Nationwide Business Online casino plus Racino Game Revenue Examination

A Period of time of Adjustment

Oops! That giant hissing sound is the gaming balloon that experienced been increasing in excess of the a long time, little by little losing air. But, it has not been a tide that reduced all ships nevertheless, as some emerging and expanding gaming jurisdictions confirmed sturdy expansion in 2008.

General, the industrial and racetrack casino sectors (excluding Indian gaming), experienced a three.five % decline 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 fall, as they confirmed a obtain of almost $one billion in 2008, thus bringing the Commercial sector market place decline to $1.8 billion, or 6.seven %. Nevada was the biggest loser in 2008, dropping nearly $1.three billion, far more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, on line casino operators ended up caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not until the third and fourth quarters when it actually nosedived. Driving the crest of 12 months in excess of 12 months industry development throughout the nation and the availability of enough credit history and equity resources, new building and enlargement proliferated in current many years. Nowadays, confronted with the realities of declining, or at greatest stagnant demand, a lot of of these projects are now regarded in excess of-leveraged and/or above-sized. As a end result a lot of gaming firms are attempting to renegotiate their personal debt – created far more difficult by reduce valuations – although also paring down operational expenses. The latter has turn out to be a really problematic conundrum when dealing with the opposition, especially in individuals jurisdictions that are now vying for marketplace shares with new rising casino projects in neighboring places. A topic we discuss a lot more fully in the Point out by Point out analysis section of this publication.

As a result of these circumstances the gaming business landscape is now strewn with impending fatalities. Amongst the much more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows each 7 days.

“How lengthy will these economic conditions persist, and are we at the bottom yet?” are queries no 1 appears to be answering but. What is clear nevertheless is that most gaming jurisdictions will have to understand how to deal with a more compact pie.

Observe:
This analysis contains only gaming revenues of certified casinos and pari-mutuel outlets that supply on line casino video games, and not Indian gaming functions, card rooms, or tiny non-casino type slot places. The total post, which includes income tables is available on our net web page.

Input/Output Design

A important factor that looks to have arisen from the ashes of this current pattern is that numerous casino projects had been just as well massive to support them selves. The input, in terms of expenditure dollars, was not proportional to the output, in phrases of internet profit soon after financial debt support, when compared to previously reached benefits. Far more and/or bigger is not constantly far better. Looking at the increase in non-gaming revenue 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 method nonetheless is that the fees associated with widening industry penetration and occasioned-use, are substantially larger than those incurred to draw in the foundation industry.

As daytripper marketplaces turn into much more competitive, casino venues will have to count much more and a lot more on their in-home resort patrons, and size their homes (and anticipations) accordingly. Whilst Steve Wynn started a significant development in creating up-marketplace mega-locations, there merely was not ample desire on the Strip to warrant the numerous other related initiatives that adopted that aimed at the identical market.

The trick is to strike a satisfied medium in project configurations which of system need less of a ‘seat-of-pants’ strategy, and one particular that is far more examined. A shameless plug for improvement consultants like ourselves.

Other Gaming Routines

Although there are no revealed detailed data of American Indian gaming revenues, anecdotal proof appears 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 drop of about seven per cent, or almost $114 million, more than doubling the 3.five % fall from the year prior to. This market place is evidently nevertheless reeling from the ripple-impact of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions based mostly on a gaming income method from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 compared to the earlier calendar year lowering .8 percent in the very first quarter, 7.5 p.c in the 2nd quarter, 9.five per cent in the third quarter, and sixteen.1 % in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, stories that even though calendar year 2008 showed an nearly 2 percent growth price in gaming revenues, there was an eight.seven per cent decrease in the 3rd quarter and an almost ten per cent decrease in the fourth quarter of 2008, compared with 2007. Gaming income traits at nearby Niagara Falls, Ontario were down 1.5% in 2008 in comparison with 2007.

It’s been a combined-bag for point out lotteries throughout the nation. The North American Affiliation of Condition & Provincial Lotteries reports that U.S. lotteries generated a whole of $60.six billion in sales in fiscal 2008, up about 3 % from the earlier yr nevertheless some jurisdictions noted decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on various fiscal year finishes, it would seem to be that the knowledge does not reflect the impact of 3rd and/or fourth quarter results.

According to info offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven per cent to $13.seven billion in 2008, compared to $14.seven billion in 2007.

Planned & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned significantly of the progress in once-a-year on line casino/racino revenues more than the several years, and their affect is apt to keep on into the near future.

Florida
Miami Dade voters accepted a ballot concern that enables each and every of 3 pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has but to declared its ideas. There are many other proposals currently being regarded as that would further broaden casino growth throughout the condition.

Illinois
The condition lastly obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ recreation casino located in Des Plaines just east of O’Hare. The new facility is not probably to open until finally 2010. There has also been some discussion about making it possible for an enhance in for each location gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that enables for the development of four on line casino gaming zones and slots at current horse and dog tracks appears mired, as only one particular facility is presently underneath building, while three other proposals have been rescinded. The only bidder on the Cherokee County deal, 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 good deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten table online games, together with a next period because of to open up in 2011 with 875 slots and twenty table video games. The state has prolonged the software approach for the other 3 zones until April, 2009.

Kentucky
There is still a great deal of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos appears to be again on the entrance-burner, but probably not solved throughout the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most latest getting the 390 area M Resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new accommodations include two factors of the Town Heart task, and the Fountainebleau.

dream casino on line casino growth assignments in Baton Rouge and Lake Charles, even though delayed, are documented to still be on-keep track of for opening this year and/or early 2010.

Maine
There is a invoice underneath consideration that could a lot more than double Penn National’s slot machines to 3,000, as properly as a proposal that would get rid of the restriction that slots be positioned inside of 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional people to let slots, could be taking into consideration moving to a more hospitable town.

Maryland
A referendum was approved in November, 2008 that makes it possible for for the development of five casinos with a total of 15,000 slots, and now the bidding war is afoot though it is not as powerful as the state had predicted.

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has operate into various funding troubles and although the lodge portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled again relatively, is even now on observe to open this 12 months.

New England
Massachusetts, a sleeping-giant in terms of market likely, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to muster the political assist. A latest review accomplished by Dartmouth College estimates that Massachusetts resident spent much more than $920 million final 12 months at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an selection to produce casinos, nonetheless the subject is most likely to be revisited, specifically if Massachusetts decides to go ahead. There are also makes an attempt in Maine to reconsider its alternatives.

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 keep on augmenting purses with an further tax. The governor however, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it looked as if Aqueduct’s four,500 VLT facility would finally be created, the successful bidder indicated an inability to make the required $370 million fee, citing the present lending local weather, and throwing the venture back again into the lap of the governor. Even though the industry demand in the location could be deemed very sturdy, the prospect of extra competitiveness from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, specially thinking about that slightly significantly less than thirty% of the web get is retained by the operator.

Plans to relocate Monticello Raceway into a resort complicated are getting reconsidered probably owing to equally the possible opening of at least one particular or probably two racino operations in the NY metro area, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
But yet another gaming proposal is being set forth in Ohio, soon after very last year’s edition was turned down by the voters. This plan phone calls for one particular casino every single in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure required of $250 million, as properly as an preliminary licensing payment of $fifty million, and a 33 percent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is envisioned to be operational in August, ’09 although Philadelphia’s two slot services nonetheless wallow in a political mire, but are expected to commence building this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and incorporate 300 video games, a hundred and forty rooms and a vast selection of features.

Texas
Legislators are proposing a voter referendum that would amend the state constitution to let on line casino gambling in selected areas, as well as let gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Condition authorities has proffered the idea of permitting the resort to offer casino online games, but this effort is in too early a phase to have any traction one particular way or one more.

Indian Gaming
A current Supreme Court docket ruling that restricts the having of lands into have confidence in on behalf of federally acknowledged American Indian tribes has additional stymied some new Course III gaming assignments across the nation. Additionally, there were eleven Indian casino projects turned down by the DOI last year because of its new rule that casinos need to be around adequate to a reservation that tribal members can function at them. It has been proposed that the new Obama administration may be a lot more sympathetic to the growth of Indian gaming initiatives, but this problem has yet to be resolved.

In the meantime, there are other Class III initiatives in the a variety of levels of advancement. The Seneca on line casino task in Buffalo, NY, although running a little momentary facility, has delayed an currently below design everlasting facility till the industry rebounds. They have also expressed an curiosity in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could impact their plans for bigger initiatives. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this 12 months, and other individuals are in the planning phase. Texas may enable the reopening of Indian gaming services and let other location and there are plans afoot by the Navajos in Arizona to construct added casinos. California is poised to open two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Overall gaming earnings in Atlantic Metropolis has declined seven.6 per cent, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining itself in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up positioned in Atlantic Town, where it appeared as if it might really even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually nevertheless its industry share was being encroached upon, 1st by the advancement of a big Class III gaming operation in Connecticut, and then yet another slots operations in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening all around Atlantic City’s long term potential customers. It truly is reliance on working day-trippers lulled it into a bogus feeling of safety, and it now finds alone getting to redefine its mission statement to “spot vacation resort.”

The only issue with this method even so is that it is unwell-equipped to pull it off. For all intents and functions, Atlantic Town is under-roomed and/or over-gamed. There is basically not enough working day-tripper marketplace to go about, and their effective investing location is tightening, as the peripheral populations northward now/will have far more prepared obtain to a widened provide in New York (Yonkers, and soon at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only genuine aggressive positive aspects are its lodge ability and the availability of table game titles, although the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a location resort the city requirements to produce extra visitor rooms and not automatically gaming potential. By comparison, the Las Vegas Strip houses – accurate gaming destinations, in that they do not have significantly of a day-trip industry, except for the ‘locals’ – have an average of .87 gaming positions per visitor space even though Atlantic City’s typical is 2.74 positions for each guest place.

It is not a coincidence that Atlantic City’s two premier resorts, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, had been the least impacted by the latest downturn. The Borgata skilled a gaming revenue drop of one.6 p.c, even though Harrah’s Marina documented a four.9 p.c improve when compared to 2007. Moreover, 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, such as the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.

With a constant increase in gaming revenues by means of 2006, the city appeared key for more improvement, which precipitated organizing for 4 new resort assignments, every of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion project remains an iron skeleton, Pinnacle Enjoyment has declared it may seek to promote its razed Sands site, MGM Mirage has shelved its on line casino programs, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport site.

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