Countrywide Business Casino and Racino Gaming Revenue Analysis

A Period of time of Adjustment

Oops! That big hissing seem is the gaming balloon that had been increasing over the several years, little by little shedding air. But, it has not been a tide that reduced all ships nevertheless, as some rising and expanding gaming jurisdictions confirmed robust growth in 2008.

Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.5 % decrease in gaming revenues for 2008, creating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of almost $1 billion in 2008, thereby bringing the Professional sector market place drop to $1.eight billion, or 6.seven percent. Nevada was the greatest loser in 2008, dropping virtually $1.three billion, more than half of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, on line casino operators have been caught relatively flat-footed by the extent of the 2008 revenue downturn, as it was not till the 3rd and fourth quarters when it really nosedived. Driving the crest of calendar year over year marketplace development across the region and the availability of ample credit score and fairness cash, new construction and enlargement proliferated in current several years. Today, faced with the realities of declining, or at ideal stagnant demand from customers, numerous of these assignments are now regarded as more than-leveraged and/or in excess of-sized. As a outcome several gaming organizations are trying to renegotiate their personal debt – manufactured far more difficult by reduced valuations – whilst also paring down operational fees. The latter has turn into a quite problematic conundrum when dealing with the competitors, especially in individuals jurisdictions that are now vying for market shares with new emerging casino initiatives in neighboring locations. A topic we go over a lot more totally in the Condition by Point out examination segment of this publication.

As a result of these problems the gaming business landscape is now strewn with impending fatalities. Between jullbet.com troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the listing grows each and every week.

“How long will these financial conditions persist, and are we at the base however?” are questions no a single seems to be answering but. What is distinct even so is that most gaming jurisdictions will have to learn how to offer with a smaller pie.

Observe:
This investigation includes only gaming revenues of certified casinos and pari-mutuel stores that offer on line casino game titles, and not Indian gaming functions, card rooms, or tiny non-casino variety slot locations. The complete post, including profits tables is obtainable on our web web page.

Enter/Output Product

A essential aspect that seems to have arisen from the ashes of this current craze is that numerous on line casino tasks were just too huge to help on their own. The enter, in terms of expense dollars, was not proportional to the output, in terms of internet earnings right after financial debt provider, in contrast to beforehand achieved final results. Much more and/or even bigger is not often better. Seeing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of much more extensive amenities in many other jurisdictions. The flaw in this technique nonetheless is that the fees related with widening industry penetration and occasioned-use, are significantly larger than individuals incurred to entice the foundation market place.

As daytripper markets turn out to be far more competitive, on line casino venues will have to count a lot more and a lot more on their in-residence resort patrons, and dimension their homes (and expectations) accordingly. While Steve Wynn began a key pattern in producing up-market mega-locations, there just was not sufficient desire on the Strip to warrant the numerous other related tasks that adopted that aimed at the very same market.

The trick is to strike a pleased medium in task configurations which of course call for less of a ‘seat-of-pants’ approach, and a single that is far more analyzed. A shameless plug for growth consultants like ourselves.

Other Gaming Routines

Even though there are no published detailed knowledge of American Indian gaming revenues, anecdotal proof seems to recommend that this phase has been as difficult hit as the Business sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, symbolizing a drop of about seven p.c, or almost $114 million, a lot more than doubling the three.five per cent fall from the 12 months ahead of. This industry is evidently nevertheless reeling from the ripple-impact of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions dependent on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the preceding 12 months decreasing .eight percent in the first quarter, seven.five per cent in the next quarter, nine.five % in the third quarter, and 16.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reports that even though calendar 12 months 2008 showed an virtually 2 p.c growth charge in gaming revenues, there was an 8.7 percent decrease in the 3rd quarter and an nearly ten % drop in the fourth quarter of 2008, in comparison with 2007. Gaming income tendencies at close by Niagara Falls, Ontario were down 1.5% in 2008 compared with 2007.

It is been a mixed-bag for state lotteries across the place. The North American Association of State & Provincial Lotteries studies that U.S. lotteries produced a whole of $60.six billion in income in fiscal 2008, up about 3 percent from the previous yr yet some jurisdictions noted decreases, most notably California, which showed an eight per cent drop. Inasmuch as some of these states are on various fiscal year ends, it would appear that the info does not mirror the effect of third and/or fourth quarter results.

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

Planned & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned a lot of the development in yearly casino/racino revenues in excess of the many years, and their effect is apt to carry on into the in close proximity to long term.

Florida
Miami Dade voters accepted a ballot issue that makes it possible for each and every of 3 pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Dog Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has yet to announced its strategies. There are quite a few other proposals becoming regarded as that would more grow on line casino development all through the condition.

Illinois
The state lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,two hundred+ recreation on line 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 discussion about allowing an increase in per spot gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery system that enables for the growth of 4 casino gaming zones and slots at present horse and canine tracks appears mired, as only one facility is presently beneath construction, while three other proposals have been rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is found so shut to the condition line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk online games, along with a 2nd section due to open in 2011 with 875 slots and twenty desk games. The condition has extended the software approach for the other three zones until April, 2009.

Kentucky
There is still a lot of ‘jockeying’ going on, but the prospect of as many as 8 slot parlors and racinos appears to be back on the front-burner, but probably not solved during the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most modern being the 390 space M Resort in Henderson. There are expansions underway at the two Caesars Palace and Hard Rock and new resorts consist of two parts of the Metropolis Center venture, and the Fountainebleau.

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

Maine
There is a monthly bill below consideration that could more than double Penn National’s slot equipment to three,000, as nicely as a proposal that would eliminate the restriction that slots be found inside of 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing neighborhood people to allow slots, might be taking into consideration moving to a more hospitable city.

Maryland
A referendum was approved in November, 2008 that enables for the development of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intensive as the point out experienced expected.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has operate into a variety of funding concerns and whilst the lodge portion is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back somewhat, is still on observe to open this year.

New England
Massachusetts, a sleeping-big in conditions of marketplace prospective, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to muster the political help. A recent examine accomplished by Dartmouth University estimates that Massachusetts resident invested far more than $920 million final 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an choice to produce casinos, however the subject is very likely to be revisited, particularly if Massachusetts decides to go forward. There are also tries in Maine to rethink its alternatives.

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 proceed augmenting purses with an added tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing software which ironically, can only be preserved by making it possible for the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s four,500 VLT facility would finally be developed, the successful bidder indicated an incapacity to make the needed $370 million charge, citing the existing lending weather, and throwing the undertaking back again into the lap of the governor. Even though the marketplace demand in the area could be regarded very powerful, the prospect of additional competition from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, specifically thinking about that somewhat much less than 30% of the net get is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort sophisticated are getting reconsidered maybe owing to equally the possible opening of at the very least one or maybe two racino operations in the NY metro spot, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
Yet an additional gaming proposal is becoming put forth in Ohio, soon after final year’s variation was turned down by the voters. This prepare calls for one casino each in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure required of $250 million, as well as an preliminary licensing fee of $fifty million, and a 33 per cent tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers task in Pittsburgh is envisioned to be operational in August, ’09 while Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are anticipated to start development this yr.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and consist of 300 online games, 140 rooms and a broad assortment of amenities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to let casino gambling in selected locations, as properly as permit 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 personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer you. State govt has proffered the idea of making it possible for the resort to supply on line casino game titles, but this energy is in way too early a stage to have any traction one particular way or one more.

Indian Gaming
A current Supreme Courtroom ruling that restricts the having of lands into have faith in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming initiatives across the country. Furthermore, there were eleven Indian on line casino initiatives turned down by the DOI very last calendar year since of its new rule that casinos need to be around ample to a reservation that tribal associates can perform at them. It has been recommended that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming projects, but this issue has nevertheless to be tackled.

Meanwhile, there are other Class III tasks in the various phases of improvement. The Seneca on line casino undertaking in Buffalo, NY, although running a little temporary facility, has delayed an currently underneath design long lasting facility till the market place rebounds. They have also expressed an interest in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could impact their programs for bigger assignments. There are new Indian gaming assignments set to open in Michigan and Oklahoma this calendar year, and other folks are in the planning phase. Texas may permit the reopening of Indian gaming services and permit other venue and there are programs afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming earnings in Atlantic City has declined seven.six %, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining itself in an powerful comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, exactly where it seemed as if it may possibly actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually nevertheless its market place share was being encroached upon, very first by the advancement of a large Class III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening close to Atlantic City’s long term prospective customers. It is reliance on working day-trippers lulled it into a fake perception of security, and it now finds alone obtaining to redefine its mission statement to “vacation spot vacation resort.”

The only problem with this method nevertheless is that it is sick-geared up to pull it off. For all intents and functions, Atlantic Metropolis is underneath-roomed and/or in excess of-gamed. There is basically not sufficient day-tripper industry to go around, and their efficient investing area is tightening, as the peripheral populations northward now/will have far more ready obtain to a widened supply in New York (Yonkers, and soon at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only real competitive benefits are its lodge potential and the availability of table video games, though the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In get to sufficiently compete as a destination vacation resort the metropolis wants to create extra guest rooms and not always gaming ability. By comparison, the Las Vegas Strip properties – real gaming places, in that they do not have considerably of a working day-trip industry, other than for the ‘locals’ – have an average of .87 gaming positions for each guest area while Atlantic City’s common is two.74 positions for each guest place.

It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, were the the very least impacted by the latest downturn. The Borgata knowledgeable a gaming profits drop of one.6 %, although Harrah’s Marina described a 4.9 p.c enhance compared to 2007. Furthermore, the hardest strike 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 properties and Resorts with the hoped for sale of the Tropicana has been even more delayed, and dropping valuation.

With a constant increase in gaming revenues through 2006, the metropolis seemed prime for additional advancement, which precipitated planning for four new resort tasks, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion task continues to be an iron skeleton, Pinnacle Amusement has announced it may seek out to market 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.