2008 National Industrial Casino & Racino Gaming Revenue Investigation

A Period of time of Adjustment

Oops! That large hissing sound is the gaming balloon that experienced been growing more than the many years, little by little getting rid of air. But, it has not been a tide that decreased all ships nonetheless, as some emerging and increasing gaming jurisdictions showed strong expansion in 2008.

Total, the industrial and racetrack casino sectors (excluding Indian gaming), skilled a three.five per cent decrease in gaming revenues for 2008, making a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a gain of nearly $1 billion in 2008, thus bringing the Commercial sector market drop to $one.eight billion, or 6.seven p.c. Nevada was the greatest loser in 2008, dropping nearly $one.3 billion, far more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators had been caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Driving the crest of yr above calendar year market progress throughout the place and the availability of sufficient credit history and equity funds, new development and enlargement proliferated in modern many years. Nowadays, confronted with the realities of declining, or at best stagnant demand, numerous of these initiatives are now regarded in excess of-leveraged and/or in excess of-sized. As a consequence many gaming firms are attempting to renegotiate their personal debt – made a lot more hard by reduced valuations – even though also paring down operational fees. The latter has turn into a extremely problematic conundrum when dealing with the competitiveness, specially in those jurisdictions that are now vying for market place shares with new rising on line casino projects in neighboring regions. A matter we talk about more totally in the Point out by State investigation section of this publication.

As a result of these situations the gaming business landscape is now strewn with impending fatalities. Between the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows each week.

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

This investigation includes only gaming revenues of accredited casinos and pari-mutuel shops that offer you on line casino game titles, and not Indian gaming operations, card rooms, or little non-casino type slot places. The total post, such as profits tables is available on our internet page.

Enter/Output Design

A important aspect that seems to have arisen from the ashes of this recent trend is that several on line casino tasks ended up just way too large to help them selves. The input, in conditions of investment pounds, was not proportional to the output, in terms of web income soon after personal debt service, when compared to formerly reached final results. More and/or bigger is not often far better. Viewing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of much more extensive amenities in a lot of other jurisdictions. The flaw in this method even so is that the expenses linked with widening industry penetration and occasioned-use, are substantially higher than these incurred to entice the foundation market place.

As daytripper markets turn out to be more aggressive, on line casino venues will have to depend much more and much more on their in-residence hotel patrons, and dimensions their properties (and expectations) accordingly. While Steve Wynn commenced a significant craze in generating up-marketplace mega-locations, there simply was not sufficient demand on the Strip to warrant the several other equivalent assignments that adopted that aimed at the same area of interest.

The trick is to strike a satisfied medium in project configurations which of training course demand less of a ‘seat-of-pants’ technique, and one particular that is far more studied. A shameless plug for development consultants like ourselves.

Other Gaming Routines

Even though there are no printed comprehensive info of American Indian gaming revenues, anecdotal evidence appears to advise that this segment has been as hard strike as the Industrial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, symbolizing a drop of about seven per cent, or nearly $114 million, a lot more than doubling the 3.five percent fall from the year before. This industry is apparently still reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming stories that contributions primarily based on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the earlier yr reducing .eight % in the 1st quarter, seven.5 p.c in the 2nd quarter, 9.5 percent in the 3rd quarter, and 16.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reviews that whilst calendar yr 2008 showed an virtually 2 percent growth rate in gaming revenues, there was an eight.seven percent decrease in the third quarter and an almost ten per cent decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings traits at close by Niagara Falls, Ontario were down one.five% in 2008 when compared with 2007.

It really is been a blended-bag for point out lotteries throughout the region. The North American Affiliation of State & Provincial Lotteries stories that U.S. lotteries generated a total of $sixty.six billion in sales in fiscal 2008, up about three p.c from the prior yr yet some jurisdictions documented decreases, most notably California, which showed an eight percent fall. Inasmuch as some of these states are on a variety of fiscal yr finishes, it would look that the information does not mirror the effect of 3rd and/or fourth quarter final results.

In accordance to information supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling 7 percent to $thirteen.seven billion in 2008, compared to $14.seven billion in 2007.

Planned & Proposed New Expansions

As previously famous, it has been new gaming jurisdictions that have spawned considerably of the development in yearly casino/racino revenues over the a long time, and their affect is apt to continue into the near potential.

Miami Dade voters accredited a ballot concern that makes it possible for every of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Pet Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has but to declared its programs. There are several other proposals being regarded that would further broaden casino growth throughout the condition.

The point out ultimately got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ sport casino located in Des Plaines just east of O’Hare. The new facility is not very likely to open up right up until 2010. There has also been some dialogue about enabling an improve in for every spot gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

The state’s expanded lottery program that enables for the advancement of 4 on line casino gaming zones and slots at present horse and puppy tracks seems mired, as only one facility is presently underneath design, even though 3 other proposals were 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 located so near to the point out line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table online games, alongside with a 2nd phase owing to open up in 2011 with 875 slots and twenty desk games. The point out has prolonged the software procedure for the other three zones until April, 2009.

There is nevertheless a lot of ‘jockeying’ likely on, but the prospect of as many as eight slot parlors and racinos seems to be back again on the front-burner, but likely not settled in the course of the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear 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 Difficult Rock and new accommodations include two elements of the Town Center task, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino improvement initiatives in Baton Rouge and Lake Charles, even though delayed, are described to nonetheless be on-track for opening this calendar year and/or early 2010.

There is a monthly bill beneath thing to consider that could far more than double Penn National’s slot machines to 3,000, as well as a proposal that would remove the restriction that slots be situated inside of five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local citizens to permit slots, could be taking into consideration moving to a more hospitable city.

A referendum was approved in November, 2008 that enables for the development of 5 casinos with a overall of fifteen,000 slots, and now the bidding war is afoot even though it is not as extreme as the point out experienced anticipated.

Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has run into numerous funding troubles and whilst the lodge portion is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled again fairly, is even now on keep track of to open this calendar year.

New England
Massachusetts, a sleeping-giant in phrases of market place prospective, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political assist. A current study finished by Dartmouth University estimates that Massachusetts resident invested much more than $920 million last yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an alternative to build casinos, even so the subject matter is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also tries in www.tasterschoice.co.kr 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 proceed augmenting purses with an further tax. The governor even so, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot machines especially 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 ultimately be developed, the successful bidder indicated an incapability to make the required $370 million fee, citing the current lending climate, and throwing the venture back again into the lap of the governor. Even though the marketplace need in the area could be regarded as very powerful, the prospect of extra opposition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, especially taking into consideration that a bit less than thirty% of the net earn is retained by the operator.

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

But another gaming proposal is becoming place forth in Ohio, after very last year’s model was turned down by the voters. This prepare phone calls for one on line casino every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure needed of $250 million, as effectively as an preliminary licensing price of $fifty million, and a 33 percent tax on gaming earnings.

The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot services nonetheless wallow in a political mire, but are predicted to begin construction this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and contain 300 video games, a hundred and forty rooms and a extensive selection of amenities.

Legislators are proposing a voter referendum that would amend the point out constitution to let casino gambling in designated locations, as properly as enable gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. Condition government has proffered the idea of enabling the resort to provide casino games, but this hard work is in also early a stage to have any traction a single way or one more.

Indian Gaming
A current Supreme Court ruling that restricts the taking of lands into believe in on behalf of federally identified American Indian tribes has more stymied some new Course III gaming tasks throughout the region. Moreover, there were eleven Indian on line casino projects turned down by the DOI final calendar year because of its new rule that casinos should be around ample to a reservation that tribal members can work at them. It has been suggested that the new Obama administration might be far more sympathetic to the improvement of Indian gaming projects, but this concern has nevertheless to be dealt with.

Meanwhile, there are other Class III initiatives in the numerous levels of development. The Seneca on line casino project in Buffalo, NY, whilst running a modest short term facility, has delayed an presently beneath design everlasting facility till the industry rebounds. They have also expressed an desire in creating a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could effect their strategies for greater initiatives. There are new Indian gaming assignments set to open in Michigan and Oklahoma this yr, and other individuals are in the organizing stage. Texas might enable the reopening of Indian gaming services and allow other location and there are programs afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to 3 new Class III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming revenue in Atlantic City 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 itself in an intense comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast were situated in Atlantic Town, where it appeared as if it may well in fact even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly nonetheless its industry share was currently being encroached on, first by the development of a huge Class III gaming operation in Connecticut, and then another slots operations in Rhode Island, and then video clip 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 operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening around Atlantic City’s potential prospective customers. It’s reliance on working day-trippers lulled it into a bogus perception of protection, and it now finds by itself obtaining to redefine its mission assertion to “destination vacation resort.”

The only dilemma with this strategy even so is that it is unwell-equipped to pull it off. For all intents and purposes, Atlantic City is beneath-roomed and/or more than-gamed. There is just not sufficient day-tripper industry to go about, and their powerful investing location is tightening, as the peripheral populations northward now/will have a lot more prepared access to a widened provide in New York (Yonkers, and soon at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only genuine competitive rewards are its lodge capability and the availability of table online games, although the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately contend as a spot vacation resort the town demands to develop further visitor rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip properties – accurate gaming places, in that they do not have significantly of a working day-trip marketplace, other than for the ‘locals’ – have an average of .87 gaming positions for every visitor room whilst Atlantic City’s regular is two.seventy four positions per guest room.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, had been the minimum impacted by the latest downturn. The Borgata experienced a gaming income fall of 1.six percent, while Harrah’s Marina reported a 4.nine p.c improve in comparison to 2007. Moreover, the most difficult strike 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, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.

With a steady rise in gaming revenues by means of 2006, the town seemed prime for even more development, which precipitated preparing for 4 new resort assignments, every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion venture continues to be an iron skeleton, Pinnacle Enjoyment has announced it may seek to sell its razed Sands site, MGM Mirage has shelved its on line casino programs, and Penn National appears to have stopped its pursuit of the Bader Subject airport web site.

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