2008 Nationwide Professional Casino & Racino Gaming Earnings Investigation

A Period of Adjustment

Oops! That large hissing seem is the gaming balloon that had been developing above the a long time, slowly shedding air. But, it has not been a tide that decreased all ships however, as some emerging and growing gaming jurisdictions showed powerful development in 2008.

Total, the commercial and racetrack casino sectors (excluding Indian gaming), seasoned a three.five percent decrease in gaming revenues for 2008, generating a complete 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 almost $1 billion in 2008, therefore bringing the Industrial sector marketplace decrease to $one.8 billion, or six.7 %. Nevada was the biggest loser in 2008, dropping nearly $1.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, casino operators ended up caught reasonably flat-footed by the extent of the 2008 earnings downturn, as it was not until the third and fourth quarters when it genuinely nosedived. Riding the crest of year in excess of yr industry growth across the region and the availability of sufficient credit rating and equity resources, new building and enlargement proliferated in latest several years. These days, confronted with the realities of declining, or at ideal stagnant demand from customers, many of these projects are now considered more than-leveraged and/or over-sized. As a outcome many gaming businesses are attempting to renegotiate their debt – produced much more hard by reduce valuations – whilst also paring down operational charges. The latter has grow to be a quite problematic conundrum when dealing with the opposition, specifically in those jurisdictions that are now vying for market place shares with new rising on line casino assignments in neighboring areas. A matter we examine more entirely in the State by State investigation segment of this publication.

As a result of these problems the gaming sector landscape is now strewn with impending fatalities. Between the more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the record grows every single 7 days.

“How prolonged will these economic problems persist, and are we at the bottom nevertheless?” are inquiries no one particular seems to be answering but. What is clear nonetheless is that most gaming jurisdictions will have to discover how to deal with a scaled-down pie.

Observe:
This investigation consists of only gaming revenues of certified casinos and pari-mutuel retailers that supply on line casino online games, and not Indian gaming operations, card rooms, or tiny non-on line casino sort slot places. The whole write-up, such as revenue tables is accessible on our web website page.

Input/Output Product

A important factor that seems to have arisen from the ashes of this present pattern is that many casino projects had been just also massive to help them selves. The input, in terms of expenditure pounds, was not proportional to the output, in phrases of net revenue following financial debt services, when compared to previously achieved results. Far more and/or bigger is not usually greater. Seeing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of far more comprehensive features in numerous other jurisdictions. The flaw in this approach nonetheless is that the charges related with widening industry penetration and occasioned-use, are significantly larger than individuals incurred to draw in the foundation market.

As daytripper markets become a lot more competitive, on line casino venues will have to rely a lot more and far more on their in-home resort patrons, and dimensions their homes (and anticipations) accordingly. Although Steve Wynn began a major trend in making up-market place mega-locations, there just was not sufficient need on the Strip to warrant the numerous other comparable projects that followed that aimed at the identical specialized niche.

The trick is to strike a happy medium in undertaking configurations which of training course need significantly less of a ‘seat-of-pants’ method, and one particular that is a lot more researched. A shameless plug for advancement consultants like ourselves.

Other Gaming Routines

Despite the fact that there are no published comprehensive data of American Indian gaming revenues, anecdotal proof appears to propose that this segment has been as tough hit as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a drop of about 7 per cent, or practically $114 million, far more than doubling the 3.5 percent fall from the yr prior to. This industry is evidently still reeling from the ripple-influence of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming stories that contributions primarily based on a gaming earnings method from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 compared to the prior year reducing .8 per cent in the 1st quarter, 7.five p.c in the next quarter, 9.five per cent in the third quarter, and sixteen.one percent in the fourth quarter.

Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, studies that although calendar year 2008 confirmed an virtually two % expansion fee in gaming revenues, there was an eight.7 per cent drop in the 3rd quarter and an practically ten p.c decline in the fourth quarter of 2008, in contrast with 2007. Gaming earnings tendencies at close by Niagara Falls, Ontario were down 1.five% in 2008 compared with 2007.

It truly is been a combined-bag for condition lotteries throughout the region. The North American Affiliation of Point out & Provincial Lotteries reports that U.S. lotteries produced a complete of $60.6 billion in revenue in fiscal 2008, up about three percent from the previous yr however some jurisdictions documented decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on different fiscal year finishes, it would seem to be that the knowledge does not reflect the affect of third and/or fourth quarter final results.

In accordance to info presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 percent to $13.seven billion in 2008, versus $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As previously mentioned, it has been new gaming jurisdictions that have spawned much of the expansion in yearly casino/racino revenues above the several years, and their effect is apt to carry on into the in close proximity to foreseeable future.

Florida
Miami Dade voters accepted a ballot concern that makes it possible for each and every of 3 pari-mutuels to have a on line casino facility of up to 2,000 slot equipment. The Flagler Dog Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has but to introduced its strategies. There are numerous other proposals being considered that would further increase casino growth during the condition.

Illinois
The point out finally acquired all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,200+ sport casino positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some dialogue about making it possible for an improve in for each area gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery program that enables for the growth of four casino gaming zones and slots at present horse and pet tracks seems mired, as only one facility is presently under construction, while three other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is positioned so shut to the point out line that its parking great deal is in Kansas. WooriCasinoda in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk games, together with a second section because of to open in 2011 with 875 slots and 20 table games. The condition has extended the software procedure for the other three zones until April, 2009.

Kentucky
There is still a lot of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos seems to be again on the front-burner, but likely not settled in the course of the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest becoming the 390 place M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Hard Rock and new resorts consist of two parts of the Town Middle venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, although delayed, are documented to even now be on-observe for opening this yr and/or early 2010.

Maine
There is a monthly bill below thought that could more than double Penn National’s slot equipment to 3,000, as well as a proposal that would remove the restriction that slots be located in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional citizens to allow slots, could be taking into consideration moving to a a lot more hospitable town.

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

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has operate into numerous financing troubles and although the resort part is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled again somewhat, is still on monitor to open this 12 months.

New England
Massachusetts, a sleeping-large in phrases of industry likely, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t look to muster the political assistance. A latest research accomplished by Dartmouth University estimates that Massachusetts resident spent a lot more than $920 million final 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to build casinos, nonetheless the topic is most likely to be revisited, specifically if Massachusetts decides to go forward. There are also tries 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 recently agreeing to carry on augmenting purses with an additional tax. The governor even so, has appointed a new panel to study the state’s sagging racing system which ironically, can only be preserved by enabling the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s four,500 VLT facility would lastly be developed, the winning bidder indicated an inability to make the necessary $370 million price, citing the present lending weather, and throwing the venture back into the lap of the governor. Despite the fact that the industry demand in the location could be regarded as very robust, the prospect of additional opposition from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, particularly taking into consideration that marginally much less than 30% of the web get is retained by the operator.

Ideas to relocate Monticello Raceway into a resort intricate are being reconsidered perhaps owing to each the probable opening of at least 1 or possibly two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Ohio
However an additional gaming proposal is getting place forth in Ohio, right after final year’s variation was turned down by the voters. This program phone calls for one casino every single in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure necessary of $250 million, as nicely as an initial licensing price of $fifty million, and a 33 percent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are anticipated to start design this year.

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and include three hundred game titles, 140 rooms and a wide range of facilities.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. State authorities has proffered the idea of enabling the resort to offer you on line casino video games, but this work is in also early a phase to have any traction a single way or an additional.

Indian Gaming
A current Supreme Court ruling that restricts the getting of lands into believe in on behalf of federally identified American Indian tribes has more stymied some new Class III gaming assignments throughout the region. Moreover, there ended up eleven Indian on line casino assignments turned down by the DOI very last 12 months since of its new rule that casinos should be close to ample to a reservation that tribal associates can perform at them. It has been suggested that the new Obama administration may possibly be more sympathetic to the advancement of Indian gaming assignments, but this problem has nevertheless to be dealt with.

Meanwhile, there are other Course III tasks in the numerous phases of growth. The Seneca casino undertaking in Buffalo, NY, whilst running a tiny momentary facility, has delayed an currently under construction long lasting facility right up until the marketplace rebounds. They have also expressed an desire in establishing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could impact their plans for greater initiatives. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this calendar year, and other people are in the preparing phase. Texas may enable the reopening of Indian gaming amenities and permit other location and there are ideas afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic City has declined seven.6 percent, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is locating by itself in an intensive comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been situated in Atlantic Metropolis, in which it looked as if it may possibly truly even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually even so its market place share was getting encroached upon, 1st by the advancement of a big Class III gaming operation in Connecticut, and then an additional slots operations 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 functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening about Atlantic City’s long term potential customers. It’s reliance on working day-trippers lulled it into a untrue sense of security, and it now finds alone possessing to redefine its mission statement to “destination vacation resort.”

The only problem with this strategy even so is that it is unwell-equipped to pull it off. For all intents and purposes, Atlantic City is under-roomed and/or over-gamed. There is merely not sufficient day-tripper industry to go all around, and their effective trading location is tightening, as the peripheral populations northward now/will have more ready access to a widened supply in New York (Yonkers, and soon at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only real aggressive positive aspects are its resort capacity and the availability of desk games, although the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In purchase to sufficiently contend as a spot vacation resort the metropolis requirements to produce extra guest rooms and not automatically gaming ability. By comparison, the Las Vegas Strip qualities – real gaming locations, in that they do not have considerably of a day-journey industry, other than for the ‘locals’ – have an typical of .87 gaming positions for every visitor place whilst Atlantic City’s common is two.74 positions for every visitor place.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, both of which additional new rooms in 2008, ended up the the very least impacted by the most current downturn. The Borgata knowledgeable a gaming revenue fall of 1.6 per cent, while Harrah’s Marina documented a four.nine per cent enhance in contrast to 2007. Moreover, the toughest hit venues, particularly 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, such as the the Trump homes and Resorts with the hoped for sale of the Tropicana has been even more delayed, and losing valuation.

With a constant increase in gaming revenues by way of 2006, the town 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.5 billion project continues to be an iron skeleton, Pinnacle Amusement has introduced it may well look for to sell its razed Sands internet site, MGM Mirage has shelved its casino ideas, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport internet site.

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