2008 Countrywide Professional On line casino as well as Racino Online games Earnings Investigation

A Interval of Adjustment

Oops! That large hissing seem is the gaming balloon that experienced been expanding in excess of the years, slowly dropping air. But, it has not been a tide that lowered all ships nonetheless, as some rising and growing gaming jurisdictions confirmed sturdy progress in 2008.

General, the professional and racetrack on line casino sectors (excluding Indian gaming), skilled a three.5 p.c drop in gaming revenues for 2008, creating a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a acquire of practically $one billion in 2008, thus bringing the Commercial sector industry decrease to $one.8 billion, or 6.7 p.c. Nevada was the largest loser in 2008, dropping nearly $1.3 billion, a lot more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, casino operators were caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not till the third and fourth quarters when it really nosedived. Riding the crest of 12 months over year market place progress throughout the place and the availability of enough credit score and equity funds, new building and enlargement proliferated in current many years. Today, confronted with the realities of declining, or at best stagnant need, numerous of these projects are now considered over-leveraged and/or in excess of-sized. As a result a lot of gaming businesses are attempting to renegotiate their financial debt – produced a lot more difficult by decrease valuations – whilst also paring down operational expenses. The latter has turn into a extremely problematic conundrum when working with the competitiveness, especially in people jurisdictions that are now vying for industry shares with new emerging on line casino tasks in neighboring regions. A subject matter we go over a lot more entirely in the State by Point out investigation area of this publication.

As a consequence of these problems the gaming industry landscape is now strewn with impending fatalities. Amid the much more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows each and every week.

“How extended will these financial situations persist, and are we at the base but?” are queries no a single appears to be answering yet. What is very clear nonetheless is that most gaming jurisdictions will have to understand how to deal with a smaller pie.

This examination includes only gaming revenues of accredited casinos and pari-mutuel retailers that supply casino online games, and not Indian gaming operations, card rooms, or small non-casino variety slot locations. The whole write-up, which includes income tables is offered on our web page.

Input/Output Model

A key aspect that would seem to have arisen from the ashes of this existing pattern is that many casino assignments were just way too huge to support on their own. The enter, in phrases of investment dollars, was not proportional to the output, in conditions of net earnings following personal debt service, compared to earlier accomplished benefits. Far more and/or bigger is not always much better. Observing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of far more extensive amenities in a lot of other jurisdictions. The flaw in this approach however is that the fees related with widening market penetration and occasioned-use, are considerably higher than these incurred to draw in the foundation marketplace.

As daytripper markets turn into far more competitive, on line casino venues will have to depend a lot more and far more on their in-house resort patrons, and size their properties (and expectations) appropriately. Even though Steve Wynn started out a main pattern in producing up-industry mega-locations, there simply was not adequate desire on the Strip to warrant the a lot of other comparable tasks that followed that aimed at the very same market.

The trick is to strike a content medium in undertaking configurations which of system demand significantly less of a ‘seat-of-pants’ strategy, and one particular that is more analyzed. A shameless plug for growth consultants like ourselves.

Other Gaming Pursuits

Even though there are no printed comprehensive data of American Indian gaming revenues, anecdotal evidence appears to suggest that this segment has been as difficult strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, representing a drop of about seven per cent, or virtually $114 million, more than doubling the three.5 percent fall from the 12 months just before. This market place is evidently nonetheless reeling from the ripple-effect of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming stories that contributions based on a gaming revenue formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the preceding calendar year reducing .eight % in the 1st quarter, 7.five % in the 2nd quarter, 9.five percent in the third quarter, and sixteen.one percent 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, stories that even though calendar calendar year 2008 confirmed an virtually two per cent progress price in gaming revenues, there was an 8.7 per cent decline in the third quarter and an nearly ten per cent decrease in the fourth quarter of 2008, compared with 2007. Gaming revenue traits at nearby Niagara Falls, Ontario ended up down 1.five% in 2008 in contrast with 2007.

It truly is been a blended-bag for point out lotteries across the region. The North American Affiliation of State & Provincial Lotteries reviews that U.S. lotteries created a whole of $60.6 billion in revenue in fiscal 2008, up about three p.c from the earlier calendar year nevertheless some jurisdictions noted decreases, most notably California, which showed an 8 percent drop. Inasmuch as some of these states are on numerous fiscal 12 months ends, it would look that the info does not mirror the influence of 3rd and/or fourth quarter benefits.

In accordance to knowledge provided by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 p.c to $thirteen.seven billion in 2008, compared to $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned significantly of the growth in once-a-year casino/racino revenues over the a long time, and their affect is apt to proceed into the near long term.

Miami Dade voters accredited a ballot issue that makes it possible for each of 3 pari-mutuels to have a casino facility of up to 2,000 slot equipment. The Flagler Pet Observe and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to introduced its strategies. There are many other proposals currently being deemed that would even more broaden on line casino advancement through the point out.

The state lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ sport casino situated in Des Plaines just east of O’Hare. The new facility is not very likely to open up until finally 2010. There has also been some dialogue about permitting an improve 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 program that permits for the advancement of 4 on line casino gaming zones and slots at current horse and dog tracks appears mired, as only a single facility is presently beneath development, although a few other proposals had been rescinded. The only bidder on the Cherokee County contract, 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 Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten desk game titles, along with a 2nd phase thanks to open up in 2011 with 875 slots and 20 desk online games. The state has extended the application approach for the other three zones right up until April, 2009.

There is nevertheless a whole 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 solved during the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most recent being the 390 room M Resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new resorts incorporate two factors of the City Center venture, and the Fountainebleau.

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

There is a invoice underneath consideration that could more than double Penn National’s slot devices to three,000, as nicely as a proposal that would remove the restriction that slots be found within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing regional citizens to allow slots, could be contemplating shifting to a a lot more hospitable city.

A referendum was accepted in November, 2008 that makes it possible for for the improvement of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot though it is not as intense as the point out experienced expected.

Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has operate into numerous funding troubles and even though the lodge part is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled again relatively, is still on keep track of to open this yr.

New England
Massachusetts, a sleeping-giant in phrases of market place likely, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but cannot look to muster the political assistance. A current research completed by Dartmouth College estimates that Massachusetts resident put in far more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an alternative to develop casinos, even so the topic is most likely to be revisited, particularly if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by just lately agreeing to continue 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 allowing the tracks to have slot machines specially 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 designed, the winning bidder indicated an incapacity to make the required $370 million payment, citing the existing lending local climate, and throwing the venture back into the lap of the governor. Though the market demand in the spot could be deemed really strong, the prospect of added opposition from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, specially considering that a bit considerably less than thirty% of the web earn is retained by the operator.

Plans to relocate Monticello Raceway into a resort complex are becoming reconsidered perhaps owing to both the possible opening of at least one particular or perhaps two racino functions in the NY metro location, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Nevertheless yet another gaming proposal is getting place forth in Ohio, right after last year’s version was turned down by the voters. This program calls for 1 casino each and every in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment needed of $250 million, as effectively as an first licensing fee of $fifty million, and a 33 % tax on gaming profits.

The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 while Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are expected to commence development this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and include three hundred video games, 140 rooms and a vast assortment of facilities.

Legislators are proposing a voter referendum that would amend the condition structure to enable on line casino gambling in designated locations, as effectively as permit gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. Point out government has proffered the idea of making it possible for the resort to offer you on line casino video games, but this work is in way too early a stage to have any traction a single way or one more.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the using 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. Additionally, there have been eleven Indian on line casino projects rejected by the DOI previous 12 months simply because of its new rule that casinos have to be close to adequate to a reservation that tribal customers can operate at them. It has been proposed that the new Obama administration may well be a lot more sympathetic to the growth of Indian gaming initiatives, but this problem has nevertheless to be resolved.

Meanwhile, there are other Course III assignments in the various phases of growth. The Seneca casino task in Buffalo, NY, even though running a small short term facility, has delayed an already underneath development permanent facility right up until the market place rebounds. They have also expressed an interest in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could influence their programs for larger initiatives. There are new Indian gaming tasks set to open up in Michigan and Oklahoma this calendar year, and other individuals are in the organizing phase. Texas may possibly allow the reopening of Indian gaming amenities and let other venue and there are ideas afoot by the Navajos in Arizona to construct further casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming revenue in Atlantic Town has declined seven.6 %, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is discovering alone in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were situated in Atlantic City, where it looked as if it may possibly really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually nevertheless its industry share was being encroached upon, 1st by the growth of a large Class III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with oncapan.com/bbs/partner_site/1176 planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future prospective customers. It’s reliance on working day-trippers lulled it into a false sense of security, and it now finds itself obtaining to redefine its mission assertion to “location 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 below-roomed and/or over-gamed. There is just not sufficient day-tripper market place to go all around, and their effective investing area is tightening, as the peripheral populations northward now/will have much more ready accessibility to a widened offer in New York (Yonkers, and soon 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 real aggressive positive aspects are its resort ability and the availability of table video games, even though the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In buy to sufficiently compete as a vacation spot resort the metropolis requirements to develop added visitor rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip houses – accurate gaming locations, in that they do not have a lot of a day-vacation marketplace, other than for the ‘locals’ – have an typical of .87 gaming positions for every visitor room while Atlantic City’s regular is 2.seventy four positions per visitor area.

It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, have been the minimum impacted by the latest downturn. The Borgata skilled a gaming revenue drop of one.six per cent, whilst Harrah’s Marina noted a 4.nine per cent increase compared to 2007. Moreover, the most difficult hit 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 houses and Resorts with the hoped for sale of the Tropicana has been even more delayed, and shedding valuation.

With a regular rise in gaming revenues through 2006, the town seemed prime for even more growth, which precipitated planning for 4 new vacation resort tasks, every single of which have now been indefinitely delayed. Revel Leisure Group’s $2.five billion undertaking stays an iron skeleton, Pinnacle Amusement has announced it may find to sell its razed Sands website, MGM Mirage has shelved its casino plans, and Penn National seems to have stopped its pursuit of the Bader Discipline airport web site.

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