Nationwide Business Online casino plus Racino Game Revenue Analysis

A Time period of Adjustment

Oops! That large hissing seem is the gaming balloon that had been expanding in excess of the many years, gradually losing air. But, it has not been a tide that lowered all ships however, as some rising and increasing gaming jurisdictions confirmed powerful growth in 2008.

Total, the industrial and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.five p.c decrease in gaming revenues for 2008, producing 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 acquire of almost $one billion in 2008, thus bringing the Business sector market place drop to $one.eight billion, or 6.7 %. Nevada was the most significant loser in 2008, dropping virtually $1.three billion, more than 50 % of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, casino operators ended up caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not until the 3rd and fourth quarters when it actually nosedived. Using the crest of year above calendar year marketplace growth across the region and the availability of sufficient credit history and equity resources, new building and expansion proliferated in modern years. Nowadays, confronted with the realities of declining, or at very best stagnant demand, numerous of these assignments are now deemed more than-leveraged and/or more than-sized. As a end result numerous gaming businesses are making an attempt to renegotiate their debt – produced far more difficult by reduce valuations – while also paring down operational expenses. The latter has turn into a very problematic conundrum when working with the competitiveness, specifically in those jurisdictions that are now vying for market shares with new rising casino assignments in neighboring areas. A topic we go over much more completely in the Condition by Condition analysis segment of this publication.

As a result of these situations the gaming business landscape is now strewn with impending fatalities. Amongst the a lot more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the record grows every single 7 days.

“How long will these financial situations persist, and are we at the bottom nevertheless?” are concerns no 1 appears to be answering nevertheless. What is obvious nevertheless is that most gaming jurisdictions will have to understand how to offer with a smaller pie.

Notice:
This investigation contains only gaming revenues of licensed casinos and pari-mutuel shops that offer casino video games, and not Indian gaming operations, card rooms, or small non-on line casino type slot places. The entire post, like profits tables is offered on our net web page.

Input/Output Design

A important element that would seem to have arisen from the ashes of this current pattern is that several on line casino assignments have been just also huge to assistance them selves. The enter, in conditions of investment pounds, was not proportional to the output, in phrases of web revenue following personal debt support, when compared to previously reached benefits. More and/or greater is not usually greater. Looking at the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of much more thorough facilities in a lot of other jurisdictions. The flaw in this technique nevertheless is that the costs associated with widening market place penetration and occasioned-use, are drastically increased than those incurred to appeal to the foundation market place.

As daytripper markets become far more aggressive, on line casino venues will have to rely much more and far more on their in-property hotel patrons, and size their homes (and anticipations) accordingly. Whilst Steve Wynn commenced a major craze in making up-marketplace mega-destinations, there simply was not sufficient demand from customers on the Strip to warrant the many other similar assignments that followed that aimed at the exact same niche.

The trick is to strike a pleased medium in undertaking configurations which of training course need much less of a ‘seat-of-pants’ strategy, and a single that is more studied. A shameless plug for development consultants like ourselves.

Other Gaming Actions

Although there are no released thorough information of American Indian gaming revenues, anecdotal evidence seems to recommend that this section has been as hard strike as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, symbolizing a drop of about seven p.c, or almost $114 million, far more than doubling the three.five percent fall from the 12 months ahead of. This marketplace is seemingly nonetheless reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming stories that contributions based on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the prior yr reducing .8 % in the initial quarter, seven.5 % in the 2nd quarter, 9.five % in the 3rd quarter, and sixteen.one percent in the fourth quarter.

Some SEC reporting Indian gaming qualities report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that although calendar year 2008 showed an practically 2 % expansion rate in gaming revenues, there was an eight.7 percent decline in the third quarter and an practically ten p.c drop in the fourth quarter of 2008, when compared with 2007. Gaming profits traits at nearby Niagara Falls, Ontario have been down one.five% in 2008 compared with 2007.

It is been a blended-bag for point out lotteries throughout the place. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries created a total of $60.6 billion in sales in fiscal 2008, up about three % from the previous 12 months yet some jurisdictions described decreases, most notably California, which confirmed an 8 p.c fall. Inasmuch as some of these states are on various fiscal year finishes, it would look that the data does not replicate the effect of 3rd and/or fourth quarter final results.

According to knowledge supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 p.c to $13.7 billion in 2008, as opposed to $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As formerly mentioned, it has been new gaming jurisdictions that have spawned considerably of the expansion in once-a-year casino/racino revenues above the several years, and their affect is apt to continue into the around potential.

Florida
Miami Dade voters authorized a ballot situation that enables every single of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has yet to declared its plans. There are several other proposals being regarded that would further broaden on line casino improvement throughout the point out.

Illinois
The state lastly acquired all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ recreation casino located in Des Plaines just east of O’Hare. The new facility is not most likely to open up until 2010. There has also been some discussion about making it possible for an boost in for every spot gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that makes it possible for for the improvement of four on line casino gaming zones and slots at existing horse and dog tracks seems mired, as only one facility is presently under building, even though a few 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 situated so shut to the state line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table games, together with a second stage owing to open in 2011 with 875 slots and 20 desk video games. The point out has prolonged the application process for the other a few zones till April, 2009.

Kentucky
There is even now a great deal of ‘jockeying’ likely on, but the prospect of as numerous as eight slot parlors and racinos appears to be back on the front-burner, but most likely not resolved throughout the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most modern getting the 390 place M Resort in Henderson. There are expansions underway at the two Caesars Palace and Hard Rock and new accommodations consist of two parts of the Town Middle task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino improvement tasks in Baton Rouge and Lake Charles, whilst delayed, are reported to even now be on-keep track of for opening this calendar year and/or early 2010.

Maine
There is a monthly bill beneath consideration that could more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would eliminate the restriction that slots be found in 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to enable slots, may possibly be considering shifting to a much more hospitable town.

Maryland
A referendum was accredited in November, 2008 that permits for the growth of five casinos with a overall of 15,000 slots, and now the bidding war is afoot though it is not as intense as the point out had predicted.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has operate into a variety of funding concerns and although the lodge part is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled again considerably, is still on monitor to open this calendar year.

New England
Massachusetts, a sleeping-huge in conditions of market place possible, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to be to muster the political assist. A modern research completed by Dartmouth College estimates that Massachusetts resident invested much more than $920 million previous calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to develop casinos, nevertheless the subject matter is most likely to be revisited, specially if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by lately agreeing to proceed augmenting purses with an further tax. The governor even so, has appointed a new panel to review the state’s sagging racing software which ironically, can only be preserved by permitting the tracks to have slot machines specially 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 ultimately be created, the successful bidder indicated an incapability to make the required $370 million price, citing the existing lending climate, and throwing the undertaking back again into the lap of the governor. Even though the market place demand from customers in the spot could be deemed fairly strong, the prospect of additional opposition from nearby Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly considering that a bit considerably less than thirty% of the internet get is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort complicated are being reconsidered maybe owing to each the possible opening of at the very least 1 or probably two racino operations in the NY metro area, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Ohio
Nevertheless another gaming proposal is becoming put forth in Ohio, soon after last year’s edition was turned down by the voters. This plan phone calls for one casino every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expense necessary of $250 million, as properly as an preliminary licensing fee of $50 million, and a 33 percent tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers task in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot services even now wallow in a political mire, but are predicted to start off construction this yr.

Indonesia Online Betting at Deadwood is slated to open up in the Slide of 2009, and contain three hundred online games, a hundred and forty rooms and a vast assortment of amenities.

Texas
Legislators are proposing a voter referendum that would amend the state structure to let on line casino gambling in selected locations, as nicely as permit gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer you. Condition federal government has proffered the notion of enabling the resort to supply on line casino game titles, but this energy is in way too early a stage to have any traction a single way or an additional.

Indian Gaming
A current Supreme Court docket ruling that restricts the taking of lands into have confidence in on behalf of federally recognized American Indian tribes has more stymied some new Course III gaming projects across the nation. In addition, there ended up eleven Indian casino tasks turned down by the DOI very last 12 months since of its new rule that casinos must be close to ample to a reservation that tribal associates can operate at them. It has been suggested that the new Obama administration may possibly be far more sympathetic to the development of Indian gaming assignments, but this situation has however to be addressed.

Meanwhile, there are other Course III assignments in the numerous stages of growth. The Seneca on line casino venture in Buffalo, NY, while operating a little short-term facility, has delayed an previously underneath design everlasting facility until finally the marketplace rebounds. They have also expressed an interest in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could influence their plans for bigger projects. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this 12 months, and other folks are in the planning stage. Texas could enable the reopening of Indian gaming amenities and enable other location and there are programs afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to a few new Class III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Town has declined seven.six percent, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is locating alone in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast were located in Atlantic Town, where it looked as if it may well really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually nonetheless its market share was becoming encroached on, initial by the development of a massive Class III gaming operation in Connecticut, and then yet another 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 ultimately two operations in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future prospects. It really is reliance on day-trippers lulled it into a bogus feeling of security, and it now finds alone getting to redefine its mission statement to “location vacation resort.”

The only dilemma with this strategy however is that it is unwell-outfitted to pull it off. For all intents and reasons, Atlantic Metropolis is underneath-roomed and/or above-gamed. There is merely not adequate day-tripper market to go around, and their successful buying and selling region is tightening, as the peripheral populations northward now/will have more ready accessibility to a widened source in New York (Yonkers, and shortly 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 rewards are its lodge potential and the availability of table video games, even though the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In order to adequately contend as a location resort the city needs to build additional visitor rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip qualities – true gaming destinations, in that they do not have considerably of a working day-vacation industry, apart from for the ‘locals’ – have an common of .87 gaming positions for every visitor room even though Atlantic City’s common is two.74 positions for every visitor place.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, were the minimum impacted by the most current downturn. The Borgata experienced a gaming earnings drop of 1.six %, although Harrah’s Marina documented a 4.nine percent improve compared to 2007. Furthermore, 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, which includes the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been more delayed, and losing valuation.

With a steady increase in gaming revenues by way of 2006, the metropolis appeared primary for additional advancement, which precipitated preparing for 4 new vacation resort assignments, every of which have now been indefinitely delayed. Revel Leisure Group’s $2.five billion venture remains an iron skeleton, Pinnacle Leisure has declared it may possibly seek to offer its razed Sands site, MGM Mirage has shelved its casino plans, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport web site.

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