2008 Nationwide Business Gambling casino & Racino Video games Earnings Evaluation

A Period of time of Adjustment

Oops! That huge hissing sound is the gaming balloon that experienced been expanding above the several years, little by little shedding air. But, it has not been a tide that reduced all ships however, as some rising and expanding gaming jurisdictions showed robust development in 2008.

Overall, the industrial and racetrack on line casino sectors (excluding Indian gaming), skilled a 3.5 percent decrease in gaming revenues for 2008, producing a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of nearly $one billion in 2008, thus bringing the Industrial sector market decrease to $one.8 billion, or 6.7 per cent. Nevada was the largest loser in 2008, dropping virtually $1.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, on line casino operators had been caught relatively flat-footed by the extent of the 2008 revenue downturn, as it was not until finally the 3rd and fourth quarters when it really nosedived. Driving the crest of yr more than 12 months industry development throughout the place and the availability of sufficient credit and equity money, new design and growth proliferated in latest many years. Right now, confronted with the realities of declining, or at greatest stagnant desire, numerous of these initiatives are now considered above-leveraged and/or more than-sized. As a result numerous gaming companies are trying to renegotiate their credit card debt – manufactured much more difficult by reduced valuations – whilst also paring down operational expenses. The latter has become a quite problematic conundrum when working with the competitiveness, specifically in those jurisdictions that are now vying for industry shares with new rising on line casino projects in neighboring regions. A subject we discuss far more completely in the State by Point out investigation segment of this publication.

As a outcome of these situations the gaming business landscape is now strewn with impending fatalities. Amid the more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the record grows each week.

“How extended will these economic conditions persist, and are we at the base nevertheless?” are inquiries no one appears to be answering yet. What is distinct nonetheless is that most gaming jurisdictions will have to discover how to offer with a scaled-down pie.

Note:
This analysis involves only gaming revenues of licensed casinos and pari-mutuel retailers that offer casino games, and not Indian gaming functions, card rooms, or tiny non-casino variety slot locations. The whole write-up, such as profits tables is available on our internet page.

Input/Output Model

A crucial factor that looks to have arisen from the ashes of this current craze is that many casino projects were just also big to help themselves. The enter, in terms of investment bucks, was not proportional to the output, in terms of web revenue soon after credit card debt service, when compared to earlier reached final results. Far more and/or bigger is not usually better. Observing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of more thorough facilities in several other jurisdictions. The flaw in this technique however is that the costs related with widening market place penetration and occasioned-use, are considerably higher than individuals incurred to entice the foundation market.

As daytripper markets become more aggressive, on line casino venues will have to count more and much more on their in-home hotel patrons, and measurement their homes (and anticipations) accordingly. Although Steve Wynn started out a significant craze in producing up-marketplace mega-destinations, there basically was not sufficient demand on the Strip to warrant the numerous other comparable assignments that followed that aimed at the same area of interest.

The trick is to strike a happy medium in undertaking configurations which of training course demand much less of a ‘seat-of-pants’ approach, and 1 that is far more analyzed. A shameless plug for advancement consultants like ourselves.

Other Gaming Actions

Though there are no printed comprehensive knowledge of American Indian gaming revenues, anecdotal evidence seems to propose that this phase has been as difficult strike as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a drop of about seven %, or virtually $114 million, more than doubling the 3.5 per cent fall from the calendar year ahead of. This market place is apparently nonetheless reeling from the ripple-effect of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming studies that contributions primarily based on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the prior calendar year decreasing .eight p.c in the initial quarter, 7.5 percent in the next quarter, 9.5 p.c in the third quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming houses report equivalent decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, studies that although calendar calendar year 2008 showed an virtually 2 per cent progress price in gaming revenues, there was an eight.seven per cent decrease in the 3rd quarter and an virtually ten p.c decline in the fourth quarter of 2008, in contrast with 2007. Gaming earnings developments at close by Niagara Falls, Ontario ended up down one.5% in 2008 in comparison with 2007.

It’s been a combined-bag for condition lotteries throughout the nation. The North American Affiliation of Point out & Provincial Lotteries studies that U.S. lotteries produced a overall of $60.6 billion in revenue in fiscal 2008, up about three % from the earlier calendar year but some jurisdictions noted decreases, most notably California, which showed an 8 p.c fall. Inasmuch as some of these states are on numerous fiscal year ends, it would seem to be that the data does not reflect the affect of third and/or fourth quarter final results.

According to info offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 per cent to $thirteen.7 billion in 2008, vs . $14.seven billion in 2007.

Planned & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned a lot of the growth in once-a-year on line casino/racino revenues over the years, and their influence is apt to continue into the in close proximity to future.

Florida
Miami Dade voters accepted a ballot problem that permits each and every of a few pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has nevertheless to announced its ideas. There are numerous other proposals being deemed that would even more increase on line casino growth throughout the point out.

Illinois
The point out lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ game on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open right up until 2010. There has also been some dialogue about making it possible for an improve in for every location gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery software that allows for the improvement of four casino gaming zones and slots at existing horse and puppy tracks seems mired, as only one facility is presently beneath construction, even though a few other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is situated so shut to the condition line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table games, together with a second period owing to open up in 2011 with 875 slots and twenty table game titles. The state has prolonged the software process for the other a few zones until April, 2009.

Kentucky
There is still a great deal of ‘jockeying’ likely on, but the prospect of as many as 8 slot parlors and racinos seems to be back on the entrance-burner, but probably not solved throughout the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most modern being the 390 area M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Difficult Rock and new lodges contain two factors of the City Centre project, and the Fountainebleau.

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

Maine
There is a monthly bill beneath 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 positioned inside of five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local residents to enable slots, may possibly be contemplating transferring to a far more hospitable town.

Maryland
A referendum was approved in November, 2008 that permits for the improvement of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as powerful as the point out had expected.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into various funding troubles and although the lodge portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled again somewhat, is still on track to open this yr.

New England
Massachusetts, a sleeping-huge in conditions of market potential, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to be to muster the political assistance. A modern examine accomplished by Dartmouth University estimates that Massachusetts resident expended much more than $920 million very last yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an alternative to build casinos, nonetheless the subject is likely to be revisited, specifically if Massachusetts decides to go forward. There are also attempts 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 added tax. The governor nonetheless, 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 especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would ultimately be designed, the profitable bidder indicated an incapacity to make the essential $370 million payment, citing the current lending climate, and throwing the project back again into the lap of the governor. Although the marketplace demand from customers in the area could be considered really strong, the prospect of additional competitors from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially taking into consideration that a bit much less than 30% of the web earn is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort intricate are becoming reconsidered possibly owing to both the possible opening of at the very least 1 or perhaps two racino functions in the NY metro location, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
But an additional gaming proposal is getting put forth in Ohio, soon after previous year’s variation was turned down by the voters. This strategy phone calls for one particular casino each and every in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment needed of $250 million, as nicely as an initial licensing fee of $fifty million, and a 33 p.c 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 envisioned to be operational in August, ’09 although Philadelphia’s two slot services nonetheless wallow in a political mire, but are expected to commence building this yr.

mpo777 bonus at Deadwood is slated to open in the Drop of 2009, and incorporate three hundred online games, one hundred forty rooms and a vast assortment of facilities.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer you. Condition federal government has proffered the idea of allowing the resort to offer casino games, but this work is in also early a phase to have any traction a single way or an additional.

Indian Gaming
A current Supreme Court ruling that restricts the using of lands into have faith in on behalf of federally acknowledged American Indian tribes has more stymied some new Course III gaming assignments across the place. Moreover, there ended up eleven Indian on line casino tasks rejected by the DOI final year because of its new rule that casinos should be close to enough to a reservation that tribal members can function at them. It has been proposed that the new Obama administration may be far more sympathetic to the development of Indian gaming tasks, but this issue has nevertheless to be addressed.

Meanwhile, there are other Course III tasks in the various phases of advancement. The Seneca casino project in Buffalo, NY, while operating a modest short term facility, has delayed an presently beneath development long term facility until finally the marketplace rebounds. They have also expressed an curiosity in creating a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could influence their ideas for bigger assignments. There are new Indian gaming projects established to open up in Michigan and Oklahoma this 12 months, and other individuals are in the planning phase. Texas may permit the reopening of Indian gaming amenities and allow other venue and there are strategies afoot by the Navajos in Arizona to build additional casinos. California is poised to open up two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic City has declined 7.6 p.c, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining by itself in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up located in Atlantic Metropolis, where it looked as if it might truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly nevertheless its industry share was becoming encroached on, first by the development of a big Class III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening around Atlantic City’s potential prospective customers. It really is reliance on working day-trippers lulled it into a bogus feeling of security, and it now finds by itself getting to redefine its mission assertion to “destination resort.”

The only issue with this strategy nevertheless is that it is ill-outfitted to pull it off. For all intents and functions, Atlantic Town is beneath-roomed and/or over-gamed. There is simply not sufficient working day-tripper industry to go all around, and their powerful trading region is tightening, as the peripheral populations northward now/will have far more all set obtain to a widened source in New York (Yonkers, and soon 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 true aggressive rewards are its resort ability and the availability of table video games, despite the fact that the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In get to adequately contend as a spot resort the city needs to build additional visitor rooms and not essentially gaming capability. By comparison, the Las Vegas Strip qualities – real gaming places, in that they do not have much of a day-vacation industry, besides for the ‘locals’ – have an regular of .87 gaming positions for each guest space whilst Atlantic City’s typical is 2.seventy four positions per visitor space.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, had been the minimum impacted by the latest downturn. The Borgata skilled a gaming profits fall of 1.six per cent, while Harrah’s Marina reported a 4.9 percent enhance in contrast to 2007. Moreover, the hardest 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, like the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.

With a regular increase in gaming revenues through 2006, the metropolis appeared key for further advancement, which precipitated arranging for four new resort projects, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion task stays an iron skeleton, Pinnacle Leisure has declared it may possibly seek to market its razed Sands site, MGM Mirage has shelved its casino programs, and Penn Nationwide appears to have stopped its pursuit of the Bader Discipline airport site.