2008 National Industrial Gambling casino & Racino Game titles Income Analysis

A Time period of Adjustment

Oops! That large hissing audio is the gaming balloon that had been increasing above the a long time, gradually shedding air. But, it has not been a tide that reduced all ships however, as some emerging and increasing gaming jurisdictions showed robust progress in 2008.

General, the business and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.5 % decrease in gaming revenues for 2008, producing a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of practically $1 billion in 2008, therefore bringing the Commercial sector marketplace decrease to $one.8 billion, or six.7 %. Nevada was the biggest loser in 2008, dropping nearly $1.3 billion, a lot more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most part, casino operators have been caught reasonably 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. Using the crest of year above yr market development throughout the region and the availability of enough credit and fairness resources, new construction and enlargement proliferated in latest several years. Today, confronted with the realities of declining, or at best stagnant desire, numerous of these projects are now considered over-leveraged and/or more than-sized. As a consequence numerous gaming businesses are trying to renegotiate their debt – created a lot more challenging by decrease valuations – whilst also paring down operational costs. The latter has grow to be a very problematic conundrum when dealing with the competitiveness, especially in those jurisdictions that are now vying for market shares with new rising casino projects in neighboring areas. A subject matter we talk about a lot more fully in the Point out by Point out evaluation part of this publication.

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

“How extended will these economic situations persist, and are we at the bottom nevertheless?” are queries no 1 seems to be answering nevertheless. What is distinct however is that most gaming jurisdictions will have to discover how to deal with a more compact pie.

This evaluation includes only gaming revenues of licensed casinos and pari-mutuel shops that offer casino video games, and not Indian gaming operations, card rooms, or tiny non-on line casino kind slot places. The whole article, including income tables is offered on our world wide web web page.

Input/Output Model

A important aspect that seems to have arisen from the ashes of this present pattern is that numerous on line casino tasks have been just too big to support them selves. The input, in phrases of investment decision bucks, was not proportional to the output, in conditions of web profit right after credit card debt provider, in contrast to previously reached outcomes. Far more and/or larger is not always better. Viewing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of far more extensive features in many other jurisdictions. The flaw in this method even so is that the fees connected with widening market penetration and occasioned-use, are drastically greater than those incurred to entice the foundation marketplace.

As daytripper marketplaces grow to be far more aggressive, casino venues will have to depend more and more on their in-property resort patrons, and dimension their houses (and anticipations) appropriately. Although B2Y started a significant pattern in generating up-marketplace mega-locations, there basically was not enough need on the Strip to warrant the several other comparable tasks that adopted that aimed at the very same specialized niche.

The trick is to strike a pleased medium in undertaking configurations which of training course demand considerably less of a ‘seat-of-pants’ technique, and a single that is a lot more studied. A shameless plug for advancement consultants like ourselves.

Other Gaming Routines

Though there are no published thorough data of American Indian gaming revenues, anecdotal proof seems to advise that this phase has been as tough strike as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, symbolizing a fall of about seven p.c, or practically $114 million, more than doubling the three.five % fall from the 12 months prior to. This marketplace is evidently nevertheless reeling from the ripple-impact of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions primarily based on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the preceding 12 months lowering .eight % in the 1st quarter, seven.five p.c in the second quarter, nine.5 percent in the third quarter, and sixteen.one per cent in the fourth quarter.

Some SEC reporting Indian gaming qualities report similar decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that even though calendar calendar year 2008 confirmed an nearly 2 % development price in gaming revenues, there was an eight.seven p.c drop in the third quarter and an almost 10 per cent drop in the fourth quarter of 2008, in contrast with 2007. Gaming income developments at close by Niagara Falls, Ontario were down one.five% in 2008 in contrast with 2007.

It is been a combined-bag for point out lotteries throughout the country. The North American Association of Condition & Provincial Lotteries stories that U.S. lotteries generated a total of $60.6 billion in sales in fiscal 2008, up about 3 p.c from the previous 12 months nevertheless some jurisdictions described decreases, most notably California, which confirmed an eight % drop. Inasmuch as some of these states are on various fiscal yr ends, it would seem to be that the knowledge does not reflect the affect of third and/or fourth quarter benefits.

In accordance to information presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 % to $13.seven billion in 2008, compared to $14.seven billion in 2007.

Prepared & Proposed New Expansions

As beforehand noted, it has been new gaming jurisdictions that have spawned a lot of the expansion in annual on line casino/racino revenues more than the many years, and their effect is apt to proceed into the around foreseeable future.

Miami Dade voters accepted a ballot concern that allows every single of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Puppy Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has nevertheless to announced its ideas. There are many other proposals becoming deemed that would even more grow casino development through the condition.

The condition lastly acquired all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ game on line casino positioned in Des Plaines just east of O’Hare. The new facility is not probably to open right up until 2010. There has also been some dialogue about permitting an boost 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 plan that allows for the growth of four on line casino gaming zones and slots at current horse and puppy tracks appears mired, as only one facility is presently beneath construction, while 3 other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table online games, together with a 2nd period thanks to open up in 2011 with 875 slots and twenty table game titles. The state has extended the software procedure for the other 3 zones until April, 2009.

There is even now a whole lot of ‘jockeying’ likely on, but the prospect of as several as 8 slot parlors and racinos seems to be back on the front-burner, but very likely not settled during the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most latest getting the 390 space M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new accommodations consist of two elements of the City Centre task, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino growth initiatives in Baton Rouge and Lake Charles, while delayed, are noted to still be on-monitor for opening this 12 months and/or early 2010.

There is a monthly bill below consideration that could far more than double Penn National’s slot devices to 3,000, as effectively as a proposal that would get rid of the restriction that slots be positioned inside of 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional citizens to let slots, may be contemplating moving to a far more hospitable town.

A referendum was accredited in November, 2008 that makes it possible for for the growth of five casinos with a whole of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the state experienced predicted.

Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has operate into different financing problems and although the resort portion is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back somewhat, is nonetheless on keep track of to open up this yr.

New England
Massachusetts, a sleeping-huge in phrases of market place possible, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot look to muster the political help. A modern examine concluded by Dartmouth College estimates that Massachusetts resident put in far more than $920 million very last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to develop casinos, nonetheless the matter is probably to be revisited, especially if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to continue augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would last but not least be designed, the profitable bidder indicated an incapability to make the necessary $370 million price, citing the recent lending climate, and throwing the undertaking back into the lap of the governor. Although the industry desire in the location could be considered really robust, the prospect of extra competitors from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, particularly contemplating that marginally considerably less than 30% of the web acquire is retained by the operator.

Programs to relocate Monticello Raceway into a resort intricate are being reconsidered perhaps owing to both the probable opening of at minimum one or perhaps two racino functions in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Nevertheless one more gaming proposal is being place forth in Ohio, soon after last year’s variation was turned down by the voters. This plan calls for one casino every in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision necessary of $250 million, as effectively as an preliminary licensing payment of $50 million, and a 33 p.c tax on gaming revenue.

The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 although Philadelphia’s two slot services even now wallow in a political mire, but are expected to start off development this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and include 300 online games, 140 rooms and a extensive selection of facilities.

Legislators are proposing a voter referendum that would amend the state structure to allow casino gambling in specified regions, as nicely as let gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an supply. State authorities has proffered the notion of allowing the resort to offer you casino online games, but this effort is in way too early a stage to have any traction one way or another.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the taking of lands into have confidence in on behalf of federally identified American Indian tribes has more stymied some new Class III gaming projects across the nation. Furthermore, there have been eleven Indian on line casino assignments rejected by the DOI very last 12 months simply because of its new rule that casinos have to be around sufficient to a reservation that tribal associates can work at them. It has been advised that the new Obama administration may be more sympathetic to the advancement of Indian gaming projects, but this situation has but to be dealt with.

In the meantime, there are other Course III tasks in the numerous levels of improvement. The Seneca casino project in Buffalo, NY, although operating a modest temporary facility, has delayed an already under construction long lasting facility till the market rebounds. They have also expressed an interest in establishing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could effect their plans for greater tasks. There are new Indian gaming assignments set to open in Michigan and Oklahoma this yr, and other people are in the preparing phase. Texas may possibly allow the reopening of Indian gaming facilities and allow other venue and there are strategies afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to three new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming profits in Atlantic Town has declined 7.six per cent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is locating itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been positioned in Atlantic Metropolis, the place it seemed as if it may well really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually however its market share was becoming encroached on, first by the advancement of a big Course III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future potential clients. It really is reliance on working day-trippers lulled it into a fake feeling of safety, and it now finds alone possessing to redefine its mission assertion to “spot vacation resort.”

The only problem with this approach nevertheless is that it is sick-geared up to pull it off. For all intents and purposes, Atlantic Town is beneath-roomed and/or more than-gamed. There is simply not enough working day-tripper market to go close to, and their successful investing area is tightening, as the peripheral populations northward now/will have much more completely ready obtain to a widened offer 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 true aggressive advantages are its hotel capability and the availability of table games, even though the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a spot resort the city demands to develop extra guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip qualities – accurate gaming places, in that they do not have much of a day-vacation market place, apart from for the ‘locals’ – have an common of .87 gaming positions for every visitor place while Atlantic City’s regular is 2.seventy four positions for every guest room.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, were the least impacted by the most current downturn. The Borgata knowledgeable a gaming profits drop of 1.six p.c, whilst Harrah’s Marina documented a four.9 % boost in comparison to 2007. Moreover, the hardest hit venues, specifically 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 houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a steady increase in gaming revenues through 2006, the metropolis seemed prime for further development, which precipitated planning for 4 new resort projects, every single of which have now been indefinitely delayed. Revel Amusement Group’s $2.5 billion venture remains an iron skeleton, Pinnacle Enjoyment has introduced it may look for to promote its razed Sands website, MGM Mirage has shelved its casino plans, and Penn Countrywide seems to have stopped its pursuit of the Bader Subject airport web site.

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