2008 Countrywide Industrial Casino & Racino Gaming Income Analysis

A Interval of Adjustment

Oops! That large hissing seem is the gaming balloon that had been increasing over the a long time, little by little losing air. But, it has not been a tide that decreased all ships however, as some rising and growing gaming jurisdictions showed powerful development in 2008.

Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.5 percent decline in gaming revenues for 2008, making a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a gain of practically $1 billion in 2008, thereby bringing the Industrial sector industry decline to $1.8 billion, or six.7 p.c. Nevada was the biggest loser in 2008, dropping practically $1.three billion, much more than half of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most portion, casino operators were caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the third and fourth quarters when it truly nosedived. Using the crest of yr more than year market place growth throughout the region and the availability of sufficient credit score and fairness funds, new building and expansion proliferated in current years. Right now, confronted with the realities of declining, or at ideal stagnant demand, numerous of these initiatives are now regarded above-leveraged and/or more than-sized. As a result many gaming companies are trying to renegotiate their debt – produced much more challenging by lower valuations – whilst also paring down operational fees. The latter has turn into a really problematic conundrum when dealing with the competitors, specifically in those jurisdictions that are now vying for industry shares with new rising casino tasks in neighboring places. A subject matter we examine much more entirely in the Condition by Condition evaluation segment of this publication.

As a end result of these situations the gaming market landscape is now strewn with impending fatalities. Amid the far more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows every single 7 days.

“How extended will these economic problems persist, and are we at the base yet?” are inquiries no one appears to be answering nevertheless. What is clear however is that most gaming jurisdictions will have to find out how to offer with a smaller sized pie.

Be aware:
This evaluation contains only gaming revenues of licensed casinos and pari-mutuel stores that provide on line casino games, and not Indian gaming operations, card rooms, or tiny non-casino kind slot places. The entire write-up, like revenue tables is offered on our net webpage.

Enter/Output Product

A important factor that appears to have arisen from the ashes of this recent trend is that a lot of casino projects had been just as well large to help by themselves. The input, in conditions of investment decision dollars, was not proportional to the output, in terms of web profit after debt services, in comparison to beforehand attained results. More and/or greater is not constantly far better. Viewing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of a lot more comprehensive facilities in many other jurisdictions. The flaw in this strategy nonetheless is that the expenses associated with widening market penetration and occasioned-use, are considerably larger than people incurred to appeal to the base marketplace.

As daytripper marketplaces grow to be a lot more aggressive, casino venues will have to rely much more and far more on their in-house hotel patrons, and size their qualities (and anticipations) accordingly. Whilst Steve Wynn started a significant craze in making up-market mega-locations, there just was not sufficient need on the Strip to warrant the a lot of other equivalent projects that followed that aimed at the same area of interest.

The trick is to strike a content medium in venture configurations which of program require significantly less of a ‘seat-of-pants’ approach, and 1 that is a lot more researched. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Even though there are no released in depth knowledge of American Indian gaming revenues, anecdotal evidence appears to propose that this segment has been as difficult hit as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, representing a drop of about seven percent, or nearly $114 million, a lot more than doubling the 3.5 per cent drop from the yr before. This industry is apparently nevertheless reeling from the ripple-effect of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions based mostly on a gaming income method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the earlier 12 months reducing .8 percent in the 1st quarter, seven.five % in the 2nd quarter, 9.5 percent in the third quarter, and sixteen.one p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that even though calendar year 2008 showed an virtually 2 % expansion fee in gaming revenues, there was an 8.7 per cent decrease in the 3rd quarter and an virtually ten percent drop in the fourth quarter of 2008, when compared with 2007. Gaming profits developments at nearby Niagara Falls, Ontario were down one.five% in 2008 in comparison with 2007.

It’s been a combined-bag for state lotteries across the region. The North American Association of State & Provincial Lotteries reviews that U.S. lotteries generated a whole of $60.6 billion in income in fiscal 2008, up about three per cent from the earlier 12 months yet some jurisdictions documented decreases, most notably California, which confirmed an 8 % fall. Inasmuch as www.milkbet.com of these states are on numerous fiscal calendar year finishes, it would appear that the knowledge does not mirror the impact of 3rd and/or fourth quarter results.

According to information presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling seven percent to $thirteen.seven billion in 2008, compared to $14.seven billion in 2007.

Prepared & Proposed New Expansions

As earlier observed, it has been new gaming jurisdictions that have spawned much of the growth in annual casino/racino revenues in excess of the many years, and their effect is apt to carry on into the around potential.

Florida
Miami Dade voters accepted a ballot problem that enables each and every of a few pari-mutuels to have a casino facility of up to 2,000 slot devices. The Flagler Dog Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has however to announced its ideas. There are many other proposals becoming considered that would even more broaden casino development through the state.

Illinois
The state ultimately obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ recreation on line casino found in Des Plaines just east of O’Hare. The new facility is not most likely to open up until finally 2010. There has also been some discussion about making it possible for an boost in for each location gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery system that permits for the advancement of 4 casino gaming zones and slots at existing horse and pet tracks appears mired, as only one particular facility is presently under development, even though 3 other proposals ended up rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is found so near to the condition 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 ten desk online games, alongside with a second phase because of to open up in 2011 with 875 slots and 20 desk game titles. The state has extended the software method for the other three zones right up until April, 2009.

Kentucky
There is even now a good deal of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos seems to be again on the front-burner, but probably not fixed throughout the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most latest becoming the 390 area M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Challenging Rock and new accommodations consist of two elements of the Metropolis Middle project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino growth projects in Baton Rouge and Lake Charles, while delayed, are documented to even now be on-keep track of for opening this 12 months and/or early 2010.

Maine
There is a invoice below thought that could much more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would get rid of the restriction that slots be positioned in five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing local residents to enable slots, may be thinking about transferring to a much more hospitable town.

Maryland
A referendum was accredited in November, 2008 that enables for the growth of 5 casinos with a complete of fifteen,000 slots, and now the bidding war is afoot though it is not as intense as the state experienced anticipated.

Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has run into a variety of financing concerns and whilst the hotel portion is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back relatively, is nevertheless on monitor to open up this 12 months.

New England
Massachusetts, a sleeping-big in phrases of marketplace likely, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to be to muster the political help. A recent research accomplished by Dartmouth College estimates that Massachusetts resident put in 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 option to build casinos, nevertheless the subject is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by not too long ago agreeing to keep on augmenting purses with an extra tax. The governor nevertheless, 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 devices especially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would ultimately be developed, the profitable bidder indicated an incapability to make the required $370 million payment, citing the existing lending weather, and throwing the project back into the lap of the governor. Despite the fact that the market place demand from customers in the spot could be regarded fairly strong, the prospect of additional competitors from nearby Belmont could have an influence on Aqueduct’s underlining financial feasibility, specially considering that somewhat much less than 30% of the net get is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort intricate are currently being reconsidered perhaps owing to the two the probable opening of at the very least one or maybe two racino operations in the NY metro spot, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Ohio
Yet one more gaming proposal is getting place forth in Ohio, soon after previous year’s version was turned down by the voters. This program phone calls for a single on line casino each and every in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision needed of $250 million, as nicely as an original licensing payment 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 venture in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to start off development this year.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and consist of 300 online games, one hundred forty rooms and a wide selection of facilities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to permit on line casino gambling in selected regions, as nicely as allow gambling on American Indian lands in Texas and at present 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 making it possible for the vacation resort to offer you casino game titles, but this hard work is in as well early a phase to have any traction 1 way or one more.

Indian Gaming
A current Supreme Courtroom ruling that restricts the using of lands into have confidence in on behalf of federally identified American Indian tribes has more stymied some new Course III gaming assignments across the country. Additionally, there ended up eleven Indian casino projects rejected by the DOI previous 12 months because of its new rule that casinos have to be near enough to a reservation that tribal users can work at them. It has been advised that the new Obama administration may well be more sympathetic to the improvement of Indian gaming tasks, but this situation has yet to be tackled.

Meanwhile, there are other Class III tasks in the different phases of advancement. The Seneca casino undertaking in Buffalo, NY, even though functioning a tiny short-term facility, has delayed an presently beneath building long term facility right up until the industry rebounds. They have also expressed an fascination in creating a casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could affect their strategies for bigger assignments. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this year, and others are in the planning stage. Texas may possibly let the reopening of Indian gaming facilities and enable other venue and there are plans afoot by the Navajos in Arizona to assemble additional casinos. California is poised to open two to three new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic Town has declined 7.6 p.c, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding by itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were found in Atlantic Town, where it appeared as if it may well really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually even so its market share was becoming encroached on, 1st by the improvement of a big Class III gaming operation in Connecticut, and then an additional slots functions 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 prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening around Atlantic City’s foreseeable future potential clients. It truly is reliance on working day-trippers lulled it into a false sense of stability, and it now finds by itself obtaining to redefine its mission assertion to “destination resort.”

The only dilemma with this technique nevertheless is that it is sick-equipped to pull it off. For all intents and purposes, Atlantic Metropolis is below-roomed and/or in excess of-gamed. There is simply not sufficient day-tripper market place to go all around, and their powerful buying and selling location is tightening, as the peripheral populations northward now/will have more prepared obtain to a widened supply in New York (Yonkers, and quickly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only genuine aggressive rewards are its lodge capability and the availability of table games, even though the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In buy to adequately compete as a destination vacation resort the metropolis wants to build further visitor rooms and not always gaming ability. By comparison, the Las Vegas Strip houses – correct gaming locations, in that they do not have significantly of a working day-journey market place, besides for the ‘locals’ – have an common of .87 gaming positions per guest area even though Atlantic City’s regular is 2.74 positions per guest place.

It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata experienced a gaming profits drop of 1.6 p.c, although Harrah’s Marina documented a 4.9 % enhance compared to 2007. In addition, the toughest strike venues, specifically 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, like the the Trump homes and Resorts with the hoped for sale of the Tropicana has been even more delayed, and dropping valuation.

With a regular increase in gaming revenues by way of 2006, the city seemed key for further growth, which precipitated preparing for four new vacation resort tasks, every of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion venture remains an iron skeleton, Pinnacle Entertainment has introduced it may possibly look for to sell its razed Sands website, MGM Mirage has shelved its casino ideas, and Penn Nationwide appears to have stopped its pursuit of the Bader Field airport website.