Countrywide Professional Gambling casino & Racino Game playing Income Investigation

A Time period of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been growing more than the several years, little by little getting rid of air. But, it has not been a tide that decreased all ships nevertheless, as some rising and growing gaming jurisdictions showed powerful development in 2008.

General, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.five % 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 drop, as they showed a gain of nearly $one billion in 2008, thereby bringing the Commercial sector market place drop to $one.8 billion, or 6.7 percent. Nevada was the biggest loser in 2008, dropping virtually $1.3 billion, a lot more than fifty percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most component, on line casino operators had been caught comparatively flat-footed by the extent of the 2008 earnings downturn, as it was not till the 3rd and fourth quarters when it truly nosedived. Driving the crest of calendar year above year market place expansion across the region and the availability of ample credit history and fairness money, new design and expansion proliferated in modern a long time. These days, confronted with the realities of declining, or at ideal stagnant demand, many of these tasks are now regarded as above-leveraged and/or more than-sized. First casino in Bermuda As a end result a lot of gaming companies are trying to renegotiate their financial debt – produced far more tough by lower valuations – although also paring down operational fees. The latter has become a quite problematic conundrum when working with the competition, particularly in individuals jurisdictions that are now vying for industry shares with new rising on line casino tasks in neighboring locations. A subject we discuss a lot more completely in the Point out by Condition analysis part of this publication.

As a end result of these conditions the gaming business landscape is now strewn with impending fatalities. Amid the far more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the listing grows each week.

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

Observe:
This evaluation includes only gaming revenues of licensed casinos and pari-mutuel shops that supply casino online games, and not Indian gaming operations, card rooms, or little non-casino variety slot areas. The total write-up, like income tables is accessible on our internet web page.

Input/Output Design

A key element that seems to have arisen from the ashes of this current pattern is that many on line casino initiatives had been just also big to help on their own. The enter, in phrases of expense dollars, was not proportional to the output, in terms of net revenue following personal debt services, when compared to formerly reached benefits. More and/or bigger is not always greater. Seeing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of a lot more comprehensive amenities in several other jurisdictions. The flaw in this approach even so is that the costs linked with widening market place penetration and occasioned-use, are significantly increased than these incurred to draw in the base market.

As daytripper markets turn out to be much more aggressive, on line casino venues will have to rely a lot more and more on their in-house lodge patrons, and dimensions their properties (and anticipations) appropriately. Whilst Steve Wynn commenced a main craze in generating up-industry mega-destinations, there just was not adequate demand on the Strip to warrant the numerous other similar projects that adopted that aimed at the exact same market.

The trick is to strike a pleased medium in task configurations which of system need considerably less of a ‘seat-of-pants’ approach, and a single that is a lot more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Activities

Although there are no published comprehensive information of American Indian gaming revenues, anecdotal evidence appears to recommend that this segment has been as challenging hit as the Business sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, representing a drop of about 7 %, or nearly $114 million, much more than doubling the three.five % fall from the yr prior to. This market place is evidently still reeling from the ripple-impact of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming studies that contributions dependent on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the previous yr lowering .eight per cent in the first quarter, 7.five p.c in the next quarter, nine.five per cent in the 3rd quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reviews that whilst calendar year 2008 confirmed an practically two per cent expansion price in gaming revenues, there was an eight.7 per cent drop in the 3rd quarter and an nearly ten p.c decline in the fourth quarter of 2008, compared with 2007. Gaming income developments at nearby Niagara Falls, Ontario were down one.5% in 2008 in comparison with 2007.

It really is been a combined-bag for condition lotteries across the nation. The North American Association of Condition & Provincial Lotteries stories that U.S. lotteries created a total of $sixty.six billion in sales in fiscal 2008, up about three % from the preceding year however some jurisdictions reported decreases, most notably California, which confirmed an 8 p.c drop. Inasmuch as some of these states are on a variety of fiscal 12 months ends, it would seem that the knowledge does not mirror the effect of third and/or fourth quarter outcomes.

According to info presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven p.c to $13.seven billion in 2008, vs . $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As previously observed, it has been new gaming jurisdictions that have spawned a lot of the progress in annual on line casino/racino revenues over the many years, and their influence is apt to keep on into the near potential.

Florida
Miami Dade voters accredited a ballot problem that permits every single of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Canine Track 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 programs. There are quite a few other proposals getting deemed that would even more grow on line casino improvement during the condition.

Illinois
The point out last but not least got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ sport casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open up till 2010. There has also been some dialogue about permitting an enhance 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 system that makes it possible for for the improvement of four casino gaming zones and slots at existing horse and puppy tracks appears mired, as only 1 facility is presently under building, while 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 casino in Oklahoma, which is positioned so near to the point out line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk online games, together with a 2nd stage because of to open up in 2011 with 875 slots and 20 table video games. The point out has prolonged the software method for the other three zones till April, 2009.

Kentucky
There is nevertheless a great deal of ‘jockeying’ heading on, but the prospect of as a lot of as eight slot parlors and racinos appears to be back again on the entrance-burner, but most likely not solved in the course of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most latest becoming the 390 space M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Hard Rock and new resorts incorporate two parts of the Metropolis Centre venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino improvement initiatives in Baton Rouge and Lake Charles, even though delayed, are documented to nevertheless be on-monitor for opening this calendar year and/or early 2010.

Maine
There is a invoice under consideration that could more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would eliminate the restriction that slots be situated within five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local people to permit slots, might be taking into consideration 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 whole of 15,000 slots, and now the bidding war is afoot even though it is not as intensive as the state had predicted.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has run into different financing issues and while the hotel part is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled again relatively, is nevertheless on keep track of to open up this 12 months.

New England
Massachusetts, a sleeping-huge in terms of market prospective, is still maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to be to muster the political support. A current research finished by Dartmouth College estimates that Massachusetts resident put in much more than $920 million final year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to produce casinos, however the topic is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also tries 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 lately agreeing to proceed augmenting purses with an further tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would finally be designed, the successful bidder indicated an incapacity to make the essential $370 million payment, citing the present lending local weather, and throwing the undertaking back again into the lap of the governor. Though the marketplace demand in the location could be deemed very sturdy, the prospect of additional competitiveness from close by Belmont could have an effect on Aqueduct’s underlining economic feasibility, specifically thinking about that slightly considerably less than thirty% of the web win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered probably owing to each the possible opening of at minimum a single or maybe two racino operations in the NY metro location, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
Yet an additional gaming proposal is being set forth in Ohio, soon after last year’s model was turned down by the voters. This prepare phone calls for a single casino each and every in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision necessary of $250 million, as properly as an preliminary licensing payment of $fifty million, and a 33 % tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are expected to begin building this year.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and consist of 300 games, one hundred forty rooms and a vast assortment of features.

Texas
Legislators are proposing a voter referendum that would amend the state constitution to permit casino gambling in specified places, as properly 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 submitted for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Condition federal government has proffered the idea of permitting the resort to provide casino online games, but this energy is in way too early a phase to have any traction 1 way or one more.

Indian Gaming
A current Supreme Courtroom ruling that restricts the taking of lands into have confidence in on behalf of federally acknowledged American Indian tribes has more stymied some new Course III gaming tasks across the place. Furthermore, there had been eleven Indian casino projects turned down by the DOI previous yr simply because of its new rule that casinos should be near adequate to a reservation that tribal users can function at them. It has been suggested that the new Obama administration may well be far more sympathetic to the improvement of Indian gaming initiatives, but this situation has nevertheless to be addressed.

Meanwhile, there are other Class III tasks in the various levels of improvement. The Seneca on line casino undertaking in Buffalo, NY, whilst working a tiny temporary facility, has delayed an already underneath design long lasting facility right up until the marketplace rebounds. They have also expressed an curiosity in developing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could influence their strategies for more substantial assignments. There are new Indian gaming projects established to open up in Michigan and Oklahoma this yr, and other people are in the arranging stage. Texas might allow the reopening of Indian gaming facilities and enable other venue and there are ideas afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to 3 new Class III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming income in Atlantic Metropolis has declined 7.6 per cent, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is discovering by itself in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast were positioned in Atlantic City, where it appeared as if it may possibly actually even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually nonetheless its market share was currently being encroached on, very first by the advancement of a massive Course III gaming operation in Connecticut, and then one more slots operations in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with the prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening all around Atlantic City’s foreseeable future prospective customers. It’s reliance on working day-trippers lulled it into a bogus feeling of protection, and it now finds itself possessing to redefine its mission assertion to “vacation spot resort.”

The only problem with this approach even so is that it is unwell-outfitted to pull it off. For all intents and purposes, Atlantic Town is below-roomed and/or in excess of-gamed. There is just not ample working day-tripper market to go close to, and their powerful investing spot is tightening, as the peripheral populations northward now/will have a lot more prepared access to a widened offer in New York (Yonkers, and quickly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only true aggressive benefits are its lodge potential and the availability of table online games, despite the fact that the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In order to adequately contend as a vacation spot vacation resort the metropolis needs to develop added visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip properties – true gaming destinations, in that they do not have considerably of a working day-excursion market place, except for the ‘locals’ – have an typical of .87 gaming positions for each visitor space while Atlantic City’s common is 2.seventy four positions per guest area.

It is not a coincidence that Atlantic City’s two premier resorts, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, have been the least impacted by the latest downturn. The Borgata knowledgeable a gaming income drop of one.six %, although Harrah’s Marina reported a 4.nine p.c improve when compared to 2007. Moreover, the toughest hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, such as the the Trump houses and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.

With a constant increase in gaming revenues by way of 2006, the town seemed key for more advancement, which precipitated preparing for four new resort assignments, every of which have now been indefinitely delayed. Revel Leisure Group’s $2.five billion project remains an iron skeleton, Pinnacle Enjoyment has declared it may possibly seek out to sell its razed Sands web site, MGM Mirage has shelved its casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Field airport site.