Nationwide Professional Casino & Racino Gaming Revenue Investigation

A Period of Adjustment

Oops! That giant hissing audio is the gaming balloon that had been growing over the several years, little by little dropping air. But, it has not been a tide that reduced all ships nonetheless, as some emerging and expanding gaming jurisdictions confirmed sturdy growth in 2008.

Total, the business and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.5 p.c drop in gaming revenues for 2008, generating a total 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 nearly $one billion in 2008, thereby bringing the Industrial sector market drop to $1.eight billion, or six.7 p.c. Nevada was the greatest loser in 2008, dropping nearly $one.three billion, more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most portion, casino operators had been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not until the 3rd and fourth quarters when it actually nosedived. Driving the crest of year above yr market place progress throughout the nation and the availability of ample credit rating and equity funds, new building and expansion proliferated in recent several years. These days, faced with the realities of declining, or at best stagnant need, a lot of of these initiatives are now deemed more than-leveraged and/or above-sized. As a result several gaming businesses are trying to renegotiate their debt – made more challenging by reduced valuations – whilst also paring down operational expenses. The latter has turn out to be a really problematic conundrum when dealing with the opposition, particularly in those jurisdictions that are now vying for market place shares with new rising casino projects in neighboring areas. A subject we talk about far more totally in the Point out by Point out investigation part of this publication.

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

“How long will these economic situations persist, and are we at the base yet?” are queries no one appears to be answering yet. What is obvious even so is that most gaming jurisdictions will have to find out how to offer with a more compact pie.

Note:
This examination involves only gaming revenues of accredited casinos and pari-mutuel stores that supply on line casino games, and not Indian gaming functions, card rooms, or small non-casino kind slot areas. The entire write-up, which includes earnings tables is available on our internet website page.

Enter/Output Model

A essential factor that looks to have arisen from the ashes of this current craze is that many on line casino tasks have been just way too large to assist by themselves. The enter, in conditions of investment decision pounds, was not proportional to the output, in terms of internet revenue right after personal debt provider, in contrast to beforehand reached benefits. More and/or greater is not always greater. Observing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of more extensive amenities in several other jurisdictions. The flaw in this approach nonetheless is that the charges associated with widening market place penetration and occasioned-use, are considerably higher than these incurred to draw in the foundation industry.

As daytripper markets grow to be a lot more competitive, casino venues will have to depend much more and much more on their in-residence resort patrons, and dimension their houses (and anticipations) accordingly. Even though Steve Wynn commenced a significant development in making up-market mega-places, there simply was not sufficient demand from customers on the Strip to warrant the a lot of other comparable assignments that adopted that aimed at the exact same area of interest.

The trick is to strike a happy medium in undertaking configurations which of program call for less of a ‘seat-of-pants’ strategy, and 1 that is much more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Pursuits

Even though there are no released comprehensive data of American Indian gaming revenues, anecdotal proof appears to advise that this section has been as difficult strike as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a fall of about 7 p.c, or practically $114 million, more than doubling the 3.5 % fall from the year before. This industry is apparently nevertheless reeling from the ripple-result of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions based on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the preceding yr decreasing .8 per cent in the first quarter, 7.five percent in the 2nd quarter, nine.five per cent in the third quarter, and 16.one p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reports that even though calendar yr 2008 confirmed an virtually 2 percent progress fee in gaming revenues, there was an 8.seven per cent decline in the 3rd quarter and an practically ten % drop in the fourth quarter of 2008, in comparison with 2007. Gaming profits developments at nearby Niagara Falls, Ontario have been down 1.five% in 2008 in comparison with 2007.

It’s been a blended-bag for point out lotteries throughout the place. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries generated a complete of $60.six billion in revenue in fiscal 2008, up about three p.c from the previous year however some jurisdictions noted decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on a variety of fiscal 12 months finishes, it would appear that the knowledge does not mirror the affect of third and/or fourth quarter results.

In accordance to info supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven percent to $thirteen.7 billion in 2008, as opposed to $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As beforehand mentioned, it has been new gaming jurisdictions that have spawned much of the expansion in yearly on line casino/racino revenues more than the a long time, and their affect is apt to keep on into the near future.

Florida
Miami Dade voters accepted a ballot situation that makes it possible for every single of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Dog Observe and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has but to declared its strategies. There are quite a few other proposals being regarded as that would additional expand casino growth through the state.

Illinois
The condition ultimately acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ game on line casino positioned 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 dialogue about making it possible for an increase in per place gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery system that enables for the advancement of 4 casino gaming zones and slots at current horse and canine tracks appears mired, as only one facility is presently underneath building, although a few other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is positioned so close to the state line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk online games, together with a second stage due to open up in 2011 with 875 slots and 20 table online games. The state has prolonged the software approach for the other 3 zones until April, 2009.

Kentucky
There is nevertheless a good deal of ‘jockeying’ heading on, but the prospect of as a lot of as 8 slot parlors and racinos appears to be back again on the entrance-burner, but probably not settled for the duration of the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most modern becoming the 390 room M Resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new hotels contain two parts of the Town Heart undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino advancement tasks in Baton Rouge and Lake Charles, although delayed, are documented to nonetheless be on-track for opening this yr and/or early 2010.

Maine
There is a invoice underneath thought that could much 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 in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing nearby residents to let slots, might be contemplating shifting to a more hospitable city.

Maryland
A referendum was authorized in November, 2008 that enables for the growth of five casinos with a whole of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the condition had anticipated.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has run into numerous funding problems and although the resort portion is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled again relatively, is even now on monitor to open this 12 months.

New England
Massachusetts, a sleeping-giant in conditions of marketplace potential, 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 support. A modern study accomplished by Dartmouth College estimates that Massachusetts resident expended much more than $920 million very last year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to create casinos, even so the subject matter is most likely to be revisited, specially if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its choices.

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 added tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by making it possible for the tracks to have slot devices specifically at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would finally be developed, the profitable bidder indicated an incapability to make the necessary $370 million charge, citing the present lending local weather, and throwing the venture back into the lap of the governor. Though the market place demand from customers in the location could be regarded quite powerful, the prospect of further competitors from nearby Belmont could have an impact on Aqueduct’s underlining financial feasibility, specially considering that marginally significantly less than thirty% of the internet get is retained by the operator.

Programs to relocate Monticello Raceway into a resort complicated are becoming reconsidered maybe owing to the two the possible opening of at least one particular or possibly two racino operations in the NY metro location, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Ohio
However yet another gaming proposal is being put forth in Ohio, following final year’s variation was turned down by the voters. This program calls for one particular casino each in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment decision essential of $250 million, as properly as an initial licensing fee of $fifty million, and a 33 p.c tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot services still wallow in a political mire, but are predicted to start development this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and incorporate three hundred games, a hundred and forty rooms and a wide variety of amenities.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an provide. Point out govt has proffered the notion of enabling the vacation resort to offer casino game titles, but this hard work is in as well early a phase to have any traction one way or an additional.

Indian Gaming
A modern Supreme Court docket ruling that restricts the taking of lands into trust on behalf of federally acknowledged American Indian tribes has further stymied some new Course III gaming initiatives throughout the region. In addition, there had been eleven Indian on line casino assignments rejected by the DOI final year because of its new rule that casinos need to be near sufficient to a reservation that tribal users can operate at them. ดูหนัง has been suggested that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming projects, but this issue has but to be tackled.

Meanwhile, there are other Course III initiatives in the a variety of phases of development. The Seneca casino task in Buffalo, NY, although working a tiny short-term facility, has delayed an previously underneath design long term facility till the market place rebounds. They have also expressed an curiosity in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could impact their programs for greater assignments. There are new Indian gaming assignments established to open in Michigan and Oklahoma this calendar year, and other people are in the planning phase. Texas might permit the reopening of Indian gaming services and allow other venue and there are strategies 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

Whole gaming profits in Atlantic Metropolis has declined seven.six %, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is locating alone in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been located in Atlantic Metropolis, exactly where it looked as if it might actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually nonetheless its marketplace share was becoming encroached upon, initial by the growth of a huge Course III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most 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 operations in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future potential customers. It’s reliance on day-trippers lulled it into a untrue feeling of stability, and it now finds by itself obtaining to redefine its mission assertion to “location vacation resort.”

The only difficulty with this method however is that it is unwell-geared up to pull it off. For all intents and purposes, Atlantic City is under-roomed and/or more than-gamed. There is merely not enough day-tripper industry to go all around, and their effective buying and selling region is tightening, as the peripheral populations northward now/will have much more all set entry to a widened offer in New York (Yonkers, and shortly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only genuine aggressive rewards are its resort capacity and the availability of desk games, though the latter is likely to eventuate in Pennsylvania, and perhaps Delaware. In order to adequately contend as a location resort the city needs to create additional guest rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip qualities – accurate gaming locations, in that they do not have much of a working day-excursion marketplace, apart from for the ‘locals’ – have an typical of .87 gaming positions per visitor place although Atlantic City’s typical is 2.74 positions per guest space.

It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, ended up the the very least impacted by the most recent downturn. The Borgata skilled a gaming profits drop of 1.six percent, whilst Harrah’s Marina reported a 4.9 percent enhance in comparison to 2007. Additionally, the toughest strike venues, particularly 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 properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a steady increase in gaming revenues through 2006, the town seemed prime for further development, which precipitated arranging for 4 new vacation resort tasks, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion undertaking stays an iron skeleton, Pinnacle Enjoyment has announced it may possibly find to offer its razed Sands site, MGM Mirage has shelved its on line casino plans, and Penn Countrywide appears to have stopped its pursuit of the Bader Field airport web site.