Countrywide Professional Online casino plus Racino Game playing Revenue Investigation

A Period of Adjustment

Oops! That huge hissing audio is the gaming balloon that experienced been growing over the a long time, gradually getting rid of air. But, it has not been a tide that reduced all ships however, as some emerging and growing gaming jurisdictions showed powerful growth in 2008.

All round, the industrial and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.five % decline in gaming revenues for 2008, making a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of virtually $one billion in 2008, therefore bringing the Professional sector market place decline to $1.eight billion, or percent. Nevada was the most significant loser in 2008, dropping virtually $1.3 billion, far more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, casino operators had been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the 3rd and fourth quarters when it actually nosedived. Driving the crest of calendar year more than 12 months market place expansion throughout the country and the availability of enough credit rating and fairness cash, new development and enlargement proliferated in modern several years. Right now, faced with the realities of declining, or at greatest stagnant need, several of these tasks are now deemed over-leveraged and/or above-sized. As a result a lot of gaming businesses are trying to renegotiate their credit card debt – manufactured much more challenging by lower valuations – although also paring down operational expenses. The latter has become a extremely problematic conundrum when dealing with the competitiveness, specially in those jurisdictions that are now vying for marketplace shares with new emerging on line casino assignments in neighboring areas. A subject we go over more fully in the State by Condition evaluation part of this publication.

As a outcome of these conditions the gaming industry landscape is now strewn with impending fatalities. Among the much more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the listing grows every 7 days.

“How long will persist, and are we at the base yet?” are inquiries no 1 seems to be answering but. What is obvious however is that most gaming jurisdictions will have to discover how to deal with a smaller pie.

This investigation involves only gaming revenues of accredited casinos and pari-mutuel outlets that supply on line casino video games, and not Indian gaming functions, card rooms, or modest non-casino variety slot areas. The entire write-up, like profits tables is offered on our web website page.

Input/Output Product

A important element that seems to have arisen from the ashes of this present pattern is that a lot of on line casino projects have been just too huge to help them selves. The input, in phrases of investment decision bucks, was not proportional to the output, in conditions of internet earnings soon after personal debt services, when compared to beforehand reached outcomes. More and/or bigger is not constantly far better. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of far more thorough amenities in many other jurisdictions. The flaw in this technique nevertheless is that the expenses related with widening market place penetration and occasioned-use, are considerably larger than people incurred to attract the base market place.

As daytripper marketplaces turn into more aggressive, casino venues will have to count much more and far more on their in-residence lodge patrons, and dimensions their homes (and anticipations) appropriately. Although Steve Wynn began a key pattern in creating up-market place mega-locations, there simply was not sufficient demand on the Strip to warrant the a lot of other related projects that followed that aimed at the very same specialized niche.

The trick is to strike a pleased medium in venture configurations which of training course demand less of a ‘seat-of-pants’ strategy, and one particular that is a lot more analyzed. A shameless plug for advancement consultants like ourselves.

Other Gaming Activities

Despite the fact that there are no revealed detailed data of American Indian gaming revenues, anecdotal proof appears to suggest that this phase has been as difficult strike as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, symbolizing a drop of about 7 per cent, or almost $114 million, more than doubling the 3.5 percent drop from the yr ahead of. This market place is apparently nonetheless reeling from the ripple-influence of a casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Division of Gaming reviews that contributions based mostly on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in contrast to the earlier 12 months decreasing .8 % in the very first quarter, 7.5 p.c in the second quarter, 9.5 per cent in the third quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, studies that even though calendar calendar year 2008 confirmed an virtually two per cent progress fee in gaming revenues, there was an 8.7 % drop in the 3rd quarter and an practically 10 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.five% in 2008 in contrast with 2007.

It truly is been a mixed-bag for point out lotteries throughout the nation. The North American Affiliation of State & Provincial Lotteries studies that U.S. lotteries generated a whole of $sixty.six billion in sales in fiscal 2008, up about three % from the earlier yr but some jurisdictions reported decreases, most notably California, which showed an 8 percent fall. Inasmuch as some of these states are on various fiscal yr finishes, it would seem to be that the information does not replicate the effect of 3rd and/or fourth quarter results.

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

Planned & Proposed New Expansions

As beforehand noted, it has been new gaming jurisdictions that have spawned considerably of the growth in once-a-year casino/racino revenues more than the years, and their effect is apt to continue into the around foreseeable future.

Miami Dade voters accredited a ballot situation that allows every of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Pet 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 nevertheless to announced its ideas. There are numerous other proposals getting regarded that would more expand on line casino improvement all through the state.

The condition finally acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ sport on line casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open right up until 2010. There has also been some dialogue about permitting an improve in per area gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

The state’s expanded lottery system that permits for the advancement of 4 casino gaming zones and slots at present horse and canine tracks appears mired, as only one facility is presently below design, whilst 3 other proposals had been 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 situated so shut to the state line that its parking great deal 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 desk video games, along with a 2nd phase due to open in 2011 with 875 slots and twenty desk online games. The condition has prolonged the application approach for the other three zones until finally April, 2009.

There is even now a great deal of ‘jockeying’ heading on, but the prospect of as many as 8 slot parlors and racinos appears to be back again on the entrance-burner, but very likely not resolved during the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest getting the 390 room M Resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new accommodations incorporate two parts of the Metropolis Middle venture, and the Fountainebleau.

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

There is a invoice beneath thought that could much more than double Penn National’s slot devices to three,000, as nicely as a proposal that would remove the restriction that slots be situated inside 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional citizens to allow slots, may possibly be taking into consideration relocating to a more hospitable city.

A referendum was accredited in November, 2008 that permits for the improvement of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot although it is not as powerful as the point out experienced predicted.

Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has run into numerous financing issues and even though the resort portion is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back considerably, is still on observe to open this year.

New England
Massachusetts, a sleeping-huge in terms of industry prospective, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to muster the political support. A modern research accomplished by Dartmouth University estimates that Massachusetts resident invested much more than $920 million final calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an choice to produce casinos, even so the subject matter is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also makes an attempt in Maine to rethink its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by just lately agreeing to continue augmenting purses with an additional tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by enabling the tracks to have slot equipment 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 lastly be developed, the winning bidder indicated an incapability to make the necessary $370 million price, citing the existing lending climate, and throwing the project back again into the lap of the governor. Even though the market place demand in the spot could be regarded as quite strong, the prospect of additional competitiveness from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, particularly contemplating that somewhat significantly less than 30% of the internet acquire is retained by the operator.

Ideas to relocate Monticello Raceway into a resort intricate are getting reconsidered possibly owing to equally the possible opening of at least 1 or possibly two racino functions in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Nevertheless another gaming proposal is being set forth in Ohio, after final year’s edition was turned down by the voters. This prepare phone calls for a single on line casino each in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense needed of $250 million, as well as an original licensing payment of $50 million, and a 33 percent tax on gaming profits.

The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is envisioned to be operational in August, ’09 while Philadelphia’s two slot amenities still wallow in a political mire, but are expected to begin development this yr.

South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and contain three hundred video games, a hundred and forty rooms and a broad selection of facilities.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an supply. Condition federal government has proffered the idea of allowing the vacation resort to offer on line casino game titles, but this hard work is in way too early a stage to have any traction 1 way or another.

Indian Gaming
A recent Supreme Court ruling that restricts the using of lands into have faith in on behalf of federally regarded American Indian tribes has more stymied some new Course III gaming assignments across the region. Moreover, there ended up eleven Indian on line casino initiatives turned down by the DOI final year since of its new rule that casinos must be in close proximity to sufficient to a reservation that tribal customers can operate at them. It has been proposed that the new Obama administration may well be more sympathetic to the development of Indian gaming tasks, but this issue has however to be addressed.

Meanwhile, there are other Class III assignments in the a variety of levels of development. The Seneca on line casino undertaking in Buffalo, NY, whilst operating a little short-term facility, has delayed an currently underneath building long lasting facility till the marketplace rebounds. They have also expressed an fascination in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could influence their ideas for bigger tasks. There are new Indian gaming projects set to open up in Michigan and Oklahoma this calendar year, and other folks are in the planning phase. Texas may permit the reopening of Indian gaming amenities and let other venue and there are programs 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 earnings in Atlantic Metropolis has declined seven.six percent, from $four.9 billion in 2007 to $four.five 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 had been found in Atlantic Town, in which it looked as if it may in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly even so its market share was being encroached on, very first by the improvement of a massive Course III gaming procedure in Connecticut, and then one more slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening around Atlantic City’s long term potential customers. It really is reliance on working day-trippers lulled it into a bogus perception of protection, and it now finds alone possessing to redefine its mission assertion to “vacation spot vacation resort.”

The only issue with this strategy nevertheless is that it is ill-outfitted to pull it off. For all intents and needs, Atlantic Town is below-roomed and/or in excess of-gamed. There is basically not enough day-tripper market place to go all around, and their effective buying and selling region is tightening, as the peripheral populations northward now/will have more all set obtain to a widened source in New York (Yonkers, and soon at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only true aggressive positive aspects are its hotel capacity and the availability of table online games, though the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a spot resort the city needs to produce added visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip houses – correct gaming destinations, in that they do not have a lot of a working day-excursion marketplace, other than for the ‘locals’ – have an typical of .87 gaming positions for each visitor space even though Atlantic City’s typical is two.seventy four positions for every guest area.

It is not a coincidence that Atlantic City’s two greatest hotels, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, ended up the minimum impacted by the most recent downturn. The Borgata knowledgeable a gaming income fall of 1.6 p.c, although Harrah’s Marina described a 4.9 percent improve when compared to 2007. Furthermore, the hardest hit 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, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been more delayed, and dropping valuation.

With a regular rise in gaming revenues by way of 2006, the town seemed primary for additional growth, which precipitated arranging for 4 new vacation resort projects, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion undertaking remains an iron skeleton, Pinnacle Enjoyment has announced it may well seek out to market its razed Sands internet site, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide seems to have stopped its pursuit of the Bader Field airport internet site.