2008 Nationwide Business On line casino & Racino Gaming Profits Investigation

A Period of time of Adjustment

Oops! That huge hissing audio is the gaming balloon that had been growing in excess of the a long time, slowly and gradually dropping air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and expanding gaming jurisdictions showed sturdy progress in 2008.

General, the industrial and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.5 percent decline in gaming revenues for 2008, creating a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a gain of virtually $1 billion in 2008, thereby bringing the Professional sector marketplace decline to $one.eight billion, or 6.seven %. Nevada was the greatest loser in 2008, dropping nearly $1.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, on line casino operators had been caught relatively flat-footed by the extent of the 2008 income downturn, as it was not right up until the third and fourth quarters when it really nosedived. Riding the crest of calendar year over year industry development across the nation and the availability of enough credit and fairness funds, new building and expansion proliferated in current a long time. Today, faced with the realities of declining, or at greatest stagnant desire, several of these projects are now regarded as in excess of-leveraged and/or more than-sized. As a outcome a lot of gaming firms are trying to renegotiate their personal debt – made more tough by decrease valuations – while also paring down operational expenses. The latter has turn out to be a very problematic conundrum when working with the competition, specifically in people jurisdictions that are now vying for market shares with new rising casino initiatives in neighboring locations. A matter we examine much more fully in the Point out by Point out evaluation area of this publication.

As a end result of these circumstances the gaming sector landscape is now strewn with impending fatalities. Amongst the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows every single week.

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

Notice:
This examination includes only gaming revenues of certified casinos and pari-mutuel retailers that provide casino video games, and not Indian gaming operations, card rooms, or tiny non-on line casino type slot places. The entire write-up, like income tables is obtainable on our world wide web webpage.

Enter/Output Design

A key element that looks to have arisen from the ashes of this recent development is that many on line casino projects have been just way too large to support on their own. The input, in phrases of investment decision dollars, was not proportional to the output, in phrases of internet income following debt support, in contrast to formerly attained benefits. Far more and/or greater is not usually better. Seeing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of much more complete amenities in numerous other jurisdictions. The flaw in this method nevertheless is that the expenses related with widening market place penetration and occasioned-use, are drastically higher than those incurred to attract the foundation marketplace.

As daytripper markets become a lot more aggressive, casino venues will have to count a lot more and more on their in-residence hotel patrons, and dimension their houses (and expectations) appropriately. Although Steve Wynn commenced a major craze in creating up-market mega-locations, there just was not adequate need on the Strip to warrant the several other equivalent initiatives that adopted that aimed at the very same specialized niche.

The trick is to strike a pleased medium in task configurations which of course need considerably less of a ‘seat-of-pants’ method, and 1 that is much more analyzed. A shameless plug for growth consultants like ourselves.

Other Gaming Activities

Even though there are no released thorough info of American Indian gaming revenues, anecdotal evidence seems to suggest that this section has been as difficult strike as the Professional sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, representing a fall of about seven percent, or almost $114 million, more than doubling the 3.five percent drop from the yr before. This industry is evidently nevertheless reeling from the ripple-influence of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Division of Gaming stories that contributions dependent on a gaming earnings system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in contrast to the previous yr lowering .8 p.c in the 1st quarter, 7.5 per cent in the 2nd quarter, 9.five per cent in the 3rd quarter, and 16.one per cent in the fourth quarter.

Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that while calendar calendar year 2008 showed an practically two percent growth charge in gaming revenues, there was an eight.seven per cent decline in the 3rd quarter and an practically ten p.c decrease in the fourth quarter of 2008, when compared with 2007. Gaming https://www.milkcasino.com/ at nearby Niagara Falls, Ontario have been down 1.five% in 2008 when compared with 2007.

It is been a mixed-bag for condition lotteries throughout the region. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries produced a total of $60.6 billion in revenue in fiscal 2008, up about 3 p.c from the previous calendar year however some jurisdictions documented decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on different fiscal yr ends, it would look that the info does not mirror the impact of 3rd and/or fourth quarter results.

In accordance to data supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling seven percent to $13.seven billion in 2008, versus $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As beforehand observed, it has been new gaming jurisdictions that have spawned a lot of the progress in annual casino/racino revenues above the a long time, and their influence is apt to carry on into the around potential.

Florida
Miami Dade voters accepted a ballot issue that permits every single of 3 pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has nevertheless to announced its ideas. There are several other proposals getting deemed that would additional grow casino advancement through the point out.

Illinois
The state lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ sport on line casino found 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 discussion about enabling an enhance in per spot gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery software that allows for the development of four casino gaming zones and slots at present horse and pet tracks seems mired, as only one particular facility is presently below development, while three other proposals were rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so shut to the condition line that its parking great deal is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table online games, alongside with a 2nd period due to open in 2011 with 875 slots and 20 table game titles. The state has extended the application approach for the other a few zones right up 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 back again on the entrance-burner, but likely not solved in the course of the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most current becoming the 390 space M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new accommodations contain two components of the Town Centre venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino advancement assignments in Baton Rouge and Lake Charles, whilst delayed, are documented to still be on-monitor for opening this yr and/or early 2010.

Maine
There is a bill below thing to consider that could much more than double Penn National’s slot machines to three,000, as well as a proposal that would eliminate the restriction that slots be positioned in five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to allow slots, could be contemplating moving to a a lot more hospitable city.

Maryland
A referendum was authorized in November, 2008 that permits for the improvement of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot though it is not as intensive as the state had anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into various financing problems and whilst the hotel part is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back again considerably, is nevertheless on observe to open this 12 months.

New England
Massachusetts, a sleeping-huge in conditions of market likely, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but are not able to look to muster the political assistance. A recent research finished by Dartmouth College estimates that Massachusetts resident expended a lot more than $920 million final year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an choice to develop casinos, nevertheless the subject matter is very likely to be revisited, especially if Massachusetts decides to go ahead. 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 equipment at racetracks by recently agreeing to proceed augmenting purses with an additional tax. The governor even so, has appointed a new panel to examine the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot devices specifically at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would last but not least be created, the profitable bidder indicated an lack of ability to make the needed $370 million payment, citing the present lending weather, and throwing the project again into the lap of the governor. Despite the fact that the market place desire in the region could be considered quite powerful, the prospect of further competitiveness from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, particularly taking into consideration that somewhat much less than thirty% of the internet get is retained by the operator.

Strategies to relocate Monticello Raceway into a vacation resort sophisticated are being reconsidered possibly owing to the two the probable opening of at the very least one particular or possibly two racino functions in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
But another gaming proposal is currently being set forth in Ohio, following very last year’s variation was turned down by the voters. This strategy calls for 1 casino every in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure required of $250 million, as effectively as an initial licensing charge of $50 million, and a 33 % tax on gaming income.

Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 while Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are anticipated to start off design this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and consist of three hundred online games, a hundred and forty rooms and a extensive assortment of amenities.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an provide. Point out govt has proffered the idea of permitting the vacation resort to offer casino game titles, but this energy is in as well early a stage to have any traction 1 way or an additional.

Indian Gaming
A recent Supreme Court docket ruling that restricts the having of lands into trust on behalf of federally recognized American Indian tribes has further stymied some new Course III gaming initiatives across the country. In addition, there were eleven Indian on line casino projects rejected by the DOI previous year since of its new rule that casinos must be in close proximity to sufficient to a reservation that tribal users can perform at them. It has been advised that the new Obama administration may be far more sympathetic to the growth of Indian gaming initiatives, but this problem has nevertheless to be resolved.

In the meantime, there are other Class III assignments in the a variety of levels of growth. The Seneca on line casino task in Buffalo, NY, although running a modest short-term facility, has delayed an previously below construction long lasting facility till the market place rebounds. They have also expressed an fascination in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could influence their programs for bigger assignments. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this calendar year, and other people are in the preparing phase. Texas might permit the reopening of Indian gaming facilities and allow other venue and there are plans afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to a few new Course III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming earnings in Atlantic Town has declined 7.6 %, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding by itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been positioned in Atlantic City, the place it looked as if it may in fact even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Gradually nonetheless its market place share was getting encroached upon, very first by the growth of a large Class III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening about Atlantic City’s long term potential clients. It truly is reliance on day-trippers lulled it into a bogus perception of stability, and it now finds alone obtaining to redefine its mission assertion to “vacation spot resort.”

The only problem with this approach nevertheless is that it is sick-equipped to pull it off. For all intents and reasons, Atlantic Metropolis is below-roomed and/or in excess of-gamed. There is just not enough day-tripper market to go about, and their effective buying and selling region is tightening, as the peripheral populations northward now/will have much more all set access to a widened supply 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 true competitive positive aspects are its hotel potential and the availability of desk online games, even though the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In order to adequately compete as a destination resort the city demands to create further guest rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip properties – real gaming locations, in that they do not have much of a working day-trip market place, apart from for the ‘locals’ – have an common of .87 gaming positions for each guest space while Atlantic City’s average is two.seventy four positions per visitor area.

It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, were the the very least impacted by the most recent downturn. The Borgata experienced a gaming profits fall of one.six %, even though Harrah’s Marina documented a four.9 % boost in contrast to 2007. In addition, the hardest strike venues, specifically 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, like the the Trump homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.

With a continual rise in gaming revenues by way of 2006, the town appeared key for additional advancement, which precipitated preparing for 4 new resort tasks, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $2.5 billion venture stays an iron skeleton, Pinnacle Entertainment has announced it might seek out to promote its razed Sands site, MGM Mirage has shelved its casino programs, and Penn National appears to have stopped its pursuit of the Bader Discipline airport web site.

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