Countrywide Business On line casino plus Racino Game playing Income Analysis

A Interval of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been growing over the many years, little by little losing air. But, it has not been a tide that reduced all ships even so, as some rising and growing gaming jurisdictions confirmed robust progress in 2008.

All round, the business and racetrack casino sectors (excluding Indian gaming), knowledgeable a three.five p.c drop in gaming revenues for 2008, making a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a gain of almost $one billion in 2008, therefore bringing the Industrial sector industry drop to $one.eight billion, or 6.seven %. Nevada was the greatest loser in 2008, dropping almost $1.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators ended up caught fairly flat-footed by the extent of the 2008 income downturn, as it was not until finally the third and fourth quarters when it actually nosedived. Riding the crest of 12 months over calendar year market place development throughout the place and the availability of ample credit rating and fairness money, new design and growth proliferated in current many years. These days, faced with the realities of declining, or at ideal stagnant demand, a lot of of these initiatives are now regarded above-leveraged and/or in excess of-sized. As a end result several gaming firms are making an attempt to renegotiate their debt – produced a lot more challenging by reduce valuations – even though also paring down operational fees. The latter has turn out to be a quite problematic conundrum when working with the opposition, specially in those jurisdictions that are now vying for market place shares with new emerging on line casino initiatives in neighboring regions. A topic we examine much more entirely in the Condition by State evaluation area of this publication.

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

“How lengthy will these financial problems persist, and are we at the base however?” are inquiries no one particular seems to be answering nevertheless. What is distinct however is that most gaming jurisdictions will have to discover how to offer with a smaller sized pie.

Be aware:
This evaluation includes only gaming revenues of accredited casinos and pari-mutuel outlets that supply on line casino online games, and not Indian gaming operations, card rooms, or tiny non-on line casino kind slot areas. The complete write-up, including revenue tables is accessible on our web webpage.

Input/Output Product

A important factor that would seem to have arisen from the ashes of this present craze is that several on line casino tasks have been just way too large to assist by themselves. The enter, in terms of investment decision pounds, was not proportional to the output, in phrases of internet income right after financial debt service, compared to formerly attained results. Much more and/or greater is not always much better. Seeing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of more comprehensive facilities in a lot of other jurisdictions. The flaw in this technique however is that the costs connected with widening industry penetration and occasioned-use, are substantially greater than these incurred to appeal to the base market place.

As daytripper marketplaces grow to be far more competitive, casino venues will have to rely much more and far more on their in-house hotel patrons, and dimension their homes (and anticipations) appropriately. Even though Steve Wynn started out a main trend in creating up-industry mega-locations, there basically was not enough demand on the Strip to warrant the many other equivalent tasks that followed that aimed at the very same market.

The trick is to strike a happy medium in project configurations which of course require less of a ‘seat-of-pants’ method, and 1 that is far more analyzed. A shameless plug for improvement consultants like ourselves.

Other Gaming Activities

Despite the fact that there are no released thorough data of American Indian gaming revenues, anecdotal proof seems to propose that this phase has been as challenging strike as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, symbolizing a fall of about 7 p.c, or virtually $114 million, more than doubling the three.five percent fall from the calendar year prior to. This marketplace is apparently even now reeling from the ripple-effect of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming studies that contributions based mostly on a gaming income method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the preceding year reducing .eight percent in the first quarter, 7.five % in the 2nd quarter, 9.five % in the 3rd quarter, and sixteen.1 % in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reviews that even though calendar yr 2008 confirmed an practically 2 per cent development rate in gaming revenues, there was an 8.seven per cent decline in the 3rd quarter and an nearly 10 p.c decrease in the fourth quarter of 2008, compared with 2007. Gaming income developments at nearby Niagara Falls, Ontario were down one.5% in 2008 compared with 2007.

It is been a blended-bag for condition lotteries across the place. The North American Affiliation of State & Provincial Lotteries reviews that U.S. lotteries produced a overall of $sixty.six billion in revenue in fiscal 2008, up about 3 p.c from the previous calendar year nevertheless some jurisdictions noted decreases, most notably California, which showed an eight p.c drop. Inasmuch as some of these states are on different fiscal year ends, it would seem that the info does not reflect the impact of 3rd and/or fourth quarter benefits.

According to data offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 p.c to $13.seven billion in 2008, versus $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As formerly mentioned, it has been new gaming jurisdictions that have spawned a lot of the progress in once-a-year casino/racino revenues in excess of the years, and their impact is apt to continue into the around long term.

Florida
Miami Dade voters accredited a ballot concern that allows each of 3 pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Puppy Monitor 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 programs. There are several other proposals being regarded that would additional grow on line casino improvement through the condition.

Illinois
The point out finally obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ match on line casino situated in Des Plaines just east of O’Hare. The new facility is not probably to open up right up until 2010. There has also been some dialogue about allowing an boost in for every area gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery system that enables for the growth of 4 on line casino gaming zones and slots at present horse and dog tracks seems mired, as only one particular facility is presently beneath design, 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 on line casino in Oklahoma, which is positioned so near to the condition line that its parking great deal is in Kansas. Toriters in Dodge City is planing a December 2009 opening with 575 slots and ten desk online games, along with a second section owing to open up in 2011 with 875 slots and 20 desk online games. The condition has prolonged the application method for the other 3 zones until April, 2009.

Kentucky
There is nonetheless a lot of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos seems to be back again on the front-burner, but most likely not solved in the course of the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most latest currently being the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new accommodations consist of two components of the City Centre project, and the Fountainebleau.

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

Maine
There is a monthly bill underneath thought that could far more than double Penn National’s slot machines to 3,000, as effectively as a proposal that would eliminate the restriction that slots be positioned in 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to allow slots, may possibly be contemplating transferring to a more hospitable city.

Maryland
A referendum was authorized in November, 2008 that enables for the improvement 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 experienced predicted.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has operate into different financing troubles and although the lodge portion is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back again considerably, is still on observe to open up this calendar year.

New England
Massachusetts, a sleeping-big in terms of market likely, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to muster the political assistance. A modern research accomplished by Dartmouth College estimates that Massachusetts resident put in far more than $920 million previous 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to develop casinos, nevertheless the matter is probably to be revisited, particularly if Massachusetts decides to go ahead. There are also tries in Maine to rethink its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by recently agreeing to continue augmenting purses with an added tax. The governor nonetheless, has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by permitting the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would lastly be designed, the successful bidder indicated an incapability to make the required $370 million price, citing the recent lending weather, and throwing the project back again into the lap of the governor. Despite the fact that the marketplace demand in the spot could be regarded as really powerful, the prospect of extra competitiveness from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, specially thinking about that marginally much less than thirty% of the web get is retained by the operator.

Ideas to relocate Monticello Raceway into a resort complicated are currently being reconsidered perhaps owing to the two the possible opening of at least 1 or maybe two racino operations in the NY metro area, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
Nevertheless an additional gaming proposal is becoming place forth in Ohio, after very last year’s model was turned down by the voters. This strategy phone calls for one particular casino each in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure needed of $250 million, as well as an first licensing fee of $50 million, and a 33 % tax on gaming profits.

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

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and contain three hundred online games, 140 rooms and a wide selection of facilities.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to allow on line casino gambling in specified regions, as properly as allow gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. State authorities has proffered the notion of making it possible for the resort to provide casino games, but this work is in as well early a stage to have any traction one way or one more.

Indian Gaming
A current Supreme Courtroom ruling that restricts the having of lands into trust on behalf of federally recognized American Indian tribes has further stymied some new Course III gaming projects across the nation. Moreover, there were eleven Indian casino tasks turned down by the DOI last calendar year because of its new rule that casinos have to be near sufficient to a reservation that tribal associates can perform at them. It has been suggested that the new Obama administration may well be a lot more sympathetic to the development of Indian gaming tasks, but this issue has but to be tackled.

In the meantime, there are other Class III initiatives in the a variety of levels of improvement. The Seneca casino task in Buffalo, NY, while operating a small temporary facility, has delayed an already below construction permanent facility right up until the marketplace rebounds. They have also expressed an interest in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is getting challenged, and could effect their ideas for bigger projects. There are new Indian gaming projects set to open in Michigan and Oklahoma this 12 months, and other individuals are in the organizing stage. Texas could allow the reopening of Indian gaming amenities and allow other location and there are plans afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to a few new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Overall gaming revenue in Atlantic Town 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 locating by itself in an intensive comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up located in Atlantic City, where it looked as if it may really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly and gradually nevertheless its market share was becoming encroached on, initial by the growth of a massive Course III gaming operation 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 lately Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening close to Atlantic City’s long term potential clients. It’s reliance on day-trippers lulled it into a bogus perception of stability, and it now finds by itself having to redefine its mission statement to “location vacation resort.”

The only dilemma with this technique even so is that it is sick-outfitted to pull it off. For all intents and needs, Atlantic Metropolis is underneath-roomed and/or above-gamed. There is merely not ample working day-tripper market to go around, and their successful investing area is tightening, as the peripheral populations northward now/will have more prepared 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 accessibility, the city’s only real aggressive advantages are its hotel potential and the availability of table video games, even though the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In buy to sufficiently contend as a location vacation resort the metropolis needs to build further visitor rooms and not always gaming capacity. By comparison, the Las Vegas Strip qualities – accurate gaming destinations, in that they do not have a lot of a day-journey marketplace, besides for the ‘locals’ – have an average of .87 gaming positions per visitor area although Atlantic City’s average is two.seventy four positions for each guest space.

It is not a coincidence that Atlantic City’s two greatest resorts, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, have been the least impacted by the most recent downturn. The Borgata skilled a gaming profits drop of 1.6 per cent, even though Harrah’s Marina documented a 4.9 % improve when compared to 2007. Furthermore, the hardest strike venues, specifically 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, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a continual rise in gaming revenues through 2006, the town seemed prime for even more improvement, which precipitated preparing for four new vacation resort initiatives, every of which have now been indefinitely delayed. Revel Amusement Group’s $2.five billion task stays an iron skeleton, Pinnacle Enjoyment has announced it may possibly find to sell its razed Sands website, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport internet site.

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