2008 Nationwide Industrial Casino & Racino Gaming Income Investigation

A Time period of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been expanding above the years, little by little dropping air. But, it has not been a tide that reduced all ships however, as some emerging and increasing gaming jurisdictions showed powerful growth in 2008.

Total, the professional and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.five % decline in gaming revenues for 2008, making a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of virtually $1 billion in 2008, thus bringing the Business sector market place decline to $1.8 billion, or 6.seven %. Nevada was the most significant loser in 2008, dropping almost $1.three billion, more than fifty percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most portion, casino operators were caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the 3rd and fourth quarters when it truly nosedived. Riding the crest of yr above yr market place progress throughout the country and the availability of enough credit and fairness resources, new construction and expansion proliferated in latest many years. Nowadays, faced with the realities of declining, or at greatest stagnant need, many of these projects are now regarded as above-leveraged and/or in excess of-sized. As a end result numerous gaming companies are making an attempt to renegotiate their credit card debt – created much more challenging by reduce valuations – whilst also paring down operational costs. The latter has grow to be a really problematic conundrum when dealing with the competition, particularly in individuals jurisdictions that are now vying for industry shares with new rising on line casino initiatives in neighboring locations. A topic we examine more entirely in the State by Condition investigation segment of this publication.

As a consequence of these problems the gaming business landscape is now strewn with impending fatalities. Among the much more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the checklist grows every single week.

“How lengthy will these financial problems persist, and are we at the bottom but?” are inquiries no 1 seems to be answering yet. What is obvious however is that most gaming jurisdictions will have to learn how to deal with a smaller pie.

This evaluation involves only gaming revenues of accredited casinos and pari-mutuel outlets that offer you on line casino online games, and not Indian gaming functions, card rooms, or tiny non-casino kind slot spots. The complete report, which includes profits tables is obtainable on our web webpage.

Input/Output Product

A key facet that appears to have arisen from the ashes of this existing trend is that a lot of on line casino projects ended up just too large to support them selves. The enter, in phrases of expense dollars, was not proportional to the output, in conditions of web revenue right after credit card debt services, in comparison to earlier achieved results. Far more and/or bigger is not constantly better. Seeing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of far more comprehensive features in a lot of other jurisdictions. The flaw in this strategy even so is that the charges connected with widening market penetration and occasioned-use, are drastically increased than individuals incurred to appeal to the base market.

As daytripper markets turn into more aggressive, on line casino venues will have to depend much more and more on their in-residence resort patrons, and size their properties (and anticipations) accordingly. Even though Steve Wynn began a significant pattern in generating up-industry mega-places, there just was not sufficient demand from customers on the Strip to warrant the a lot of other comparable initiatives that adopted that aimed at the same area of interest.

The trick is to strike a content medium in task configurations which of training course call for much less of a ‘seat-of-pants’ approach, and one particular that is more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Pursuits

Although there are no revealed in depth information of American Indian gaming revenues, anecdotal evidence appears to advise that this section has been as difficult hit as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, representing a fall of about 7 %, or virtually $114 million, more than doubling the three.5 % drop from the year ahead of. This industry is apparently nevertheless reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming reports that contributions based on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the previous calendar year reducing .eight percent in the very first quarter, seven.five per cent in the second quarter, 9.five per cent in the third quarter, and sixteen.one % in the fourth quarter.

Some SEC reporting Indian gaming qualities report similar decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that although calendar calendar year 2008 confirmed an almost two p.c expansion rate in gaming revenues, there was an eight.7 p.c drop in the 3rd quarter and an virtually 10 percent decline in the fourth quarter of 2008, in comparison with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario ended up down one.five% in 2008 in contrast with 2007.

It is been a combined-bag for state lotteries throughout the country. The North American Association of State & Provincial Lotteries reviews that U.S. lotteries created a total of $60.6 billion in income in fiscal 2008, up about three percent from the prior yr yet some jurisdictions described decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on a variety of fiscal yr finishes, it would appear that the knowledge does not mirror the affect of third and/or fourth quarter results.

According to info provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling seven p.c to $13.7 billion in 2008, vs . $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As earlier famous, it has been new gaming jurisdictions that have spawned considerably of the progress in yearly on line casino/racino revenues more than the several years, and their influence is apt to carry on into the close to foreseeable future.

Miami Dade voters approved a ballot issue that permits each and every of 3 pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Dog Observe 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 plans. There are many other proposals currently being regarded that would more increase on line casino improvement through the condition.

The state finally got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,200+ sport casino found in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some dialogue about making it possible for an improve in for every location 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 permits for the growth of 4 casino gaming zones and slots at present horse and canine tracks seems mired, as only one facility is presently underneath development, although three 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 situated so shut to the state line that its parking good deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table game titles, together with a 2nd stage owing to open up in 2011 with 875 slots and 20 table game titles. The state has prolonged the software approach for the other a few zones until April, 2009.

There is still a whole lot of ‘jockeying’ going on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be back on the front-burner, but very likely not resolved in the course of the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most recent being the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Hard Rock and new hotels consist of two elements of the City Center undertaking, and the Fountainebleau.

Pinnacle Entertainment’s new casino growth initiatives in Baton Rouge and Lake Charles, whilst delayed, are described to even now be on-observe for opening this year and/or early 2010.

There is a bill beneath consideration that could more than double Penn National’s slot machines to 3,000, as properly as a proposal that would eliminate the restriction that slots be located within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing local residents to let slots, could be considering relocating to a more hospitable city.

A referendum was accepted in November, 2008 that allows for the improvement of five casinos with a overall of 15,000 slots, and now the bidding war is afoot although it is not as extreme as the point out experienced anticipated.

Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has run into a variety of funding concerns and whilst the lodge part is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled again relatively, is nonetheless on keep track of to open up this year.

New England
Massachusetts, a sleeping-giant in terms of marketplace possible, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not look to muster the political help. A modern study concluded by Dartmouth College estimates that Massachusetts resident invested much more than $920 million previous calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to create casinos, nonetheless the matter is most likely to be revisited, especially 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 just lately agreeing to keep on augmenting purses with an further tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing software which ironically, can only be preserved by enabling the tracks to have slot equipment especially at the Meadowlands. (See Pussy888 Download Vegas831 Squeeze section)

New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would lastly be produced, the profitable bidder indicated an inability to make the necessary $370 million payment, citing the existing lending local weather, and throwing the task again into the lap of the governor. Although the market place demand in the region could be deemed fairly powerful, the prospect of extra opposition from nearby Belmont could have an impact on Aqueduct’s underlining financial feasibility, specifically thinking about that a bit less than thirty% of the net earn is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered possibly owing to the two the possible opening of at minimum one particular or maybe two racino functions in the NY metro area, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

Nevertheless another gaming proposal is being place forth in Ohio, after final year’s version was turned down by the voters. This plan phone calls for one casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment required of $250 million, as effectively as an preliminary licensing price of $fifty million, and a 33 p.c tax on gaming revenue.

The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 although Philadelphia’s two slot amenities still wallow in a political mire, but are predicted to start building this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and consist of 300 online games, 140 rooms and a vast variety of features.

Legislators are proposing a voter referendum that would amend the state structure to allow casino gambling in specified areas, as well as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Condition govt has proffered the idea of making it possible for the vacation resort to provide casino games, but this effort is in also early a phase to have any traction a single way or one more.

Indian Gaming
A current Supreme Courtroom ruling that restricts the having of lands into believe in on behalf of federally recognized American Indian tribes has more stymied some new Class III gaming projects across the country. In addition, there have been eleven Indian on line casino tasks rejected by the DOI final 12 months simply because of its new rule that casinos need to be in close proximity to ample to a reservation that tribal users can work at them. It has been proposed that the new Obama administration might be far more sympathetic to the improvement of Indian gaming projects, but this concern has nevertheless to be resolved.

Meanwhile, there are other Course III initiatives in the a variety of levels of growth. The Seneca on line casino task in Buffalo, NY, even though working a modest temporary facility, has delayed an already under building everlasting facility until the industry rebounds. They have also expressed an interest in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could influence their programs for bigger tasks. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this yr, and other folks are in the planning phase. Texas might permit the reopening of Indian gaming facilities and let other location and there are strategies afoot by the Navajos in Arizona to build further casinos. California is poised to open up two to three new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic City has declined seven.6 p.c, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is locating by itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been located in Atlantic Town, where it seemed as if it may in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly nonetheless its industry share was becoming encroached upon, first by the development of a massive Class III gaming procedure in Connecticut, and then one more slots operations 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 casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening around Atlantic City’s potential prospects. It really is reliance on day-trippers lulled it into a untrue feeling of security, and it now finds itself obtaining to redefine its mission statement to “spot resort.”

The only difficulty with this strategy however is that it is sick-equipped to pull it off. For all intents and functions, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is simply not sufficient working day-tripper industry to go around, and their powerful investing location is tightening, as the peripheral populations northward now/will have far more prepared accessibility to a widened source in New York (Yonkers, and quickly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only actual aggressive rewards are its resort ability and the availability of desk video games, though the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In purchase to adequately compete as a spot resort the town requirements to create added guest rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip homes – accurate gaming destinations, in that they do not have much of a day-journey industry, other than for the ‘locals’ – have an common of .87 gaming positions for every visitor room whilst Atlantic City’s typical is 2.seventy four positions for each visitor room.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, were the the very least impacted by the most current downturn. The Borgata skilled a gaming income fall of one.6 per cent, while Harrah’s Marina described a four.9 % enhance in comparison to 2007. Additionally, the hardest hit venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity 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 further delayed, and losing valuation.

With a constant rise in gaming revenues by way of 2006, the town seemed key for additional growth, which precipitated organizing for four new vacation resort projects, each of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion task continues to be an iron skeleton, Pinnacle Amusement has announced it may possibly look for to promote its razed Sands web site, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport site.

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