2008 Nationwide Industrial On line casino & Racino Gaming Income Analysis

A Period of time of Adjustment

Oops! That large hissing seem is the gaming balloon that had been developing more than the a long time, slowly getting rid of air. But, it has not been a tide that lowered all ships even so, as some emerging and expanding gaming jurisdictions confirmed robust development in 2008.

Total, the commercial and racetrack casino sectors (excluding Indian gaming), experienced a three.5 p.c drop in gaming revenues for 2008, producing a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a acquire of nearly $one billion in 2008, thus bringing the Commercial sector marketplace decrease to $1.8 billion, or six.7 per cent. Nevada was the largest loser in 2008, dropping virtually $one.three billion, a lot more than 50 % of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, casino operators ended up caught comparatively flat-footed by the extent of the 2008 revenue downturn, as it was not until finally the 3rd and fourth quarters when it actually nosedived. Driving the crest of calendar year above year market expansion across the region and the availability of ample credit score and equity money, new building and enlargement proliferated in latest several years. Right now, faced with the realities of declining, or at very best stagnant desire, several of these initiatives are now regarded over-leveraged and/or over-sized. As a outcome numerous gaming organizations are making an attempt to renegotiate their credit card debt – made more challenging by decrease valuations – even though also paring down operational charges. The latter has grow to be a really problematic conundrum when working with the competitors, particularly in people jurisdictions that are now vying for industry shares with new emerging on line casino projects in neighboring regions. A matter we talk about much more completely in the Point out by Condition analysis part of this publication.

As a outcome of these problems the gaming industry landscape is now strewn with impending fatalities. Amongst the more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the listing grows every single 7 days.

“How extended will these financial circumstances persist, and are we at the base yet?” are questions no 1 appears to be answering yet. What is clear nevertheless is that most gaming jurisdictions will have to learn how to deal with a scaled-down pie.

Note:
This analysis includes only gaming revenues of accredited casinos and pari-mutuel shops that offer on line casino online games, and not Indian gaming operations, card rooms, or tiny non-casino variety slot places. The complete write-up, such as income tables is accessible on our web page.

Enter/Output Product

A crucial factor that appears to have arisen from the ashes of this existing pattern is that numerous on line casino assignments have been just also massive to assistance by themselves. The enter, in terms of expense bucks, was not proportional to the output, in conditions of net earnings after credit card debt support, when compared to beforehand reached outcomes. Much more and/or larger is not usually far better. Observing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of far more extensive amenities in many other jurisdictions. The flaw in this method nonetheless is that the costs related with widening industry penetration and occasioned-use, are substantially larger than people incurred to attract the base marketplace.

As daytripper markets become more competitive, on line casino venues will have to rely a lot more and far more on their in-home hotel patrons, and measurement their qualities (and expectations) appropriately. Although Steve Wynn started a main pattern in generating up-industry mega-locations, there merely was not ample desire on the Strip to warrant the many other comparable initiatives that adopted that aimed at the exact same market.

The trick is to strike a satisfied medium in venture configurations which of program need significantly less of a ‘seat-of-pants’ method, and one that is more analyzed. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Even though there are no revealed in depth data of American Indian gaming revenues, anecdotal proof seems to propose that this phase has been as difficult strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, symbolizing a drop of about 7 percent, or virtually $114 million, a lot more than doubling the 3.five per cent fall from the yr prior to. This market place is seemingly still 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 profits formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in contrast to the preceding yr lowering .8 p.c in the 1st quarter, seven.five p.c in the second quarter, nine.five percent in the third quarter, and 16.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, studies that even though calendar 12 months 2008 confirmed an practically 2 p.c growth fee in gaming revenues, there was an eight.seven % decline in the third quarter and an almost ten percent drop in the fourth quarter of 2008, in contrast with 2007. Gaming income trends at close by Niagara Falls, Ontario were down 1.five% in 2008 when compared with 2007.

It is been a blended-bag for condition lotteries throughout the nation. The North American Affiliation of State & Provincial Lotteries reports that U.S. lotteries produced a complete of $sixty.six billion in sales in fiscal 2008, up about 3 percent from the earlier yr nevertheless some jurisdictions noted decreases, most notably California, which confirmed an 8 per cent drop. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would look that the data does not reflect the influence of 3rd and/or fourth quarter final results.

According to information presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling seven p.c to $13.7 billion in 2008, vs . $14.seven billion in 2007.

Prepared & Proposed New Expansions

As formerly mentioned, it has been new gaming jurisdictions that have spawned considerably of the progress in yearly casino/racino revenues above the several years, and their affect is apt to proceed into the near future.

Florida
Miami Dade voters accepted a ballot situation that makes it possible for each of a few pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Dog Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has nevertheless to declared its plans. There are quite a few other proposals currently being regarded as that would more expand on line casino growth throughout the state.

Illinois
The state ultimately got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ match on line casino found in Des Plaines just east of O’Hare. The new facility is not most likely to open till 2010. There has also been some dialogue about making it possible for an increase in per area 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 software that permits for the improvement of four casino gaming zones and slots at existing horse and dog tracks appears mired, as only one particular facility is presently underneath development, although a few other proposals were rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is situated so close to the point out line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table video games, together with a 2nd phase due to open in 2011 with 875 slots and 20 desk game titles. The condition has extended the software procedure for the other a few zones until finally April, 2009.

Kentucky
There is even now a lot of ‘jockeying’ going on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back on the entrance-burner, but probably not settled for the duration of the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most current getting the 390 room M Resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new resorts incorporate two components of the City Heart undertaking, and the Fountainebleau.

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

Maine
There is a bill underneath thought that could a lot more than double Penn National’s slot equipment to 3,000, as properly as a proposal that would get rid of the restriction that slots be situated in five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to permit slots, might be thinking about transferring to a more hospitable town.

Maryland
A referendum was authorized in November, 2008 that enables for the growth of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as powerful as the state experienced expected.

Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open up in 2008, but has operate into numerous financing concerns and even though the resort part is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back again fairly, is nevertheless on keep track of to open this 12 months.

New England
Massachusetts, a sleeping-giant in terms of industry likely, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political help. A modern study accomplished by Dartmouth University estimates that Massachusetts resident invested a lot more than $920 million final 12 months at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to develop casinos, nevertheless the subject matter is very likely to be revisited, specially if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by not too long ago agreeing to keep on augmenting purses with an further tax. The governor nevertheless, 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 equipment specially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would lastly be developed, the winning bidder indicated an incapacity to make the needed $370 million payment, citing the current lending weather, and throwing the project back into the lap of the governor. Although the industry demand in the location could be considered really sturdy, the prospect of added competition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, specifically taking into consideration that a bit much less than 30% of the web earn is retained by the operator.

Plans to relocate Monticello Raceway into a resort complex are becoming reconsidered perhaps owing to the two the probable opening of at the very least a single or probably two racino functions in the NY metro spot, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
Nevertheless one more gaming proposal is getting put forth in Ohio, soon after previous year’s edition was turned down by the voters. This plan phone calls for one particular on line casino every in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be BK Woori Casino of $250 million, as effectively as an original licensing payment of $fifty million, and a 33 p.c tax on gaming income.

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

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and include 300 games, 140 rooms and a wide variety of facilities.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer you. Point out authorities has proffered the idea of making it possible for the resort to provide casino video games, but this energy is in too early a phase to have any traction one way or another.

Indian Gaming
A latest Supreme Court docket ruling that restricts the having of lands into trust on behalf of federally identified American Indian tribes has further stymied some new Class III gaming assignments across the country. In addition, there have been eleven Indian casino tasks turned down by the DOI previous year because of its new rule that casinos have to be around enough to a reservation that tribal customers can work at them. It has been recommended that the new Obama administration may possibly be far more sympathetic to the improvement of Indian gaming projects, but this situation has but to be addressed.

In the meantime, there are other Course III projects in the a variety of phases of growth. The Seneca casino project in Buffalo, NY, while working a modest momentary facility, has delayed an currently beneath design everlasting facility right up until the market rebounds. They have also expressed an fascination in building a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could affect their strategies for larger initiatives. There are new Indian gaming assignments established to open in Michigan and Oklahoma this year, and other people are in the planning stage. Texas may possibly enable the reopening of Indian gaming amenities and allow other location and there are strategies afoot by the Navajos in Arizona to build added casinos. California is poised to open two to three new Class III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming earnings in Atlantic Metropolis has declined 7.6 p.c, from $4.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is locating by itself in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast were located in Atlantic City, where it looked as if it may well in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually even so its marketplace share was becoming encroached upon, first by the advancement of a huge Course III gaming procedure in Connecticut, and then another slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening about Atlantic City’s future prospects. It’s reliance on day-trippers lulled it into a bogus sense of protection, and it now finds alone having to redefine its mission statement to “spot resort.”

The only difficulty with this technique even so is that it is sick-outfitted to pull it off. For all intents and functions, Atlantic City is under-roomed and/or above-gamed. There is basically not enough working day-tripper market to go around, and their efficient trading area is tightening, as the peripheral populations northward now/will have a lot more completely ready access to a widened source in New York (Yonkers, and before long 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 true competitive benefits are its lodge capability and the availability of table game titles, though the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In order to sufficiently compete as a destination resort the metropolis demands to create extra guest rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip homes – true gaming places, in that they do not have a lot of a working day-excursion market, besides for the ‘locals’ – have an common of .87 gaming positions for each visitor space even though Atlantic City’s common is 2.74 positions for each visitor room.

It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, have been the least impacted by the most recent downturn. The Borgata skilled a gaming earnings fall of one.six percent, while Harrah’s Marina documented a 4.nine percent boost when compared to 2007. In addition, the most difficult hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest amount of rooms. In the meantime some of the venues are teetering on viability, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a steady increase in gaming revenues by means of 2006, the city appeared primary for further advancement, which precipitated organizing for 4 new resort assignments, each of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion venture continues to be an iron skeleton, Pinnacle Entertainment has announced it might seek to promote its razed Sands internet site, MGM Mirage has shelved its on line casino programs, and Penn Nationwide appears to have stopped its pursuit of the Bader Field airport internet site.

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