2008 National Professional Casino & Racino Gaming Income Analysis

A Period of Adjustment

Oops! That big hissing sound is the gaming balloon that had been growing more than the a long time, slowly and gradually dropping air. But, it has not been a tide that reduced all ships nonetheless, as some emerging and expanding gaming jurisdictions confirmed powerful growth in 2008.

Total, the commercial and racetrack on line casino sectors (excluding Indian gaming), experienced a three.5 % decline in gaming revenues for 2008, making a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of virtually $one billion in 2008, therefore bringing the Professional sector market decrease to $one.8 billion, or 6.seven percent. Nevada was the biggest loser in 2008, dropping almost $1.three billion, more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most part, on line casino operators have been caught reasonably flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the 3rd and fourth quarters when it genuinely nosedived. Driving the crest of year above year market place progress throughout the nation and the availability of enough credit rating and equity money, new design and enlargement proliferated in current a long time. Today, confronted with the realities of declining, or at greatest stagnant desire, several of these assignments are now regarded as above-leveraged and/or more than-sized. As a outcome several gaming companies are trying to renegotiate their personal debt – made much more challenging by decrease valuations – although also paring down operational fees. The latter has become a very problematic conundrum when working with the competitiveness, particularly in people jurisdictions that are now vying for industry shares with new emerging casino initiatives in neighboring regions. A matter we go over far more completely in the State by Condition investigation part of this publication.

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

“How long will these financial problems persist, and are we at the bottom however?” are inquiries no a single appears to be answering nevertheless. What is obvious however is that most gaming jurisdictions will have to find out how to offer with a smaller pie.

Note:
This examination consists of only gaming revenues of licensed casinos and pari-mutuel stores that offer casino video games, and not Indian gaming operations, card rooms, or little non-on line casino type slot locations. The complete article, such as revenue tables is accessible on our web web page.

Input/Output Model

A essential aspect that would seem to have arisen from the ashes of this current development is that a lot of on line casino tasks ended up just way too big to assistance themselves. www.wooricasinoda.com , in terms of expense pounds, was not proportional to the output, in conditions of web profit following debt services, compared to earlier reached outcomes. Far more and/or larger is not often much better. Looking at the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of more comprehensive 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 substantially higher than individuals incurred to attract the foundation market.

As daytripper marketplaces become more competitive, casino venues will have to count much more and more on their in-property hotel patrons, and dimension their houses (and anticipations) appropriately. Even though Steve Wynn began a significant craze in creating up-marketplace mega-locations, there merely was not adequate desire on the Strip to warrant the several other similar initiatives that adopted that aimed at the very same market.

The trick is to strike a pleased medium in venture configurations which of training course require significantly less of a ‘seat-of-pants’ approach, and one that is a lot more analyzed. A shameless plug for improvement consultants like ourselves.

Other Gaming Pursuits

Even though there are no revealed in depth knowledge of American Indian gaming revenues, anecdotal evidence seems to propose that this phase has been as challenging strike as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, representing a drop of about 7 per cent, or virtually $114 million, much more than doubling the three.five percent drop from the year just before. This marketplace is evidently nevertheless reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming studies that contributions based mostly on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the earlier calendar year decreasing .eight p.c in the 1st quarter, 7.5 p.c in the next quarter, nine.five % in the 3rd quarter, and sixteen.1 percent in the fourth quarter.

Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that even though calendar yr 2008 confirmed an virtually two per cent progress price in gaming revenues, there was an 8.seven percent decline in the third quarter and an virtually ten percent decline in the fourth quarter of 2008, in comparison with 2007. Gaming earnings tendencies at close by Niagara Falls, Ontario were down 1.5% in 2008 in comparison with 2007.

It truly is been a combined-bag for condition lotteries across the country. The North American Affiliation of Condition & Provincial Lotteries reviews that U.S. lotteries produced a complete of $sixty.6 billion in revenue in fiscal 2008, up about three percent from the earlier 12 months nevertheless some jurisdictions documented decreases, most notably California, which showed an 8 percent drop. Inasmuch as some of these states are on different fiscal year ends, it would seem that the data does not mirror the affect of 3rd and/or fourth quarter results.

In accordance to knowledge supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven percent to $thirteen.seven billion in 2008, vs . $14.7 billion in 2007.

Planned & Proposed New Expansions

As formerly mentioned, it has been new gaming jurisdictions that have spawned much of the development in once-a-year on line casino/racino revenues over the many years, and their effect is apt to proceed into the around long term.

Florida
Miami Dade voters accepted a ballot situation that permits each and every of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Canine Observe and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has yet to declared its programs. There are quite a few other proposals being regarded as that would further broaden on line casino growth through the condition.

Illinois
The condition lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ recreation on line casino situated 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 enabling an boost in for every area gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery system that allows for the growth of four casino gaming zones and slots at current horse and dog tracks seems mired, as only one facility is presently underneath design, while 3 other proposals ended up rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is found so near to the state line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table game titles, along with a 2nd section due to open in 2011 with 875 slots and twenty table video games. The state has prolonged the application procedure for the other a few zones till April, 2009.

Kentucky
There is nevertheless a lot of ‘jockeying’ heading on, but the prospect of as many as 8 slot parlors and racinos appears to be back again on the entrance-burner, but very likely not solved for the duration of the present legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most current being the 390 space M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new resorts contain two factors of the Metropolis Heart project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino development initiatives in Baton Rouge and Lake Charles, whilst delayed, are described to even now be on-track for opening this 12 months and/or early 2010.

Maine
There is a bill underneath thought that could much more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would remove the restriction that slots be situated inside 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to permit slots, might be taking into consideration moving to a more hospitable city.

Maryland
A referendum was accredited in November, 2008 that makes it possible for for the development of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the condition had expected.

Mississippi
Grand Soleil Casino Resort in Natchez had been slated to open up in 2008, but has operate into a variety of funding problems and while the lodge part is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back somewhat, is still on track to open this calendar year.

New England
Massachusetts, a sleeping-giant in terms of marketplace prospective, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to muster the political assistance. A recent examine completed by Dartmouth University estimates that Massachusetts resident expended a lot more than $920 million last calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to build casinos, even so the topic is likely to be revisited, particularly if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its alternatives.

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 continue augmenting purses with an further tax. The governor however, has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by making it possible for the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would lastly be created, the profitable bidder indicated an inability to make the essential $370 million payment, citing the existing lending local weather, and throwing the task again into the lap of the governor. Even though the market place need in the location could be regarded as fairly robust, the prospect of extra competitiveness from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, specifically contemplating that a bit much less than 30% of the net win is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort complicated are currently being reconsidered perhaps owing to the two the probable opening of at the very least one or probably two racino operations in the NY metro region, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

Ohio
But an additional gaming proposal is being set forth in Ohio, following last year’s variation was turned down by the voters. This strategy phone calls for a single casino each in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment necessary of $250 million, as nicely as an initial licensing fee of $50 million, and a 33 p.c tax on gaming income.

Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is expected to be operational in August, ’09 while Philadelphia’s two slot services nonetheless wallow in a political mire, but are expected to commence development this 12 months.

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

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to allow on line casino gambling in specified regions, as properly as allow 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 Lodges, who have reportedly tendered an provide. State federal government has proffered the notion of making it possible for the resort to supply on line casino game titles, but this energy is in also early a phase to have any traction one particular way or another.

Indian Gaming
A latest Supreme Court ruling that restricts the getting of lands into trust on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming assignments throughout the nation. In addition, there have been eleven Indian casino assignments turned down by the DOI last 12 months simply because of its new rule that casinos should be around adequate to a reservation that tribal customers can function at them. It has been recommended that the new Obama administration might be more sympathetic to the advancement of Indian gaming tasks, but this situation has yet to be resolved.

Meanwhile, there are other Class III assignments in the different phases of development. The Seneca on line casino task in Buffalo, NY, even though functioning a tiny temporary facility, has delayed an previously below development everlasting facility until the marketplace rebounds. They have also expressed an interest in developing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could affect their strategies for more substantial initiatives. There are new Indian gaming assignments established to open in Michigan and Oklahoma this 12 months, and other folks are in the preparing phase. Texas could enable the reopening of Indian gaming amenities and let other location and there are programs afoot by the Navajos in Arizona to assemble added casinos. California is poised to open two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Metropolis has declined 7.6 p.c, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding itself in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast have been found in Atlantic City, where it appeared as if it may actually even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually even so its market share was currently being encroached on, very first by the development of a large Course III gaming operation in Connecticut, and then another slots functions 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 planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening about Atlantic City’s long term prospective customers. It truly is reliance on working day-trippers lulled it into a untrue perception of protection, and it now finds by itself having to redefine its mission statement to “spot vacation resort.”

The only dilemma with this approach nevertheless is that it is unwell-equipped to pull it off. For all intents and reasons, Atlantic Metropolis is beneath-roomed and/or over-gamed. There is simply not enough working day-tripper market to go close to, and their successful buying and selling spot is tightening, as the peripheral populations northward now/will have more ready entry to a widened provide 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 genuine aggressive positive aspects are its hotel ability and the availability of desk games, though the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In buy to sufficiently compete as a vacation spot resort the city requirements to develop additional visitor rooms and not automatically gaming capability. By comparison, the Las Vegas Strip homes – true gaming locations, in that they do not have much of a day-journey market place, except for the ‘locals’ – have an common of .87 gaming positions per guest place although Atlantic City’s regular is two.seventy four positions per guest area.

It is not a coincidence that Atlantic City’s two greatest resorts, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, ended up the minimum impacted by the most recent downturn. The Borgata knowledgeable a gaming profits fall of 1.six p.c, even though Harrah’s Marina reported a four.9 % boost when compared to 2007. Furthermore, the toughest strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest number of rooms. In the meantime some of the venues are teetering on viability, which includes the the Trump houses and Resorts with the hoped for sale of the Tropicana has been even more delayed, and shedding valuation.

With a steady increase in gaming revenues by means of 2006, the city seemed primary for even more improvement, which precipitated planning for 4 new vacation resort assignments, every of which have now been indefinitely delayed. Revel Amusement Group’s $two.five billion task continues to be an iron skeleton, Pinnacle Amusement has introduced it may possibly seek to market its razed Sands internet site, MGM Mirage has shelved its on line casino strategies, and Penn National seems to have stopped its pursuit of the Bader Discipline airport site.