Nationwide Commercial Internet casino & Racino Gaming Earnings Examination

A Time period of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been expanding over the several years, gradually dropping air. But, it has not been a tide that lowered all ships however, as some rising and growing gaming jurisdictions showed powerful expansion in 2008.

General, the industrial and racetrack casino sectors (excluding Indian gaming), skilled a three.five percent drop in gaming revenues for 2008, creating a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of virtually $1 billion in 2008, thereby bringing the Commercial sector marketplace decrease to $one.eight billion, or six.7 %. Nevada was the most significant loser in 2008, dropping practically $1.3 billion, far more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators had been caught fairly 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 in excess of yr industry progress across the nation and the availability of sufficient credit score and equity cash, new construction and growth proliferated in modern a long time. Today, confronted with the realities of declining, or at greatest stagnant demand, a lot of of these projects are now considered over-leveraged and/or more than-sized. As a result numerous gaming organizations are making an attempt to renegotiate their debt – manufactured a lot more challenging by lower valuations – while also paring down operational charges. The latter has become a quite problematic conundrum when dealing with the competitiveness, particularly in those jurisdictions that are now vying for market shares with new emerging casino initiatives in neighboring regions. A matter we discuss much more fully in the Point out by State investigation section of this publication.

As a result of these problems the gaming industry landscape is now strewn with impending fatalities. Among the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows each and every week.

“How lengthy will these financial situations persist, and are we at the bottom nevertheless?” are inquiries no a single appears to be answering nevertheless. What is very clear however is that most gaming jurisdictions will have to understand how to offer with a more compact pie.

This examination consists of only gaming revenues of accredited casinos and pari-mutuel outlets that offer you on line casino games, and not Indian gaming operations, card rooms, or tiny non-casino kind slot places. The whole article, like income tables is offered on our internet web page.

Input/Output Design

A key facet that looks to have arisen from the ashes of this current trend is that numerous on line casino tasks had been just as well huge to assist themselves. The enter, in conditions of expenditure pounds, was not proportional to the output, in conditions of internet revenue soon after credit card debt service, compared to previously attained benefits. A lot more and/or larger is not usually better. Observing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of much more extensive features in a lot of other jurisdictions. The flaw in this approach however is that the expenses related with widening market place penetration and occasioned-use, are substantially higher than those incurred to appeal to the base market place.

As daytripper marketplaces become more aggressive, casino venues will have to rely much more and far more on their in-property resort patrons, and dimension their houses (and expectations) accordingly. While Steve Wynn started a major trend in generating up-industry mega-locations, there basically was not adequate demand from customers on the Strip to warrant the a lot of other related projects that adopted that aimed at the exact same market.

The trick is to strike a pleased medium in project configurations which of course demand much less of a ‘seat-of-pants’ method, and 1 that is a lot more researched. A shameless plug for development consultants like ourselves.

Other Gaming Pursuits

Even though there are no printed thorough information of American Indian gaming revenues, anecdotal evidence seems to suggest that this phase has been as difficult strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, representing a fall of about seven per cent, or nearly $114 million, more than doubling the three.five per cent drop from the calendar year ahead of. This industry is apparently nevertheless reeling from the ripple-impact 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 reviews that contributions based mostly on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the prior 12 months reducing .eight per cent in the very first quarter, 7.five percent in the next quarter, 9.5 percent in the 3rd quarter, and per cent in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that while calendar 12 months 2008 confirmed an virtually 2 per cent progress fee in gaming revenues, there was an % drop in the third quarter and an nearly ten percent decrease in the fourth quarter of 2008, compared with 2007. Gaming profits trends at nearby Niagara Falls, Ontario were down one.five% in 2008 in comparison with 2007.

It truly is been a mixed-bag for state lotteries throughout the place. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries created a whole of $sixty.six billion in sales in fiscal 2008, up about three p.c from the earlier 12 months but some jurisdictions noted decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on different fiscal calendar year finishes, it would look that the data does not replicate the impact of third and/or fourth quarter results.

According to data presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 percent to $13.7 billion in 2008, compared to $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned considerably of the progress in once-a-year on line casino/racino revenues over the a long time, and their influence is apt to continue into the around potential.

pro-edelstar authorized a ballot issue that allows every of three pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Dog Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has however to declared its ideas. There are quite a few other proposals becoming considered that would even more grow on line casino advancement throughout the point out.

The condition ultimately acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ sport casino found in Des Plaines just east of O’Hare. The new facility is not likely to open until finally 2010. There has also been some dialogue about allowing an enhance in for each area gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

The state’s expanded lottery program that enables for the growth of 4 on line casino gaming zones and slots at current horse and canine tracks seems mired, as only 1 facility is presently beneath design, although 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 situated so shut to the point out line that its parking great deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table game titles, alongside with a second phase thanks to open up in 2011 with 875 slots and 20 desk online games. The condition has prolonged the application process for the other a few zones until finally April, 2009.

There is nevertheless a whole lot of ‘jockeying’ going on, but the prospect of as numerous as eight slot parlors and racinos appears to be again on the entrance-burner, but likely not fixed for the duration of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most recent currently being the 390 space M Resort in Henderson. There are expansions underway at both Caesars Palace and Hard Rock and new accommodations contain two factors of the Town Heart undertaking, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino advancement tasks in Baton Rouge and Lake Charles, whilst delayed, are described to still be on-keep track of for opening this calendar year and/or early 2010.

There is a invoice underneath thing to consider that could more than double Penn National’s slot machines to three,000, as properly as a proposal that would take away the restriction that slots be found inside 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local residents to allow slots, could be contemplating transferring to a a lot more hospitable city.

A referendum was approved in November, 2008 that allows for the improvement of 5 casinos with a complete of fifteen,000 slots, and now the bidding war is afoot even though it is not as extreme as the condition experienced anticipated.

Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has run into various financing concerns and even though the lodge portion is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back fairly, is still on keep track of to open up this year.

New England
Massachusetts, a sleeping-huge in conditions of market possible, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not appear to muster the political help. A latest review accomplished by Dartmouth College estimates that Massachusetts resident put in a lot more than $920 million previous calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to produce casinos, even so the matter is very likely to be revisited, specially if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by not too long ago agreeing to carry on augmenting purses with an added tax. The governor even so, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot machines particularly at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it seemed as if Aqueduct’s four,500 VLT facility would lastly be created, the winning bidder indicated an inability to make the necessary $370 million payment, citing the existing lending local weather, and throwing the undertaking back into the lap of the governor. Though the marketplace need in the region could be deemed really sturdy, the prospect of extra competitiveness from close by Belmont could have an effect on Aqueduct’s underlining economic feasibility, specially thinking about that slightly considerably less than thirty% of the internet acquire is retained by the operator.

Plans to relocate Monticello Raceway into a resort intricate are getting reconsidered possibly owing to each the probable opening of at least 1 or possibly two racino operations in the NY metro spot, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Yet another gaming proposal is getting set forth in Ohio, after very last year’s variation was turned down by the voters. This prepare phone calls for one particular on line casino each in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense required of $250 million, as nicely as an first licensing payment of $fifty million, and a 33 p.c tax on gaming revenue.

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 whilst Philadelphia’s two slot services still wallow in a political mire, but are anticipated to start construction this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and consist of 300 video games, 140 rooms and a wide range of facilities.

Legislators are proposing a voter referendum that would amend the condition constitution to enable on line casino gambling in selected regions, as effectively as allow gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer. State government has proffered the idea of permitting the vacation resort to supply on line casino online games, but this work is in way too early a phase to have any traction one particular way or another.

Indian Gaming
A modern Supreme Court docket ruling that restricts the using of lands into believe in on behalf of federally identified American Indian tribes has more stymied some new Class III gaming assignments throughout the place. Additionally, there ended up eleven Indian casino tasks turned down by the DOI final 12 months since of its new rule that casinos need to be close to adequate to a reservation that tribal users can work at them. It has been recommended that the new Obama administration may well be more sympathetic to the advancement of Indian gaming projects, but this problem has however to be tackled.

In the meantime, there are other Class III projects in the a variety of phases of advancement. The Seneca on line casino venture in Buffalo, NY, while working a little short-term facility, has delayed an previously below construction long term facility until the market place rebounds. They have also expressed an fascination in establishing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could impact their plans for greater initiatives. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this yr, and other people are in the organizing phase. Texas may possibly allow the reopening of Indian gaming amenities and allow other location and there are plans afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to three new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming revenue in Atlantic Metropolis has declined seven.6 percent, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining alone in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast were positioned in Atlantic City, the place it seemed as if it may possibly really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually nevertheless its industry share was being encroached on, initial by the improvement of a big Course III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening all around Atlantic City’s foreseeable future prospective customers. It’s reliance on day-trippers lulled it into a false sense of security, and it now finds alone having to redefine its mission statement to “vacation spot vacation resort.”

The only difficulty with this method however is that it is unwell-outfitted to pull it off. For all intents and reasons, Atlantic Town is under-roomed and/or over-gamed. There is just not sufficient day-tripper market to go around, and their powerful buying and selling spot is tightening, as the peripheral populations northward now/will have far more all set accessibility 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 access, the city’s only real competitive advantages are its hotel capability and the availability of desk games, though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In get to sufficiently compete as a spot resort the metropolis needs to produce extra guest rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip homes – true gaming places, in that they do not have a lot of a working day-trip industry, apart from for the ‘locals’ – have an regular of .87 gaming positions per guest room although Atlantic City’s typical is two.seventy four positions per guest room.

It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, were the minimum impacted by the newest downturn. The Borgata seasoned a gaming earnings drop of one.six p.c, although Harrah’s Marina documented a four.9 p.c improve when compared to 2007. Additionally, the hardest strike 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 homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.

With a steady rise in gaming revenues by means of 2006, the city appeared key for more growth, which precipitated organizing for 4 new resort assignments, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion project stays an iron skeleton, Pinnacle Entertainment has announced it may well seek out to promote its razed Sands website, MGM Mirage has shelved its on line casino plans, and Penn Nationwide seems to have stopped its pursuit of the Bader Area airport site.

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