Countrywide Industrial Online casino and Racino Gambling Revenue Analysis

A Time period of Adjustment

Oops! That big hissing audio is the gaming balloon that experienced been growing over the years, slowly shedding air. But, it has not been a tide that decreased all ships nevertheless, as some emerging and increasing gaming jurisdictions showed sturdy growth in 2008.

Overall, the industrial and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.5 % decline in gaming revenues for 2008, generating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a gain of nearly $one billion in 2008, thereby bringing the Business sector market decline to $one.eight billion, or 6.7 per cent. Nevada was the greatest loser in 2008, dropping virtually $1.3 billion, much more than 50 % of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most component, casino operators had been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not right up until the third and fourth quarters when it really nosedived. Driving the crest of year over yr industry growth throughout the place and the availability of sufficient credit rating and equity money, new development and growth proliferated in latest years. These days, faced with the realities of declining, or at best stagnant desire, several of these initiatives are now considered in excess of-leveraged and/or above-sized. As a outcome several gaming firms are trying to renegotiate their financial debt – created far more difficult by decrease valuations – even though also paring down operational fees. The latter has grow to be a extremely problematic conundrum when dealing with the competitors, particularly in people jurisdictions that are now vying for market shares with new rising on line casino assignments in neighboring regions. A subject we examine more totally in the Point out by Condition investigation section of this publication.

As a consequence of these circumstances the gaming business landscape is now strewn with impending fatalities. Between the far more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows each week.

“How long will these economic circumstances persist, and are we at the bottom yet?” are inquiries no 1 seems to be answering however. What is clear even so is that most gaming jurisdictions will have to learn how to offer with a smaller sized pie.

This investigation involves only gaming revenues of certified casinos and pari-mutuel shops that offer you casino video games, and not Indian gaming functions, card rooms, or tiny non-casino type slot places. The complete write-up, such as profits tables is accessible on our world wide web web page.

Input/Output Product

A essential factor that looks to have arisen from the ashes of this present development is that a lot of on line casino projects have been just way too large to help themselves. The enter, in phrases of expense bucks, was not proportional to the output, in conditions of net profit soon after credit card debt support, in comparison to earlier attained benefits. Much more and/or larger is not always greater. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of far more extensive amenities in many other jurisdictions. The flaw in this approach however is that the expenses associated with widening market penetration and occasioned-use, are significantly increased than individuals incurred to entice the base market.

As daytripper marketplaces become far more competitive, on line casino venues will have to depend much more and more on their in-property hotel patrons, and dimension their qualities (and expectations) appropriately. Whilst Steve Wynn began a significant pattern in producing up-market mega-locations, there merely was not ample demand from customers on the Strip to warrant the many other equivalent tasks that followed that aimed at the same specialized niche.

The trick is to strike a content medium in venture configurations which of course require much less of a ‘seat-of-pants’ approach, and one particular that is a lot more analyzed. A shameless plug for development consultants like ourselves.

Other Gaming Pursuits

Although there are no printed detailed knowledge of American Indian gaming revenues, anecdotal evidence seems to recommend that this section has been as challenging 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 seven %, or virtually $114 million, much more than doubling the three.5 per cent drop from the year ahead of. This marketplace is seemingly even now reeling from the ripple-result 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 on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the prior 12 months reducing .8 p.c in the initial quarter, 7.5 per cent in the 2nd quarter, 9.five p.c in the third quarter, and 16.1 percent in the fourth quarter. reporting Indian gaming qualities report equivalent decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, stories that although calendar year 2008 confirmed an virtually 2 percent development rate in gaming revenues, there was an eight.7 p.c drop in the 3rd quarter and an virtually 10 per cent decrease in the fourth quarter of 2008, in contrast with 2007. Gaming earnings traits at nearby Niagara Falls, Ontario have been down 1.5% in 2008 in contrast with 2007.

It is been a blended-bag for point out lotteries throughout the nation. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries generated a complete of $60.6 billion in revenue in fiscal 2008, up about 3 percent from the previous year but some jurisdictions described decreases, most notably California, which showed an 8 percent fall. Inasmuch as some of these states are on a variety of fiscal yr finishes, it would seem to be that the information does not replicate the influence of 3rd and/or fourth quarter final results.

In accordance to information provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 per cent to $13.7 billion in 2008, compared to $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As beforehand observed, it has been new gaming jurisdictions that have spawned a lot of the development in once-a-year on line casino/racino revenues over the years, and their impact is apt to continue into the near long term.

Miami Dade voters authorized a ballot issue that makes it possible for each and every of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Canine Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has but to introduced its strategies. There are many other proposals currently being deemed that would further broaden casino growth all through the point out.

The state ultimately acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ recreation 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 boost in for each area gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

The state’s expanded lottery system that allows for the advancement of 4 casino gaming zones and slots at current horse and pet tracks appears mired, as only 1 facility is presently under construction, whilst 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 state line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk video games, along with a next period because of to open up in 2011 with 875 slots and 20 desk game titles. The condition has prolonged the software process for the other 3 zones right up until April, 2009.

There is nonetheless a good deal of ‘jockeying’ likely on, but the prospect of as numerous as eight slot parlors and racinos seems to be back again on the entrance-burner, but likely not solved throughout the present legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most latest being the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Tough Rock and new hotels contain two factors of the Metropolis Centre undertaking, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino advancement assignments in Baton Rouge and Lake Charles, while delayed, are noted to nonetheless be on-track for opening this 12 months and/or early 2010.

There is a bill below consideration that could far more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would take away the restriction that slots be located inside 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to enable slots, may be taking into consideration transferring to a more hospitable town.

A referendum was authorized in November, 2008 that makes it possible for for the advancement of five casinos with a total of 15,000 slots, and now the bidding war is afoot although it is not as intensive as the state had expected.

Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has run into numerous financing concerns and even though the hotel portion is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back again considerably, is nevertheless on keep track of to open this 12 months.

New England
Massachusetts, a sleeping-large in terms of market likely, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to muster the political support. A current study completed by Dartmouth College estimates that Massachusetts resident spent far more than $920 million last year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an choice to produce casinos, nevertheless the subject is very likely to be revisited, specially 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 machines at racetracks by just lately agreeing to carry on augmenting purses with an extra tax. The governor however, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by enabling the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would lastly be produced, the successful bidder indicated an inability to make the required $370 million fee, citing the recent lending local climate, and throwing the undertaking back again into the lap of the governor. Although the market place demand in the location could be regarded as quite strong, the prospect of further opposition from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, specifically contemplating that slightly much less than thirty% of the internet win is retained by the operator.

Plans to relocate Monticello Raceway into a resort complex are becoming reconsidered perhaps owing to the two the possible opening of at least one or maybe two racino functions in the NY metro location, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

However one more gaming proposal is getting set forth in Ohio, right after very last year’s model was turned down by the voters. This program phone calls for 1 casino every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expense needed of $250 million, as nicely as an preliminary licensing charge of $50 million, and a 33 % tax on gaming profits.

The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 while Philadelphia’s two slot services even now wallow in a political mire, but are expected to begin construction this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and contain three hundred online games, a hundred and forty rooms and a broad selection of amenities.

Legislators are proposing a voter referendum that would amend the point out constitution to enable casino gambling in specified areas, as nicely as enable gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Condition federal government has proffered the idea of making it possible for the vacation resort to supply on line casino games, but this work is in as well early a phase to have any traction one way or an additional.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the getting of lands into have confidence in on behalf of federally recognized American Indian tribes has even more stymied some new Class III gaming projects across the place. Additionally, there have been eleven Indian on line casino initiatives rejected by the DOI previous yr since of its new rule that casinos must be near adequate to a reservation that tribal members can function at them. It has been recommended that the new Obama administration may be far more sympathetic to the advancement of Indian gaming initiatives, but this situation has however to be dealt with.

Meanwhile, there are other Course III tasks in the a variety of phases of improvement. The Seneca on line casino task in Buffalo, NY, while operating a modest short-term facility, has delayed an presently underneath design long term facility until finally the industry rebounds. They have also expressed an interest in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could affect their plans for larger assignments. There are new Indian gaming tasks set to open in Michigan and Oklahoma this year, and other people are in the organizing stage. Texas may permit the reopening of Indian gaming amenities and allow other location and there are strategies afoot by the Navajos in Arizona to assemble further casinos. California is poised to open two to 3 new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic Metropolis has declined seven.six per cent, from $4.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is discovering itself in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up located in Atlantic Metropolis, where it looked as if it might truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually even so its market place share was currently being encroached upon, very first by the advancement of a huge 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 operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening about Atlantic City’s long term potential customers. It is reliance on day-trippers lulled it into a false feeling of stability, and it now finds by itself having to redefine its mission statement to “vacation spot vacation resort.”

The only difficulty with this approach nevertheless is that it is unwell-equipped to pull it off. For all intents and purposes, Atlantic Metropolis is beneath-roomed and/or over-gamed. There is just not ample day-tripper market to go close to, and their effective buying and selling area is tightening, as the peripheral populations northward now/will have more prepared entry to a widened source 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 entry, the city’s only real aggressive rewards are its resort capacity and the availability of table games, although the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In purchase to adequately compete as a destination vacation resort the city demands to create extra visitor rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip homes – real gaming destinations, in that they do not have considerably of a working day-trip market, except 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 visitor area.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, ended up the least impacted by the latest downturn. The Borgata knowledgeable a gaming profits drop of one.six %, although Harrah’s Marina noted a 4.9 per cent increase in comparison to 2007. Furthermore, the hardest strike venues, specifically 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 properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.

With a steady increase in gaming revenues by way of 2006, the metropolis appeared prime for even more development, which precipitated preparing for four new resort tasks, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $two.five billion task remains an iron skeleton, Pinnacle Enjoyment has introduced it may seek out to sell its razed Sands website, MGM Mirage has shelved its on line casino plans, and Penn National seems to have stopped its pursuit of the Bader Discipline airport internet site.


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