National Business Casino as well as Racino Gaming Revenue Evaluation

A Period of Adjustment

Oops! That big hissing seem is the gaming balloon that had been increasing above the many years, gradually getting rid of air. But, it has not been a tide that decreased all ships nonetheless, as some emerging and growing gaming jurisdictions showed powerful growth in 2008.

General, the business and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.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 drop, as they confirmed a gain of nearly $one billion in 2008, thereby bringing the Business sector marketplace decline to $one.8 billion, or 6.7 p.c. Nevada was the biggest loser in 2008, dropping nearly $1.three billion, far more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most portion, on line casino operators ended up caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it actually nosedived. Using the crest of yr in excess of yr market progress across the place and the availability of ample credit and equity cash, new construction and enlargement proliferated in latest a long time. These days, faced with the realities of declining, or at ideal stagnant demand, a lot of of these projects are now regarded in excess of-leveraged and/or more than-sized. As a consequence a lot of gaming companies are making an attempt to renegotiate their credit card debt – produced a lot more hard by reduced valuations – while also paring down operational charges. The latter has turn out to be a extremely problematic conundrum when working with the competitors, specially in these jurisdictions that are now vying for market shares with new rising casino assignments in neighboring regions. A topic we go over much more totally in the Condition by Condition evaluation part of this publication.

As a consequence of these situations the gaming industry landscape is now strewn with impending fatalities. Between the far more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the listing grows each week.

“How extended will these financial conditions persist, and are we at the base nevertheless?” are queries no one particular appears to be answering but. What is distinct nonetheless is that most gaming jurisdictions will have to find out how to offer with a smaller sized pie.

This examination contains only gaming revenues of certified casinos and pari-mutuel outlets that supply casino online games, and not Indian gaming functions, card rooms, or little non-on line casino type slot areas. The whole write-up, such as earnings tables is obtainable on our internet page.

Enter/Output Product

A crucial element that looks to have arisen from the ashes of this existing craze is that many casino assignments have been just way too big to help by themselves. , in conditions of investment decision dollars, was not proportional to the output, in conditions of web earnings right after financial debt service, in comparison to earlier accomplished results. Much more and/or even bigger is not constantly far better. Seeing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of much more extensive amenities in many other jurisdictions. The flaw in this method nonetheless is that the expenses linked with widening marketplace penetration and occasioned-use, are drastically larger than those incurred to draw in the foundation market place.

As daytripper markets turn out to be far more competitive, casino venues will have to count more and much more on their in-property hotel patrons, and dimensions their qualities (and expectations) appropriately. While Steve Wynn started a significant pattern in making up-industry mega-locations, there basically was not enough desire on the Strip to warrant the many other comparable assignments that adopted that aimed at the same area of interest.

The trick is to strike a happy medium in task configurations which of system need significantly less of a ‘seat-of-pants’ technique, and a single that is a lot more studied. A shameless plug for development consultants like ourselves.

Other Gaming Actions

Even though there are no released comprehensive data of American Indian gaming revenues, anecdotal evidence appears to recommend that this phase has been as challenging strike as the Professional sector. The two Connecticut Indian gaming installations report slot income of $1.6 billion in 2008, symbolizing a fall of about seven per cent, or nearly $114 million, more than doubling the three.5 p.c drop from the calendar year before. This marketplace is seemingly even now reeling from the ripple-result of a casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming studies that contributions primarily based on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in contrast to the earlier yr lowering .eight per cent in the very first quarter, seven.five % in the second quarter, 9.five % in the third quarter, and 16.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming houses report similar decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reviews that while calendar 12 months 2008 confirmed an nearly two % growth charge in gaming revenues, there was an 8.7 % drop in the 3rd quarter and an virtually 10 percent decrease in the fourth quarter of 2008, when compared with 2007. Gaming income trends at nearby Niagara Falls, Ontario were down one.5% in 2008 in contrast with 2007.

It is been a mixed-bag for state lotteries across the nation. The North American Association of State & Provincial Lotteries stories that U.S. lotteries created a whole of $sixty.six billion in revenue in fiscal 2008, up about 3 p.c from the previous 12 months however some jurisdictions reported decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on various fiscal calendar year ends, it would seem that the information does not mirror the influence of 3rd and/or fourth quarter benefits.

In accordance to data offered by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven % to $thirteen.7 billion in 2008, vs . $ billion in 2007.

Planned & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned significantly of the development in yearly casino/racino revenues above the many years, and their effect is apt to carry on into the around future.

Miami Dade voters authorized a ballot issue that enables every single of 3 pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Dog Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has however to introduced its plans. There are many other proposals being regarded as that would further broaden casino development all through the state.

The point out last but not least got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ recreation casino situated in Des Plaines just east of O’Hare. The new facility is not very likely to open right up until 2010. There has also been some discussion about making it possible for an enhance in for each spot gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

The state’s expanded lottery plan that permits for the growth of four on line casino gaming zones and slots at present horse and canine tracks appears mired, as only one particular facility is presently underneath development, although 3 other proposals have been 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 near to the state line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table video games, together with a 2nd phase thanks to open in 2011 with 875 slots and 20 desk game titles. The state has prolonged the application method for the other a few zones till April, 2009.

There is nevertheless a good deal of ‘jockeying’ going on, but the prospect of as numerous as eight slot parlors and racinos appears to be back again on the front-burner, but very likely not solved for the duration of the present legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most latest getting the 390 place M Resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new hotels incorporate two components of the Town Center venture, and the Fountainebleau.

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

There is a bill beneath thing to consider that could much more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would take away the restriction that slots be situated inside of 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing nearby inhabitants to allow slots, may possibly be contemplating moving to a much more hospitable city.

A referendum was approved in November, 2008 that makes it possible for for the advancement of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as intensive as the condition had expected.

Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has operate into various financing troubles and although the lodge portion is open up, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled again somewhat, is even now on keep track of to open up this 12 months.

New England
Massachusetts, a sleeping-huge in phrases of market possible, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t appear to muster the political support. A modern examine completed by Dartmouth College estimates that Massachusetts resident expended far more than $920 million previous yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to create casinos, nevertheless the subject matter is very likely to be revisited, especially if Massachusetts decides to go ahead. There are also tries in Maine to rethink its alternatives.

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 extra tax. The governor even so, has appointed a new panel to examine the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would ultimately be developed, the profitable bidder indicated an incapacity to make the essential $370 million fee, citing the existing lending local weather, and throwing the undertaking again into the lap of the governor. Even though the marketplace desire in the region could be regarded quite powerful, the prospect of added competitiveness from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, specifically contemplating that a bit considerably less than 30% of the web win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort complex are currently being reconsidered probably owing to equally the probable opening of at minimum a single or probably two racino operations in the NY metro area, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Nevertheless yet another gaming proposal is becoming set forth in Ohio, following very last year’s variation was turned down by the voters. This prepare phone calls for one particular casino every in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure essential of $250 million, as effectively as an original licensing price of $50 million, and a 33 per cent tax on gaming income.

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

South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and include 300 video games, one hundred forty rooms and a wide variety of features.

Legislators are proposing a voter referendum that would amend the point out structure to permit on line casino gambling in specified locations, as properly 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 individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer you. Point out government has proffered the idea of allowing the vacation resort to provide on line casino game titles, but this effort is in too early a phase to have any traction a single way or one more.

Indian Gaming
A recent Supreme Court ruling that restricts the taking of lands into believe in on behalf of federally recognized American Indian tribes has additional stymied some new Course III gaming assignments across the region. In addition, there have been eleven Indian on line casino assignments turned down by the DOI final 12 months simply because of its new rule that casinos have to be close to adequate to a reservation that tribal members can operate at them. It has been suggested that the new Obama administration may possibly be a lot more sympathetic to the advancement of Indian gaming initiatives, but this situation has nevertheless to be tackled.

In the meantime, there are other Class III tasks in the various phases of development. The Seneca on line casino venture in Buffalo, NY, while working a tiny temporary facility, has delayed an presently underneath building long term facility till the marketplace rebounds. They have also expressed an curiosity in developing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could effect their programs for greater assignments. There are new Indian gaming assignments set to open in Michigan and Oklahoma this 12 months, and other folks are in the organizing stage. Texas may allow the reopening of Indian gaming services and allow other location and there are strategies afoot by the Navajos in Arizona to build extra casinos. California is poised to open up two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming income in Atlantic Metropolis has declined 7.six per cent, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is finding alone in an powerful comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast had been positioned in Atlantic Town, in which it seemed as if it might in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly and gradually nonetheless its marketplace share was becoming encroached upon, 1st by the development of a large Course III gaming operation in Connecticut, and then another slots operations in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago 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 around Atlantic City’s future potential customers. It really is reliance on working day-trippers lulled it into a fake feeling of safety, and it now finds itself having to redefine its mission assertion to “vacation spot resort.”

The only difficulty with this technique even so is that it is unwell-equipped to pull it off. For all intents and needs, Atlantic Metropolis is under-roomed and/or more than-gamed. There is simply not ample working day-tripper marketplace to go all around, and their efficient buying and selling spot is tightening, as the peripheral populations northward now/will have a lot more ready obtain 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 entry, the city’s only actual competitive benefits are its hotel ability and the availability of table video games, despite the fact that the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a destination resort the town requirements to develop further guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip houses – correct gaming destinations, in that they do not have significantly of a day-excursion industry, apart from for the ‘locals’ – have an average of .87 gaming positions per visitor space although Atlantic City’s regular is 2.74 positions for every guest place.

It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, ended up the least impacted by the most recent downturn. The Borgata knowledgeable a gaming profits drop of one.6 %, whilst Harrah’s Marina described a four.nine per cent improve when compared to 2007. In addition, the toughest hit venues, namely 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, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been more delayed, and dropping valuation.

With a regular rise in gaming revenues by means of 2006, the town appeared prime for additional development, which precipitated organizing for four new vacation resort projects, every of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion undertaking stays an iron skeleton, Pinnacle Entertainment has announced it may possibly find to promote its razed Sands site, MGM Mirage has shelved its casino plans, and Penn National seems to have stopped its pursuit of the Bader Area airport internet site.


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