2008 Nationwide Business On line casino & Racino Gaming Income Examination

A Period of Adjustment

Oops! That large hissing audio is the gaming balloon that experienced been expanding more than the a long time, gradually losing air. But, it has not been a tide that decreased all ships nonetheless, as some rising and increasing gaming jurisdictions showed sturdy expansion in 2008.

General, the commercial and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five percent drop in gaming revenues for 2008, making a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a obtain of almost $1 billion in 2008, therefore bringing the Professional sector market place decrease to $one.8 billion, or 6.seven per cent. Trusted Casino Malaysia Vegas831 was the largest loser in 2008, dropping nearly $one.3 billion, much more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, casino operators were caught comparatively flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of 12 months in excess of yr industry progress across the nation and the availability of enough credit rating and fairness funds, new development and enlargement proliferated in modern years. These days, faced with the realities of declining, or at very best stagnant demand from customers, a lot of of these initiatives are now regarded as in excess of-leveraged and/or more than-sized. As a result numerous gaming firms are making an attempt to renegotiate their debt – created much more hard by reduced valuations – even though also paring down operational costs. The latter has turn out to be a really problematic conundrum when working with the opposition, specially in those jurisdictions that are now vying for industry shares with new rising casino initiatives in neighboring areas. A subject matter we talk about much more totally in the State by State analysis section of this publication.

As a outcome of these conditions the gaming business landscape is now strewn with impending fatalities. Amongst the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the checklist grows every single week.

“How long will these financial situations persist, and are we at the bottom but?” are concerns no one particular appears to be answering nevertheless. What is obvious nonetheless is that most gaming jurisdictions will have to discover how to deal with a smaller pie.

Be aware:
This investigation includes only gaming revenues of certified casinos and pari-mutuel retailers that offer you on line casino video games, and not Indian gaming functions, card rooms, or modest non-on line casino sort slot spots. The entire article, including earnings tables is accessible on our internet web page.

Enter/Output Design

A key element that would seem to have arisen from the ashes of this present development is that numerous casino initiatives were just way too large to assist them selves. The input, in conditions of investment decision bucks, was not proportional to the output, in terms of internet earnings right after debt support, in comparison to formerly achieved final results. More and/or larger is not always better. Viewing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of more comprehensive amenities in several other jurisdictions. The flaw in this strategy however is that the costs associated with widening market place penetration and occasioned-use, are significantly higher than individuals incurred to appeal to the base market place.

As daytripper markets grow to be a lot more competitive, casino venues will have to depend a lot more and more on their in-property hotel patrons, and size their houses (and expectations) appropriately. While Steve Wynn started a major craze in making up-marketplace mega-locations, there just was not adequate demand from customers on the Strip to warrant the many other equivalent tasks that adopted that aimed at the very same specialized niche.

The trick is to strike a pleased medium in project configurations which of program need significantly less of a ‘seat-of-pants’ strategy, and one particular that is much more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Pursuits

Though there are no published thorough knowledge of American Indian gaming revenues, anecdotal evidence appears to recommend that this section has been as difficult hit as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, symbolizing a drop of about seven per cent, or virtually $114 million, much more than doubling the three.five p.c drop from the 12 months before. This industry is apparently still reeling from the ripple-result 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 stories that contributions based mostly on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in contrast to the preceding calendar year lowering .eight percent in the first quarter, seven.5 % in the next quarter, 9.5 % in the 3rd quarter, and 16.1 % 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 12 months 2008 confirmed an nearly 2 per cent expansion fee in gaming revenues, there was an 8.7 per cent drop in the third quarter and an virtually 10 % decline in the fourth quarter of 2008, compared with 2007. Gaming profits traits at close by Niagara Falls, Ontario ended up down one.5% in 2008 in contrast with 2007.

It’s been a mixed-bag for state lotteries throughout the nation. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries generated a whole of $60.6 billion in product sales in fiscal 2008, up about three p.c from the previous yr yet some jurisdictions noted decreases, most notably California, which showed an 8 % fall. Inasmuch as some of these states are on numerous fiscal yr finishes, it would seem to be that the info does not reflect the effect of 3rd and/or fourth quarter results.

In accordance to information provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 % to $thirteen.7 billion in 2008, as opposed to $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As previously famous, it has been new gaming jurisdictions that have spawned much of the expansion in once-a-year casino/racino revenues over the many years, and their effect is apt to carry on into the around future.

Florida
Miami Dade voters authorized a ballot issue that allows each of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Canine Monitor and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has but to declared its strategies. There are several other proposals becoming regarded that would more broaden on line casino advancement during the point out.

Illinois
The condition lastly received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ sport casino situated in Des Plaines just east of O’Hare. The new facility is not very likely to open until 2010. There has also been some discussion about allowing an improve in for every location gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that allows for the advancement of four on line casino gaming zones and slots at current horse and canine tracks seems mired, as only one facility is presently beneath construction, while three 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 Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk game titles, alongside with a 2nd period because of to open up in 2011 with 875 slots and 20 table games. The condition has prolonged the application approach for the other three zones until April, 2009.

Kentucky
There is nonetheless a good deal of ‘jockeying’ going 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 resolved in the course of the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most recent getting the 390 place M Resort in Henderson. There are expansions underway at both Caesars Palace and Challenging Rock and new accommodations contain two elements of the Town Middle project, and the Fountainebleau.

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

Maine
There is a invoice below consideration that could a lot more than double Penn National’s slot machines to three,000, as properly as a proposal that would remove the restriction that slots be located within 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing local people to let slots, could be considering relocating to a far more hospitable city.

Maryland
A referendum was accepted in November, 2008 that permits for the advancement of five casinos with a complete of 15,000 slots, and now the bidding war is afoot though it is not as intense as the condition experienced anticipated.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has run into a variety of financing troubles and whilst the lodge part is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back somewhat, is nonetheless on track to open this calendar year.

New England
Massachusetts, a sleeping-giant in terms of market place potential, is still maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to look to muster the political assistance. A latest review completed by Dartmouth College estimates that Massachusetts resident invested a lot more than $920 million very last calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to produce casinos, even so the subject is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its choices.

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

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would finally be created, the successful bidder indicated an incapability to make the required $370 million price, citing the present lending weather, and throwing the task again into the lap of the governor. Although the market place need in the spot could be regarded as really sturdy, the prospect of further competitors from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, specially considering that slightly considerably less than thirty% of the net get is retained by the operator.

Ideas to relocate Monticello Raceway into a resort sophisticated are currently being reconsidered perhaps owing to equally the probable opening of at least a single or perhaps two racino operations in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
However yet another gaming proposal is being put forth in Ohio, soon after previous year’s edition was turned down by the voters. This plan phone calls for 1 on line casino each in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense necessary of $250 million, as well as an initial licensing charge of $50 million, and a 33 per cent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 while Philadelphia’s two slot amenities even now wallow in a political mire, but are expected to start building this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain three hundred game titles, one hundred forty rooms and a wide variety of features.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to enable casino gambling in designated locations, as well 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 Lodges, who have reportedly tendered an offer you. State government has proffered the idea of enabling the resort to offer you casino games, but this work is in as well early a stage to have any traction 1 way or an additional.

Indian Gaming
A current Supreme Court ruling that restricts the getting of lands into trust on behalf of federally acknowledged American Indian tribes has further stymied some new Course III gaming assignments across the region. Additionally, there ended up eleven Indian on line casino assignments turned down by the DOI previous yr since of its new rule that casinos must be in close proximity to enough to a reservation that tribal members can perform at them. It has been proposed that the new Obama administration may possibly be much more sympathetic to the improvement of Indian gaming tasks, but this concern has yet to be tackled.

In the meantime, there are other Class III tasks in the a variety of phases of improvement. The Seneca on line casino venture in Buffalo, NY, although operating a modest short-term facility, has delayed an previously below building everlasting facility right up until the marketplace rebounds. They have also expressed an desire in building a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could affect their plans for more substantial assignments. There are new Indian gaming projects established to open up in Michigan and Oklahoma this calendar year, and others are in the planning stage. Texas could allow the reopening of Indian gaming facilities and permit other location and there are programs afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open up two to 3 new Class III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Town has declined seven.six percent, from $four.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is discovering itself in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast were positioned in Atlantic City, in which it looked as if it may possibly really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Little by little nevertheless its industry share was becoming encroached upon, 1st by the growth of a big Class III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then movie 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 about Atlantic City’s future potential clients. It really is reliance on working day-trippers lulled it into a false perception of security, and it now finds itself having to redefine its mission statement to “spot vacation resort.”

The only issue with this approach even so is that it is sick-outfitted to pull it off. For all intents and purposes, Atlantic City is under-roomed and/or in excess of-gamed. There is just not ample working day-tripper market to go all around, and their powerful buying and selling spot is tightening, as the peripheral populations northward now/will have a lot more completely ready entry 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 entry, the city’s only genuine aggressive advantages are its lodge capacity and the availability of table video games, even though the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In purchase to adequately contend as a destination resort the metropolis needs to produce further visitor rooms and not essentially gaming capability. By comparison, the Las Vegas Strip homes – correct gaming places, in that they do not have much of a working day-journey market place, besides for the ‘locals’ – have an average of .87 gaming positions for each visitor place whilst Atlantic City’s common is 2.seventy four positions per visitor place.

It is not a coincidence that Atlantic City’s two largest lodges, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, were the minimum impacted by the newest downturn. The Borgata skilled a gaming profits drop of 1.6 %, whilst Harrah’s Marina reported a 4.nine per cent improve when compared to 2007. In addition, the most difficult strike venues, specifically 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 properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.

With a steady increase in gaming revenues via 2006, the city appeared prime for even more growth, which precipitated planning for four new resort tasks, each of which have now been indefinitely delayed. Revel Entertainment Group’s $two.five billion task remains an iron skeleton, Pinnacle Amusement has announced it may well seek out to promote its razed Sands web site, MGM Mirage has shelved its on line casino ideas, and Penn Nationwide appears to have stopped its pursuit of the Bader Area airport site.