2008 Countrywide Commercial Gambling casino as well as Racino Game titles Income Analysis

A Interval of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been expanding in excess of the many years, slowly and gradually shedding air. But, it has not been a tide that lowered all ships nonetheless, as some rising and expanding gaming jurisdictions confirmed robust progress in 2008.

General, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.five p.c drop in gaming revenues for 2008, making a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a obtain of practically $1 billion in 2008, thereby bringing the Industrial sector market place drop to $one.eight billion, or 6.seven %. Nevada was the biggest loser in 2008, dropping practically $one.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most portion, casino operators ended up caught fairly flat-footed by the extent of the 2008 profits downturn, as it was not till the third and fourth quarters when it truly nosedived. Using the crest of 12 months in excess of calendar year market place development across the place and the availability of ample credit score and fairness funds, new construction and expansion proliferated in latest several years. Right now, confronted with the realities of declining, or at ideal stagnant need, several of these assignments are now regarded more than-leveraged and/or more than-sized. As a outcome many gaming organizations are making an attempt to renegotiate their credit card debt – made a lot more challenging by decrease valuations – even though also paring down operational charges. The latter has grow to be a quite problematic conundrum when dealing with the competition, specially in individuals jurisdictions that are now vying for market shares with new rising casino projects in neighboring areas. A matter we go over much more fully in the Condition by Condition investigation section of this publication.

As a consequence of these situations the gaming business landscape is now strewn with impending fatalities. Among the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the checklist grows every single week.

“How prolonged will these economic situations persist, and are we at the bottom but?” are queries no 1 seems to be answering yet. What is clear however is that most gaming jurisdictions will have to learn how to deal with a more compact pie.

Observe:
This evaluation consists of only gaming revenues of certified casinos and pari-mutuel shops that offer you on line casino online games, and not Indian gaming operations, card rooms, or small non-casino kind slot spots. The entire write-up, which includes profits tables is accessible on our web website page.

Enter/Output Product

A essential aspect that looks to have arisen from the ashes of this present trend is that numerous casino projects have been just way too large to assist on their own. The input, in phrases of expense pounds, was not proportional to the output, in phrases of web income after credit card debt provider, when compared to formerly attained results. A lot more and/or larger is not usually greater. Looking at the rise in non-gaming income 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 strategy however is that the expenses connected with widening market place penetration and occasioned-use, are considerably higher than those incurred to attract the foundation industry.

As daytripper markets turn into far more competitive, casino venues will have to rely far more and far more on their in-property hotel patrons, and measurement their qualities (and anticipations) appropriately. Although Steve Wynn commenced a major development in producing up-industry mega-locations, there just was not sufficient demand on the Strip to warrant the several other similar tasks that followed that aimed at the very same niche.

The trick is to strike a pleased medium in venture configurations which of system call for significantly less of a ‘seat-of-pants’ technique, and one that is more studied. A shameless plug for advancement consultants like ourselves.

Other Gaming Routines

Although there are no released thorough data of American Indian gaming revenues, anecdotal proof seems to suggest that this segment has been as challenging strike as the Business sector. The two Connecticut Indian gaming installations report slot income of $1.6 billion in 2008, representing a fall of about seven %, or virtually $114 million, a lot more than doubling the 3.5 % drop from the calendar year prior to. This market place is apparently even now 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 Department of Gaming reviews that contributions primarily based on a gaming earnings system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the earlier yr lowering .8 per cent in the initial quarter, seven.5 percent in the second quarter, nine.5 percent in the 3rd quarter, and sixteen.one % in the fourth quarter.

Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, stories that whilst calendar 12 months 2008 confirmed an practically 2 p.c expansion fee in gaming revenues, there was an eight.seven per cent decrease in the 3rd quarter and an almost ten % decline in the fourth quarter of 2008, in comparison with 2007. Gaming earnings developments at close by Niagara Falls, Ontario were down one.five% in 2008 when compared with 2007.

It truly is been a combined-bag for state lotteries across the place. The North American Affiliation of Condition & Provincial Lotteries reviews that U.S. lotteries produced a complete of $sixty.six billion in income in fiscal 2008, up about three per cent from the preceding calendar year yet some jurisdictions reported decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on different fiscal 12 months finishes, it would look that the data does not replicate the impact of 3rd and/or fourth quarter results.

According to information presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven per cent to $thirteen.7 billion in 2008, versus $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As previously observed, it has been new gaming jurisdictions that have spawned considerably of the expansion in annual casino/racino revenues above the a long time, and their affect is apt to proceed into the around long term.

Florida
Miami Dade voters accepted a ballot concern that makes it possible for 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 arranging opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has yet to declared its programs. There are numerous other proposals being regarded as that would additional expand casino growth all through the state.

Illinois
The state ultimately received around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ match casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open until finally 2010. There has also been some dialogue about allowing an boost in for every spot gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery software that makes it possible for for the development of four on line casino gaming zones and slots at existing horse and puppy tracks appears mired, as only one facility is presently below construction, while three other proposals were rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is located so shut to the state line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten desk game titles, along with a next section owing to open in 2011 with 875 slots and twenty desk games. The point out has prolonged the software procedure for the other three zones till April, 2009.

Kentucky
There is even now a good deal of ‘jockeying’ heading on, but the prospect of as numerous as eight slot parlors and racinos seems to be back again on the front-burner, but very likely not fixed in the course of the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most latest getting the 390 area M Resort in Henderson. There are expansions underway at both Caesars Palace and Hard Rock and new resorts incorporate two components of the City Centre undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino development initiatives in Baton Rouge and Lake Charles, even though delayed, are documented to nevertheless be on-keep track of for opening this calendar year and/or early 2010.

Maine
There is a bill underneath consideration that could far more than double Penn National’s slot devices to three,000, as effectively as a proposal that would eliminate the restriction that slots be found inside five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to enable slots, may be thinking about relocating to a more hospitable town.

Maryland
A referendum was accepted in November, 2008 that makes it possible for for the improvement 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 powerful as the point out had expected.

Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open up in 2008, but has operate into various financing troubles and even though the hotel part is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again considerably, is nevertheless on monitor to open up this yr.

New England
Massachusetts, a sleeping-giant in phrases of market place likely, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t look to muster the political support. A modern review accomplished by Dartmouth University estimates that Massachusetts resident invested much more than $920 million last calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to create casinos, even so the subject is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by lately agreeing to keep on augmenting purses with an added tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing system which ironically, can only be preserved by permitting the tracks to have slot machines especially 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 ultimately be designed, the winning bidder indicated an incapacity to make the needed $370 million payment, citing the present lending local weather, and throwing the task back into the lap of the governor. Despite the fact that the marketplace need in the region could be regarded fairly robust, the prospect of added competitiveness from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, specifically contemplating that slightly less than thirty% of the internet acquire is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort intricate are becoming reconsidered maybe owing to equally the probable opening of at least one particular or possibly two racino functions in the NY metro area, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Ohio
But one more gaming proposal is being place forth in Ohio, right after very last year’s model was turned down by the voters. This strategy calls for 1 casino every single in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense necessary of $250 million, as effectively as an initial licensing charge of $50 million, and a 33 % tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 while Philadelphia’s two slot facilities even now wallow in a political mire, but are anticipated to start off design this year.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and incorporate three hundred games, a hundred and forty rooms and a extensive range of features.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to allow casino gambling in selected regions, as properly as permit 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 Resorts, who have reportedly tendered an provide. State government has proffered the idea of making it possible for the resort to offer you casino game titles, but this energy is in as well early a phase to have any traction 1 way or one more.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the getting of lands into believe in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming initiatives throughout the country. Moreover, there were eleven Indian on line casino assignments rejected by the DOI previous 12 months simply because of its new rule that casinos should be near adequate to a reservation that tribal associates can perform at them. It has been proposed that the new Obama administration might be much more sympathetic to the development of Indian gaming initiatives, but this problem has nevertheless to be addressed.

In the meantime, there are other Class III tasks in the various stages of improvement. The Seneca on line casino task in Buffalo, NY, whilst functioning a tiny temporary facility, has delayed an currently below construction long lasting facility right up until the industry rebounds. They have also expressed an desire in creating a casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could affect their strategies for more substantial tasks. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this 12 months, and others are in the planning phase. Texas may enable the reopening of Indian gaming amenities and let other venue and there are programs afoot by the Navajos in Arizona to build extra casinos. California is poised to open two to three new Class III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming profits in Atlantic Metropolis has declined 7.six p.c, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining itself in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast had been positioned in Atlantic Metropolis, exactly where it seemed as if it may truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly nonetheless its market place share was currently being encroached upon, first by the development of a massive Class III gaming procedure in Connecticut, and then another 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 operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening all around Atlantic City’s future prospects. It is reliance on day-trippers lulled it into a bogus perception of protection, and it now finds itself possessing to redefine its mission statement to “spot vacation resort.”

The only difficulty with this method even so is that it is unwell-equipped to pull it off. For all intents and purposes, Atlantic Metropolis is beneath-roomed and/or in excess of-gamed. There is merely not ample working day-tripper marketplace to go close to, and their efficient buying and selling area is tightening, as the peripheral populations northward now/will have more all set entry to a widened provide in New York (Yonkers, and quickly 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 genuine aggressive positive aspects are its hotel ability and the availability of table game titles, though the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a location resort the metropolis needs to create additional visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip houses – true gaming locations, in that they do not have much of a working day-trip industry, besides for the ‘locals’ – have an common of .87 gaming positions for every guest space even though Atlantic City’s average is 2.74 positions for each visitor place.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, were the least impacted by the newest downturn. The Borgata skilled a gaming profits fall of 1.six percent, even though Harrah’s Marina reported a four.nine p.c boost in comparison to 2007. Additionally, the hardest strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest amount of rooms. In the meantime some of the venues are teetering on viability, including the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.

With www.okcasino.com/b2y/ in gaming revenues via 2006, the metropolis appeared key for further advancement, which precipitated organizing for four new vacation resort projects, every of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion venture remains an iron skeleton, Pinnacle Amusement has declared it may well seek to promote its razed Sands website, MGM Mirage has shelved its casino ideas, and Penn Countrywide appears to have stopped its pursuit of the Bader Field airport internet site.

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