Countrywide Professional Internet casino plus Racino Game Income Analysis

A Interval of Adjustment

Oops! That huge hissing seem is the gaming balloon that experienced been expanding more than the several years, gradually shedding air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and growing gaming jurisdictions showed strong expansion in 2008.

Overall, the industrial and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.five p.c drop in gaming revenues for 2008, producing a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a obtain of practically $one billion in 2008, thereby bringing the Business sector industry decline to $one.eight billion, or 6.seven %. Nevada was the largest loser in 2008, dropping almost $1.3 billion, a lot more than 50 percent of which stemmed from the Las Vegas Strip segment.

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For the most part, on line casino operators ended up caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not until finally the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of calendar year over calendar year industry development across the country and the availability of ample credit history and fairness cash, new design and enlargement proliferated in latest years. Nowadays, faced with the realities of declining, or at greatest stagnant need, many of these assignments are now regarded as over-leveraged and/or in excess of-sized. As a end result many gaming companies are trying to renegotiate their personal debt – produced a lot more hard by reduce valuations – while also paring down operational charges. The latter has turn out to be a really problematic conundrum when dealing with the opposition, particularly in those jurisdictions that are now vying for industry shares with new emerging casino tasks in neighboring regions. A subject matter we talk about far more totally in the Condition by Point out analysis segment of this publication.

As a consequence of these situations the gaming sector landscape is now strewn with impending fatalities. Amongst the more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the record grows every 7 days.

“How lengthy will these financial circumstances persist, and are we at the base yet?” are queries no a single appears to be answering but. What is obvious nevertheless is that most gaming jurisdictions will have to find out how to offer with a smaller sized pie.

Be aware:
This analysis contains only gaming revenues of licensed casinos and pari-mutuel retailers that supply casino video games, and not Indian gaming operations, card rooms, or tiny non-casino kind slot locations. The total write-up, like revenue tables is offered on our net webpage.

Input/Output Model

A essential factor that looks to have arisen from the ashes of this present trend is that a lot of casino tasks have been just as well huge to assistance themselves. The input, in terms of expense dollars, was not proportional to the output, in conditions of web revenue after credit card debt services, when compared to beforehand accomplished benefits. Far more and/or larger is not often better. Observing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of more extensive features in many other jurisdictions. The flaw in this method even so is that the fees associated with widening industry penetration and occasioned-use, are considerably increased than these incurred to draw in the base industry.

As daytripper marketplaces turn into much more aggressive, on line casino venues will have to rely far more and far more on their in-property lodge patrons, and dimension their houses (and expectations) appropriately. Even though Steve Wynn started out a key trend in generating up-marketplace mega-destinations, there basically was not sufficient demand on the Strip to warrant the a lot of other comparable assignments that followed that aimed at the very same specialized niche.

The trick is to strike a content medium in project configurations which of system require much less of a ‘seat-of-pants’ method, and one that is far more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Although there are no published thorough information of American Indian gaming revenues, anecdotal evidence appears to advise that this section has been as tough hit as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, representing a drop of about 7 percent, or nearly $114 million, more than doubling the 3.five % drop from the year just before. This marketplace is apparently even now reeling from the ripple-effect of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming studies that contributions primarily based on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in contrast to the prior year reducing .eight per cent in the 1st quarter, 7.five % in the next quarter, nine.five % in the third quarter, and 16.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reviews that whilst calendar calendar year 2008 confirmed an almost two p.c expansion charge in gaming revenues, there was an 8.seven % decline in the third quarter and an almost ten per cent decrease in the fourth quarter of 2008, compared with 2007. Gaming revenue tendencies at close by Niagara Falls, Ontario ended up down 1.five% in 2008 compared with 2007.

It is been a mixed-bag for point out lotteries throughout the region. The North American Affiliation of Condition & Provincial Lotteries reports that U.S. lotteries created a overall of $60.6 billion in revenue in fiscal 2008, up about 3 p.c from the prior yr yet some jurisdictions noted decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would seem to be that the knowledge does not mirror the affect of 3rd and/or fourth quarter final results.

In accordance to info presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 per cent to $13.7 billion in 2008, as opposed to $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As formerly mentioned, it has been new gaming jurisdictions that have spawned a lot of the growth in annual casino/racino revenues more than the several years, and their influence is apt to continue into the close to potential.

Florida
Miami Dade voters accepted a ballot concern that allows every single of a few pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Puppy Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has however to introduced its programs. There are many other proposals becoming deemed that would even more expand casino improvement throughout the condition.

Illinois
The point out finally obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,200+ match casino positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open until 2010. There has also been some discussion about allowing an boost in per location gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery program that enables for the advancement of four on line casino gaming zones and slots at present horse and canine tracks appears mired, as only 1 facility is presently underneath construction, although 3 other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is located so near to the state line that its parking lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table game titles, along with a second period owing to open in 2011 with 875 slots and 20 desk online games. The state has prolonged the application procedure for the other three zones right up until April, 2009.

Kentucky
There is nonetheless a great deal of ‘jockeying’ heading on, but the prospect of as many as eight slot parlors and racinos seems to be again on the front-burner, but most likely not settled during the present legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most latest becoming the 390 place M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new resorts incorporate two factors of the Metropolis Center project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino advancement projects in Baton Rouge and Lake Charles, although delayed, are reported to nevertheless be on-observe for opening this yr and/or early 2010.

Maine
There is a monthly bill underneath consideration that could much more than double Penn National’s slot equipment to 3,000, as properly as a proposal that would get rid of the restriction that slots be found in five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local citizens to permit slots, may be thinking about relocating to a much more hospitable town.

Maryland
A referendum was accepted in November, 2008 that allows for the development of 5 casinos with a whole of fifteen,000 slots, and now the bidding war is afoot although it is not as intense as the point out had expected.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has run into numerous funding troubles and even though the resort part is open up, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back considerably, is even now on keep track of to open this year.

New England
Massachusetts, a sleeping-big in conditions of industry likely, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to look to muster the political help. A latest review accomplished by Dartmouth University estimates that Massachusetts resident spent more than $920 million last calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an choice to develop casinos, nonetheless the subject is very likely to be revisited, specially if Massachusetts decides to go forward. 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 machines at racetracks by lately agreeing to keep on augmenting purses with an added tax. The governor nonetheless, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by making it possible for the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would last but not least be produced, the successful bidder indicated an lack of ability to make the required $370 million price, citing the current lending local climate, and throwing the task again into the lap of the governor. Even though the marketplace need in the location could be regarded as very robust, the prospect of additional competitiveness from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, specially taking into consideration that slightly significantly less than thirty% of the internet earn is retained by the operator.

Programs to relocate Monticello Raceway into a resort complicated are being reconsidered perhaps owing to each the probable opening of at minimum one particular or probably two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Ohio
However one more gaming proposal is getting put forth in Ohio, after very last year’s variation was turned down by the voters. This strategy calls for a single on line casino every single in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure essential of $250 million, as effectively as an initial licensing charge of $50 million, and a 33 percent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot amenities still wallow in a political mire, but are anticipated to start building this year.

South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and consist of three hundred game titles, a hundred and forty rooms and a broad variety of features.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. Point out government has proffered the idea of making it possible for the vacation resort to provide casino games, but this hard work is in also early a stage to have any traction 1 way or another.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the using of lands into have faith in on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming projects throughout the region. In addition, there have been eleven Indian casino projects rejected by the DOI very last yr because of its new rule that casinos must be close to ample to a reservation that tribal users can work at them. It has been recommended that the new Obama administration may possibly be much more sympathetic to the development of Indian gaming tasks, but this situation has but to be dealt with.

In the meantime, there are other Course III tasks in the different phases of development. The Seneca casino venture in Buffalo, NY, while operating a modest temporary facility, has delayed an presently below design permanent facility until the marketplace rebounds. They have also expressed an fascination in establishing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could impact their strategies for bigger tasks. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this 12 months, and other folks are in the planning phase. Texas could allow the reopening of Indian gaming services and allow other location and there are plans afoot by the Navajos in Arizona to assemble further casinos. California is poised to open two to 3 new Class III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming income in Atlantic Metropolis has declined 7.6 percent, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining itself in an intense comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast were found in Atlantic Town, exactly where it looked as if it may possibly in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually nonetheless its market place share was getting encroached on, 1st by the advancement of a huge Course III gaming operation in Connecticut, and then another slots operations in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with the 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 around Atlantic City’s foreseeable future potential customers. It truly is reliance on day-trippers lulled it into a fake feeling of safety, and it now finds itself possessing to redefine its mission assertion to “location vacation resort.”

The only problem with this method nonetheless is that it is ill-outfitted to pull it off. For all intents and purposes, Atlantic Metropolis is underneath-roomed and/or over-gamed. There is simply not enough working day-tripper market place to go all around, and their powerful buying and selling region is tightening, as the peripheral populations northward now/will have much more prepared accessibility to a widened supply in New York (Yonkers, and shortly at Aqueduct and probably 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 online games, despite the fact that the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In purchase to adequately compete as a destination resort the city demands to build additional guest rooms and not automatically gaming potential. By comparison, the Las Vegas Strip properties – true gaming destinations, in that they do not have much of a day-trip industry, except for the ‘locals’ – have an typical of .87 gaming positions for every guest space even though Atlantic City’s common is two.seventy four positions per guest room.

It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, were the minimum impacted by the most current downturn. The Borgata experienced a gaming revenue drop of one.6 p.c, while Harrah’s Marina reported a four.nine percent boost when compared to 2007. Additionally, the most difficult strike venues, particularly 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 qualities and Resorts with the hoped for sale of the Tropicana has been more delayed, and losing valuation.

With a constant rise in gaming revenues via 2006, the metropolis seemed primary for additional growth, which precipitated arranging for 4 new resort tasks, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion task continues to be an iron skeleton, Pinnacle Amusement has announced it may well seek to offer its razed Sands website, MGM Mirage has shelved its casino programs, and Penn National appears to have stopped its pursuit of the Bader Field airport web site.

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