countrywide Business Casino and Racino Games Earnings Examination


A Period of Adjustment

Oops! UFABET is the gaming balloon that had been expanding over the years, slowly dropping air. But, it has not been a tide that lowered all ships nonetheless, as some rising and growing gaming jurisdictions showed powerful development in 2008.

Total, the business and racetrack casino sectors (excluding Indian gaming), seasoned a three.five % decline in gaming revenues for 2008, generating a whole of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of practically $1 billion in 2008, thus bringing the Professional sector market place drop to $one.eight billion, or per cent. Nevada was the greatest loser in 2008, dropping practically $1.three billion, far more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, casino operators had been caught fairly flat-footed by the extent of the 2008 profits downturn, as it was not until the third and fourth quarters when it genuinely nosedived. Using the crest of 12 months over calendar year market place expansion throughout the nation and the availability of sufficient credit rating and equity resources, new design and expansion proliferated in recent many years. Today, confronted with the realities of declining, or at very best stagnant demand from customers, several of these projects are now regarded as more than-leveraged and/or over-sized. As a outcome several gaming organizations are attempting to renegotiate their debt – created more tough by reduced valuations – even though also paring down operational expenses. The latter has become a really problematic conundrum when working with the opposition, specially in people jurisdictions that are now vying for industry shares with new emerging casino tasks in neighboring places. A matter we talk about more completely in the Condition by Point out investigation section of this publication.

As a consequence of these situations the gaming industry landscape is now strewn with impending fatalities. Among the a lot more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the record grows each and every week.

“How long will these financial problems persist, and are we at the bottom however?” are queries no 1 seems to be answering yet. What is clear however is that most gaming jurisdictions will have to find out how to offer with a scaled-down pie.

This analysis consists of only gaming revenues of certified casinos and pari-mutuel shops that offer you casino video games, and not Indian gaming operations, card rooms, or small non-on line casino variety slot locations. The total post, such as revenue tables is accessible on our internet page.

Enter/Output Design

A essential factor that appears to have arisen from the ashes of this recent trend is that numerous on line casino initiatives had been just way too huge to assist them selves. The enter, in conditions of expense bucks, was not proportional to the output, in conditions of web revenue right after personal debt provider, in contrast to beforehand reached final results. Much more and/or even bigger is not always greater. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of far more complete facilities in numerous other jurisdictions. The flaw in this method even so is that the costs connected with widening marketplace penetration and occasioned-use, are drastically increased than these incurred to appeal to the base market.

As daytripper markets turn out to be a lot more competitive, casino venues will have to count far more and a lot more on their in-house resort patrons, and size their qualities (and expectations) appropriately. Whilst Steve Wynn began a key craze in producing up-market place mega-destinations, there merely was not adequate demand from customers on the Strip to warrant the many other comparable assignments that adopted that aimed at the exact same specialized niche.

The trick is to strike a content medium in undertaking configurations which of program need less of a ‘seat-of-pants’ method, and a single that is much more studied. A shameless plug for improvement consultants like ourselves.

Other Gaming Routines

Even though there are no published detailed knowledge of American Indian gaming revenues, anecdotal evidence appears to propose that this segment has been as challenging strike as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, symbolizing a fall of about seven p.c, or nearly $114 million, more than doubling the three.5 percent drop from the year ahead of. This market place is apparently nevertheless reeling from the ripple-result of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming studies that contributions dependent on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in comparison to the earlier yr decreasing .8 p.c in the 1st quarter, seven.five p.c in the next quarter, nine.5 p.c in the third quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, stories that while calendar calendar year 2008 showed an almost two percent progress price in gaming revenues, there was an p.c decline in the 3rd quarter and an practically 10 per cent decline in the fourth quarter of 2008, when compared with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario had been down one.5% in 2008 in contrast with 2007.

It truly is been a combined-bag for state lotteries throughout the country. The North American Affiliation of Condition & Provincial Lotteries stories that U.S. lotteries produced a whole of $sixty.6 billion in sales in fiscal 2008, up about three % from the prior 12 months nevertheless some jurisdictions described decreases, most notably California, which showed an eight per cent drop. Inasmuch as some of these states are on different fiscal year ends, it would seem to be that the information does not reflect the effect of third and/or fourth quarter benefits.

In accordance to data offered by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling seven per cent to $13.7 billion in 2008, vs . $ billion in 2007.

Prepared & Proposed New Expansions

As beforehand mentioned, it has been new gaming jurisdictions that have spawned a lot of the progress in annual on line casino/racino revenues in excess of the several years, and their impact is apt to keep on into the around 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 machines. The Flagler Puppy Track and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has but to announced its strategies. There are quite a few other proposals currently being regarded that would further broaden casino advancement during the condition.

The point out finally obtained about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ sport on line casino situated in Des Plaines just east of O’Hare. The new facility is not probably to open up until 2010. There has also been some discussion about allowing an enhance in for every place gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.

The state’s expanded lottery system that permits for the improvement of 4 casino gaming zones and slots at present horse and puppy tracks appears mired, as only one facility is presently under construction, whilst a few other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is situated so close to the condition line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk game titles, alongside with a next period because of to open up in 2011 with 875 slots and twenty desk games. The state has prolonged the application process for the other three zones till April, 2009.

There is even now a good deal of ‘jockeying’ going on, but the prospect of as many as 8 slot parlors and racinos seems to be again on the front-burner, but very likely not fixed during the present legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most current becoming the 390 place M Resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new lodges incorporate two components of the Town Middle project, and the Fountainebleau.

Pinnacle Entertainment’s new casino improvement assignments in Baton Rouge and Lake Charles, although delayed, are noted to even now be on-observe for opening this year and/or early 2010.

There is a bill beneath thought that could much more than double Penn National’s slot machines to 3,000, as well as a proposal that would eliminate the restriction that slots be positioned within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to permit slots, may be contemplating moving to a a lot more hospitable town.

A referendum was accredited in November, 2008 that allows for the growth of five casinos with a whole of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intensive as the state experienced predicted.

Grand Soleil Casino Resort in Natchez had been slated to open in 2008, but has operate into numerous financing troubles and although the resort portion is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back again relatively, is nonetheless on monitor to open up this yr.

New England
Massachusetts, a sleeping-giant in phrases of industry likely, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to muster the political support. A recent study concluded by Dartmouth University estimates that Massachusetts resident put in more than $920 million last calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to develop casinos, however the topic is probably to be revisited, especially if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider its possibilities.

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

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would last but not least be designed, the profitable bidder indicated an incapability to make the needed $370 million fee, citing the existing lending climate, and throwing the task back into the lap of the governor. Despite the fact that the industry demand from customers in the location could be deemed fairly robust, the prospect of additional opposition from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, specially considering that slightly considerably less than thirty% of the web win is retained by the operator.

Programs to relocate Monticello Raceway into a resort intricate are getting reconsidered possibly owing to both the possible opening of at minimum a single or probably two racino functions in the NY metro region, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

However an additional gaming proposal is currently being put forth in Ohio, soon after very last year’s edition was turned down by the voters. This strategy phone calls for one casino each in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense necessary of $250 million, as effectively as an preliminary licensing payment of $50 million, and a 33 per cent tax on gaming revenue.

The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 while Philadelphia’s two slot facilities even now wallow in a political mire, but are anticipated to start off design this year.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and include 300 game titles, 140 rooms and a broad range of facilities.

Legislators are proposing a voter referendum that would amend the state structure to permit on line casino gambling in specified places, as nicely as allow gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Point out federal government has proffered the notion of permitting the vacation resort to offer on line casino game titles, but this energy is in too early a phase to have any traction one way or another.

Indian Gaming
A latest Supreme Court ruling that restricts the taking of lands into have confidence in on behalf of federally regarded American Indian tribes has further stymied some new Course III gaming assignments throughout the region. In addition, there have been eleven Indian casino assignments turned down by the DOI very last yr due to the fact of its new rule that casinos have to be near enough to a reservation that tribal users can function at them. It has been suggested that the new Obama administration might be much more sympathetic to the advancement of Indian gaming tasks, but this concern has nevertheless to be tackled.

Meanwhile, there are other Class III projects in the various phases of improvement. The Seneca casino project in Buffalo, NY, although working a tiny short term facility, has delayed an presently under development permanent facility until the market rebounds. They have also expressed an desire in developing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could affect their plans for larger assignments. There are new Indian gaming projects set to open up in Michigan and Oklahoma this yr, and others are in the planning stage. Texas may possibly allow the reopening of Indian gaming facilities and let other location and there are strategies afoot by the Navajos in Arizona to construct added casinos. California is poised to open up two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming profits in Atlantic Metropolis has declined seven.6 percent, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining itself in an intensive comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been found in Atlantic City, exactly where it looked as if it might in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly and gradually nonetheless its market share was getting encroached upon, initial by the growth of a massive Course III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening all around Atlantic City’s future potential clients. It truly is reliance on working day-trippers lulled it into a false feeling of stability, and it now finds by itself getting to redefine its mission statement to “destination resort.”

The only problem with this strategy nonetheless is that it is unwell-equipped to pull it off. For all intents and purposes, Atlantic City is under-roomed and/or in excess of-gamed. There is basically not ample working day-tripper market to go about, and their powerful trading spot is tightening, as the peripheral populations northward now/will have a lot more completely ready entry to a widened offer in New York (Yonkers, and quickly at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only actual aggressive rewards are its lodge ability and the availability of table game titles, even though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In get to adequately contend as a destination vacation resort the metropolis requirements to create extra visitor rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip properties – true gaming locations, in that they do not have much of a day-journey industry, except for the ‘locals’ – have an common of .87 gaming positions for every guest place even though Atlantic City’s regular is 2.seventy four positions for every visitor room.

It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, each of which extra new rooms in 2008, have been the least impacted by the latest downturn. The Borgata seasoned a gaming income fall of one.six percent, even though Harrah’s Marina noted a four.nine per cent increase in contrast to 2007. Moreover, the most difficult hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity 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 getting rid of valuation.

With a steady rise in gaming revenues by way of 2006, the town seemed key for more advancement, which precipitated organizing for 4 new resort projects, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion venture remains an iron skeleton, Pinnacle Enjoyment has announced it might find to market its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn National appears to have stopped its pursuit of the Bader Subject airport website.


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