2008 National Commercial Casino & Racino Gaming Profits Investigation

A Period of Adjustment

Oops! That big hissing seem is the gaming balloon that had been developing in excess of the a long time, slowly shedding air. But, it has not been a tide that reduced all ships nevertheless, as some emerging and growing gaming jurisdictions showed powerful progress in 2008.

Overall, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a three.5 p.c decrease in gaming revenues for 2008, producing a complete of $36.two billion, down some $800 million from 2007. 더나인카지노 was the Racino sector that has tempered this drop, as they confirmed a obtain of nearly $one billion in 2008, thus bringing the Business sector market place decline to $one.eight billion, or six.seven p.c. Nevada was the largest loser in 2008, dropping almost $one.three billion, far more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, on line casino operators were caught comparatively flat-footed by the extent of the 2008 revenue downturn, as it was not until the 3rd and fourth quarters when it really nosedived. Riding the crest of yr in excess of year industry development throughout the country and the availability of sufficient credit rating and fairness cash, new development and enlargement proliferated in modern several years. These days, faced with the realities of declining, or at ideal stagnant demand from customers, several of these initiatives are now considered over-leveraged and/or in excess of-sized. As a consequence many gaming firms are making an attempt to renegotiate their financial debt – made a lot more hard by lower valuations – whilst also paring down operational charges. The latter has become a very problematic conundrum when dealing with the opposition, particularly in people jurisdictions that are now vying for industry shares with new rising casino tasks in neighboring regions. A subject matter we go over far more completely in the Condition by Condition evaluation segment of this publication.

As a result of these problems the gaming industry landscape is now strewn with impending fatalities. Between the a lot more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows every 7 days.

“How prolonged will these economic problems persist, and are we at the bottom however?” are concerns no one appears to be answering however. What is obvious however is that most gaming jurisdictions will have to learn how to offer with a scaled-down pie.

This examination contains only gaming revenues of licensed casinos and pari-mutuel outlets that offer you casino games, and not Indian gaming functions, card rooms, or modest non-on line casino type slot areas. The whole write-up, which includes revenue tables is accessible on our world wide web page.

Enter/Output Design

A crucial aspect that appears to have arisen from the ashes of this recent pattern is that numerous casino tasks have been just as well huge to help themselves. The enter, in terms of investment bucks, was not proportional to the output, in terms of net revenue following personal debt support, in contrast to formerly attained final results. A lot more and/or bigger is not always much better. Seeing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of a lot more complete features in a lot of other jurisdictions. The flaw in this technique nonetheless is that the costs connected with widening market penetration and occasioned-use, are drastically larger than individuals incurred to appeal to the base marketplace.

As daytripper marketplaces turn out to be much more competitive, casino venues will have to rely a lot more and more on their in-home resort patrons, and measurement their qualities (and expectations) accordingly. Whilst Steve Wynn commenced a significant pattern in making up-market mega-destinations, there basically was not adequate need on the Strip to warrant the several other similar projects that followed that aimed at the same niche.

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

Other Gaming Activities

Although there are no printed comprehensive data of American Indian gaming revenues, anecdotal proof seems to recommend that this section has been as hard strike as the Professional sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, symbolizing a drop of about 7 p.c, or virtually $114 million, far more than doubling the 3.five percent fall from the calendar year before. This market place is apparently nevertheless reeling from the ripple-influence of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions based on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the earlier 12 months decreasing .eight per cent in the very first quarter, seven.5 p.c in the 2nd quarter, nine.five per cent in the third quarter, and 16.one percent in the fourth quarter.

Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reports that whilst calendar year 2008 confirmed an practically two percent progress rate in gaming revenues, there was an 8.seven % drop in the 3rd quarter and an practically ten % decrease in the fourth quarter of 2008, when compared with 2007. Gaming profits trends at close by Niagara Falls, Ontario had been down 1.five% in 2008 in comparison with 2007.

It is been a mixed-bag for point out lotteries across the place. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries created a whole of $60.six billion in sales in fiscal 2008, up about 3 % from the earlier 12 months yet some jurisdictions documented decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would look that the data does not mirror the affect of third and/or fourth quarter results.

According to data provided by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping seven percent to $thirteen.seven billion in 2008, as opposed to $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As earlier noted, it has been new gaming jurisdictions that have spawned much of the progress in annual on line casino/racino revenues in excess of the a long time, and their impact is apt to carry on into the close to future.

Miami Dade voters accepted a ballot situation that allows each and every of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Canine Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has however to declared its plans. There are quite a few other proposals being considered that would additional broaden casino development through the point out.

The condition last but not least obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ match casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open until finally 2010. There has also been some dialogue about making it possible for an enhance in per location gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

The state’s expanded lottery plan that makes it possible for for the development of 4 casino gaming zones and slots at existing horse and puppy tracks appears mired, as only one particular facility is presently under construction, although three other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so near to the state line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table video games, alongside with a second section owing to open in 2011 with 875 slots and 20 desk games. The condition has prolonged the application approach for the other a few zones until April, 2009.

There is still a good deal of ‘jockeying’ heading on, but the prospect of as a lot of as eight slot parlors and racinos appears to be again on the front-burner, but most likely not settled during the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most recent becoming the 390 space M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Difficult Rock and new hotels consist of two elements of the City Heart venture, and the Fountainebleau.

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

There is a monthly bill underneath consideration that could a lot more than double Penn National’s slot devices to 3,000, as properly as a proposal that would eliminate the restriction that slots be situated inside 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local people to enable slots, could be considering moving to a far more hospitable city.

A referendum was accepted in November, 2008 that allows for the growth of five casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the point out had expected.

Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has operate into numerous funding problems and even though the hotel part is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled again considerably, is nonetheless on track to open this yr.

New England
Massachusetts, a sleeping-large in terms of industry potential, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to appear to muster the political assistance. A current study completed by Dartmouth College estimates that Massachusetts resident put in a lot more than $920 million last 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to produce casinos, however the subject is most likely to be revisited, especially if Massachusetts decides to go ahead. There are also makes an attempt in Maine to reconsider its options.

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 keep on augmenting purses with an added tax. The governor even so, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by permitting 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 four,five hundred VLT facility would ultimately be designed, the profitable bidder indicated an incapability to make the required $370 million payment, citing the existing lending weather, and throwing the undertaking back into the lap of the governor. Even though the industry demand in the location could be deemed quite strong, the prospect of further competitiveness from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, particularly considering that somewhat considerably less than thirty% of the net get is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered probably owing to both the probable opening of at the very least a single or maybe two racino operations in the NY metro region, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Yet yet another gaming proposal is becoming put forth in Ohio, soon after previous year’s version was turned down by the voters. This strategy calls for 1 on line casino every in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision essential of $250 million, as effectively as an first licensing price of $fifty million, and a 33 per cent tax on gaming earnings.

The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to start building this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and incorporate 300 video games, a hundred and forty rooms and a wide variety of amenities.

Legislators are proposing a voter referendum that would amend the condition structure to let on line casino gambling in selected places, as properly as allow gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an provide. Point out authorities has proffered the notion of enabling the resort to offer casino game titles, but this energy is in as well early a stage to have any traction one way or another.

Indian Gaming
A current Supreme Court docket ruling that restricts the having of lands into have faith in on behalf of federally identified American Indian tribes has even more stymied some new Class III gaming assignments across the nation. Furthermore, there have been eleven Indian casino initiatives rejected by the DOI last 12 months since of its new rule that casinos must be close to sufficient to a reservation that tribal associates can work at them. It has been proposed that the new Obama administration may be a lot more sympathetic to the growth of Indian gaming projects, but this situation has yet to be resolved.

Meanwhile, there are other Course III assignments in the a variety of levels of growth. The Seneca on line casino venture in Buffalo, NY, while running a little temporary facility, has delayed an currently underneath design everlasting facility until finally the marketplace rebounds. They have also expressed an curiosity in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could impact their programs for greater initiatives. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this 12 months, and other folks are in the arranging phase. Texas may let the reopening of Indian gaming facilities and permit other location and there are plans afoot by the Navajos in Arizona to construct additional casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming revenue in Atlantic Town has declined seven.six %, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is finding alone in an extreme comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast were found in Atlantic Town, in which it appeared as if it may well actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually however its market share was being encroached upon, first by the improvement of a large Course III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening all around Atlantic City’s foreseeable future potential clients. It really is reliance on day-trippers lulled it into a bogus sense of protection, and it now finds alone having to redefine its mission statement to “location resort.”

The only problem with this strategy nonetheless is that it is unwell-geared up to pull it off. For all intents and purposes, Atlantic Town is below-roomed and/or in excess of-gamed. There is merely not enough working day-tripper market to go around, and their effective buying and selling region is tightening, as the peripheral populations northward now/will have far more prepared entry to a widened supply in New York (Yonkers, and shortly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only real competitive rewards are its lodge capacity and the availability of desk video games, though the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In buy to adequately compete as a vacation spot vacation resort the metropolis wants to create extra guest rooms and not automatically gaming potential. By comparison, the Las Vegas Strip properties – correct gaming places, in that they do not have a lot of a day-trip market place, other than for the ‘locals’ – have an typical of .87 gaming positions for each guest room while Atlantic City’s average is two.74 positions per guest room.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, have been the least impacted by the latest downturn. The Borgata seasoned a gaming revenue drop of 1.6 percent, whilst Harrah’s Marina documented a 4.9 percent improve in comparison to 2007. Additionally, the toughest 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 qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.

With a constant rise in gaming revenues by way of 2006, the town seemed key for additional growth, which precipitated planning for four new resort projects, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion project stays an iron skeleton, Pinnacle Enjoyment has announced it may find to promote its razed Sands site, MGM Mirage has shelved its on line casino plans, and Penn National appears to have stopped its pursuit of the Bader Subject airport site.