National Professional Internet casino as well as Racino Games Revenue Analysis

A Period of time of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been growing more than the many years, slowly and gradually dropping air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and growing gaming jurisdictions confirmed powerful development in 2008.

Overall, the commercial and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.5 percent drop in gaming revenues for 2008, producing a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a achieve of nearly $one billion in 2008, thereby bringing the Business sector market place drop to $1.8 billion, or p.c. Nevada was the largest loser in 2008, dropping practically $one.3 billion, a lot more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, on line casino operators have been caught relatively flat-footed by the extent of the 2008 revenue downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Using the crest of yr more than 12 months industry progress throughout the place and the availability of ample credit score and fairness cash, new construction and growth proliferated in modern years. Right now, faced with the realities of declining, or at greatest stagnant demand from customers, a lot of of these assignments are now regarded above-leveraged and/or over-sized. As a end result numerous gaming businesses are making an attempt to renegotiate their debt – created much more hard by reduced valuations – although also paring down operational charges. The latter has become a quite problematic conundrum when dealing with the competitiveness, specially in people jurisdictions that are now vying for industry shares with new emerging on line casino tasks in neighboring areas. A subject we examine much more entirely in the Point out by State evaluation section of this publication.

As a end result of these situations the gaming industry landscape is now strewn with impending fatalities. Amid the more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows every single week.

“How lengthy will these economic problems persist, and are we at the base nevertheless?” are queries no a single appears to be answering nevertheless. What is obvious nevertheless is that most gaming jurisdictions will have to learn how to offer with a scaled-down pie.

This evaluation includes only gaming revenues of certified casinos and pari-mutuel retailers that supply casino game titles, and not Indian gaming operations, card rooms, or little non-on line casino type slot places. The entire report, which includes revenue tables is available on our world wide web website page.

Enter/Output Product

A crucial factor that would seem to have arisen from the ashes of this existing craze is that several casino projects were just too huge to assist themselves. The enter, in phrases of expenditure pounds, was not proportional to the output, in phrases of net earnings following financial debt support, in comparison to beforehand reached outcomes. A lot more and/or larger is not always better. Seeing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more complete amenities in several other jurisdictions. The flaw in this technique however is that the fees related with widening market penetration and occasioned-use, are drastically larger than people incurred to appeal to the base market.

As daytripper markets grow to be far more competitive, on line casino venues will have to rely far more and far more on their in-house lodge patrons, and dimension their houses (and anticipations) appropriately. Although Steve Wynn started out a key trend in generating up-marketplace mega-locations, there basically was not sufficient demand from customers on the Strip to warrant the a lot of other comparable tasks that adopted that aimed at the exact same area of interest.

The trick is to strike a pleased medium in venture configurations which of course demand much less of a ‘seat-of-pants’ approach, and one that is more studied. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Although there are no printed comprehensive info of American Indian gaming revenues, anecdotal evidence appears to advise that this segment has been as tough strike as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a fall of about seven per cent, or nearly $114 million, far more than doubling the 3.five percent fall from the year prior to. This industry is apparently nonetheless reeling from the ripple-result of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming stories that contributions primarily based on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the preceding 12 months reducing .8 p.c in the 1st quarter, seven.5 per cent in the 2nd quarter, 9.five p.c in the 3rd quarter, and % in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, stories that whilst calendar 12 months 2008 showed an nearly 2 p.c progress rate in gaming revenues, there was an percent drop in the third quarter and an almost 10 p.c decrease in the fourth quarter of 2008, compared with 2007. Gaming profits trends at close by Niagara Falls, Ontario were down 1.five% in 2008 in comparison with 2007.

It really is been a blended-bag for state lotteries across the country. The North American Association of State & Provincial Lotteries stories that U.S. lotteries produced a overall of $sixty.six billion in revenue in fiscal 2008, up about three p.c from the earlier yr but some jurisdictions documented decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on a variety of fiscal 12 months finishes, it would seem to be that the information does not replicate the affect of third and/or fourth quarter final results.

According to knowledge provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 percent to $thirteen.7 billion in 2008, as opposed to $ billion in 2007.

Planned & Proposed New Expansions

As earlier famous, it has been new gaming jurisdictions that have spawned much of the progress in annual casino/racino revenues above the years, and their effect is apt to continue into the around potential.

Miami Dade voters authorized a ballot situation that allows every of a few pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Canine Observe and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has yet to announced its ideas. There are numerous other proposals being regarded as that would additional grow on line casino growth throughout the point out.

The point out last but not least received about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ match on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open till 2010. There has also been some discussion about enabling an enhance in per location gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

The state’s expanded lottery software that enables for the development of four casino gaming zones and slots at existing horse and puppy tracks seems mired, as only 1 facility is presently below design, although 3 other proposals had been rescinded. Winning68 on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is found so close to the point out line that its parking lot is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table games, along with a second stage thanks to open up in 2011 with 875 slots and twenty table games. The point out has prolonged the application method for the other a few zones until finally April, 2009.

There is nevertheless a good deal of ‘jockeying’ going on, but the prospect of as many as 8 slot parlors and racinos seems to be back again on the entrance-burner, but probably not resolved in the course of the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most recent currently being the 390 area M Resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new accommodations incorporate two parts of the Town Heart venture, and the Fountainebleau.

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

There is a invoice below thing to consider that could more than double Penn National’s slot equipment to 3,000, as nicely as a proposal that would remove the restriction that slots be located inside five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional residents to allow slots, could be taking into consideration moving to a much more hospitable town.

A referendum was accepted in November, 2008 that permits for the development of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the condition had anticipated.

Grand Soleil Casino Resort in Natchez had been slated to open in 2008, but has run into different funding problems and even though the lodge part is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled again fairly, is nevertheless on observe to open up this 12 months.

New England
Massachusetts, a sleeping-giant in conditions of marketplace potential, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political help. A latest study concluded by Dartmouth University estimates that Massachusetts resident invested much more than $920 million final year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an alternative to build casinos, nonetheless the matter is likely to be revisited, particularly 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 lately agreeing to continue augmenting purses with an added tax. The governor even so, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by permitting the tracks to have slot machines especially 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 essential $370 million payment, citing the present lending climate, and throwing the undertaking again into the lap of the governor. Although the marketplace desire in the area could be considered really robust, the prospect of additional competitiveness from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, especially thinking about that marginally less than thirty% of the web acquire is retained by the operator.

Programs to relocate Monticello Raceway into a resort sophisticated are being reconsidered maybe owing to the two the possible opening of at the very least one particular or maybe two racino functions in the NY metro spot, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

But another gaming proposal is becoming place forth in Ohio, following very last year’s edition was turned down by the voters. This strategy phone calls for a single on line casino every single in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure necessary of $250 million, as nicely as an first licensing fee of $fifty million, and a 33 percent tax on gaming income.

The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot services even now wallow in a political mire, but are expected to commence development this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and contain three hundred games, 140 rooms and a wide range of features.

Legislators are proposing a voter referendum that would amend the condition structure to allow casino gambling in selected regions, as nicely as permit gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. State govt has proffered the idea of enabling the vacation resort to provide on line casino games, but this hard work is in also early a phase to have any traction one particular way or an additional.

Indian Gaming
A latest Supreme Court ruling that restricts the taking of lands into believe in on behalf of federally regarded American Indian tribes has additional stymied some new Course III gaming assignments throughout the region. Additionally, there have been eleven Indian casino tasks rejected by the DOI very last calendar year since of its new rule that casinos should be close to enough to a reservation that tribal customers can operate at them. It has been suggested that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming assignments, but this problem has yet to be addressed.

In the meantime, there are other Class III assignments in the a variety of phases of development. The Seneca casino venture in Buffalo, NY, even though running a small short term facility, has delayed an presently below construction permanent facility until finally the market rebounds. They have also expressed an desire in building a casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could affect their strategies for larger tasks. There are new Indian gaming tasks established to open in Michigan and Oklahoma this year, and other individuals are in the organizing stage. Texas might allow the reopening of Indian gaming facilities and enable other venue and there are ideas 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

Overall gaming revenue in Atlantic Town has declined seven.six per cent, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is locating alone in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up located in Atlantic City, exactly where it appeared as if it may well in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Little by little nevertheless its industry share was becoming encroached on, first by the growth of a huge Class III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening close to Atlantic City’s future potential clients. It is reliance on day-trippers lulled it into a fake sense of stability, and it now finds alone having to redefine its mission statement to “location vacation resort.”

The only problem with this method even so is that it is sick-outfitted to pull it off. For all intents and reasons, Atlantic City is underneath-roomed and/or over-gamed. There is basically not ample working day-tripper industry to go all around, and their powerful investing location is tightening, as the peripheral populations northward now/will have far more completely ready accessibility to a widened source 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 access, the city’s only genuine competitive rewards are its lodge ability and the availability of desk video games, despite the fact that the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In buy to adequately compete as a vacation spot vacation resort the metropolis requirements to create additional guest rooms and not always gaming capability. By comparison, the Las Vegas Strip houses – true gaming locations, in that they do not have considerably of a day-trip industry, besides for the ‘locals’ – have an average of .87 gaming positions for each guest place although Atlantic City’s regular is two.seventy four positions for each visitor space.

It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, ended up the minimum impacted by the most current downturn. The Borgata skilled a gaming revenue drop of 1.six p.c, while Harrah’s Marina noted a 4.nine per cent improve when compared to 2007. Additionally, the toughest strike venues, particularly 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, which includes the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.

With a regular increase in gaming revenues through 2006, the town seemed prime for more growth, which precipitated planning for four new resort tasks, each and every of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion venture remains an iron skeleton, Pinnacle Amusement has introduced it may well find to sell its razed Sands web site, MGM Mirage has shelved its casino strategies, and Penn Nationwide appears to have stopped its pursuit of the Bader Field airport internet site.