2008 Nationwide Industrial Casino & Racino Gaming Income Analysis

A Time period of Adjustment

Oops! That big hissing sound is the gaming balloon that experienced been increasing in excess of the several years, slowly getting rid of air. But, it has not been a tide that reduced all ships nevertheless, as some rising and increasing gaming jurisdictions confirmed strong progress in 2008.

Overall, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a 3.five p.c drop 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 drop, as they confirmed a achieve of practically $one billion in 2008, thereby bringing the Professional sector market place decline to $1.8 billion, or six.7 p.c. Nevada was the most significant loser in 2008, dropping virtually $one.3 billion, more than fifty percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most portion, on line casino operators have been caught relatively flat-footed by the extent of the 2008 revenue downturn, as it was not until finally the third and fourth quarters when it really nosedived. Driving taruhan bola of year more than 12 months marketplace growth throughout the place and the availability of sufficient credit history and equity resources, new development and enlargement proliferated in recent years. Today, faced with the realities of declining, or at ideal stagnant need, a lot of of these initiatives are now considered above-leveraged and/or over-sized. As a outcome numerous gaming firms are making an attempt to renegotiate their debt – made more hard by lower valuations – although also paring down operational fees. The latter has turn into a quite problematic conundrum when working with the competitors, specifically in people jurisdictions that are now vying for market shares with new emerging on line casino projects in neighboring regions. A matter we examine far more totally in the Condition by State evaluation section of this publication.

As a consequence of these problems the gaming market landscape is now strewn with impending fatalities. Among the a lot more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every single week.

“How lengthy will these economic circumstances persist, and are we at the base however?” are concerns no one appears to be answering but. What is clear nonetheless is that most gaming jurisdictions will have to discover how to deal with a scaled-down pie.

Notice:
This analysis includes only gaming revenues of certified casinos and pari-mutuel stores that provide on line casino game titles, and not Indian gaming functions, card rooms, or tiny non-on line casino type slot places. The complete report, which includes income tables is obtainable on our world wide web website page.

Enter/Output Product

A essential factor that appears to have arisen from the ashes of this present craze is that numerous casino assignments had been just as well big to support by themselves. The enter, in terms of investment decision bucks, was not proportional to the output, in phrases of web earnings after debt services, in comparison to formerly reached benefits. A lot more and/or larger is not often far better. Viewing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of far more comprehensive amenities in numerous other jurisdictions. The flaw in this strategy however is that the charges linked with widening industry penetration and occasioned-use, are substantially increased than people incurred to draw in the foundation industry.

As daytripper markets grow to be much more competitive, on line casino venues will have to count much more and a lot more on their in-house hotel patrons, and dimension their houses (and anticipations) accordingly. Even though Steve Wynn commenced a main development in creating up-industry mega-destinations, there merely was not ample need on the Strip to warrant the a lot of other similar projects that followed that aimed at the same specialized niche.

The trick is to strike a satisfied medium in venture configurations which of program require considerably less of a ‘seat-of-pants’ approach, and one that is more studied. A shameless plug for improvement consultants like ourselves.

Other Gaming Routines

Despite the fact that there are no revealed detailed information of American Indian gaming revenues, anecdotal proof seems to propose that this segment has been as difficult hit as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $1.six billion in 2008, representing a fall of about 7 percent, or almost $114 million, a lot more than doubling the three.5 % fall from the calendar year just before. This market is evidently nevertheless reeling from the ripple-effect of a on line casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Office of Gaming reports that contributions dependent on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 compared to the preceding year reducing .eight p.c in the very first quarter, seven.five p.c in the 2nd quarter, nine.five per cent in the third quarter, and sixteen.one % in the fourth quarter.

Some SEC reporting Indian gaming properties report comparable decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, studies that while calendar yr 2008 confirmed an almost two per cent development fee in gaming revenues, there was an 8.seven % decline in the 3rd quarter and an nearly ten p.c decline in the fourth quarter of 2008, compared with 2007. Gaming income trends at close by Niagara Falls, Ontario were down 1.five% in 2008 compared with 2007.

It’s been a blended-bag for condition lotteries throughout the nation. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries generated a complete of $sixty.6 billion in income in fiscal 2008, up about 3 p.c from the prior year however some jurisdictions documented decreases, most notably California, which showed an eight percent fall. Inasmuch as some of these states are on various fiscal year ends, it would look that the knowledge does not reflect the effect of third and/or fourth quarter final results.

In accordance to data supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping seven p.c to $13.seven billion in 2008, vs . $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned significantly of the progress in annual casino/racino revenues above the years, and their affect is apt to keep on into the in close proximity to potential.

Florida
Miami Dade voters accepted a ballot concern that allows every single of 3 pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to declared its plans. There are numerous other proposals becoming regarded that would more broaden casino advancement throughout the condition.

Illinois
The point out lastly acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ sport on line casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open up until 2010. There has also been some dialogue about enabling an boost in for each location gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery program that enables for the development of four on line casino gaming zones and slots at existing horse and pet tracks appears mired, as only 1 facility is presently under building, while three other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is found so near to the point out line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk game titles, along with a 2nd stage thanks to open in 2011 with 875 slots and 20 desk video games. The state has extended the software method for the other 3 zones until finally April, 2009.

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

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most current becoming the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new resorts contain two parts of the City Heart task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino development projects in Baton Rouge and Lake Charles, even though delayed, are documented to even now be on-monitor for opening this 12 months and/or early 2010.

Maine
There is a bill beneath consideration that could more than double Penn National’s slot machines to 3,000, as properly as a proposal that would remove the restriction that slots be found within five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to allow slots, may be thinking about moving to a a lot more hospitable town.

Maryland
A referendum was authorized in November, 2008 that makes it possible for for the improvement of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot though it is not as extreme as the condition experienced anticipated.

Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into various financing problems and even though the resort part is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back again fairly, is still on keep track of to open up this 12 months.

New England
Massachusetts, a sleeping-giant in terms of marketplace possible, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to be to muster the political assistance. A current study finished by Dartmouth University estimates that Massachusetts resident spent a lot more than $920 million last yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to produce casinos, even so the subject matter is very likely to be revisited, specifically if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to proceed 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 enabling the tracks to have slot devices specifically at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it looked as if Aqueduct’s four,500 VLT facility would last but not least be produced, the winning bidder indicated an incapability to make the required $370 million payment, citing the present lending climate, and throwing the project back again into the lap of the governor. Although the market demand in the area could be regarded fairly robust, the prospect of additional competitors from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specifically considering that marginally considerably less than thirty% of the internet acquire is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort complicated are getting reconsidered probably owing to each the probable opening of at minimum one particular or possibly two racino functions in the NY metro spot, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Ohio
Yet another gaming proposal is currently being put forth in Ohio, following very last year’s version was turned down by the voters. This strategy calls for one casino each in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure needed of $250 million, as properly as an preliminary licensing fee of $50 million, and a 33 p.c tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are predicted to commence building this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and incorporate 300 video games, 140 rooms and a broad range of amenities.

Texas
Legislators are proposing a voter referendum that would amend the state constitution to let casino gambling in selected regions, as properly as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. State federal government has proffered the idea of allowing the vacation resort to offer you on line casino games, but this work is in as well early a stage to have any traction 1 way or another.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the using of lands into have faith in on behalf of federally identified American Indian tribes has more stymied some new Class III gaming projects throughout the region. Moreover, there have been eleven Indian on line casino assignments rejected by the DOI final yr simply because of its new rule that casinos must be in close proximity to ample to a reservation that tribal members can operate at them. It has been advised that the new Obama administration may possibly be more sympathetic to the improvement of Indian gaming projects, but this problem has however to be resolved.

Meanwhile, there are other Class III projects in the numerous stages of development. The Seneca casino project in Buffalo, NY, even though operating a small short term facility, has delayed an presently beneath construction long lasting facility until finally the market place rebounds. They have also expressed an interest in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is getting challenged, and could impact their strategies for greater initiatives. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this year, and other folks are in the planning stage. Texas might permit the reopening of Indian gaming amenities and let other location and there are ideas afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Metropolis has declined seven.6 per cent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding alone in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been found in Atlantic City, the place it seemed as if it may well really even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually nevertheless its market place share was becoming encroached upon, very first by the growth of a large Class III gaming operation in Connecticut, and then an additional slots operations 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 functions in Philadelphia, the noose is tightening close to Atlantic City’s potential prospective customers. It’s reliance on working day-trippers lulled it into a fake perception of stability, and it now finds itself getting to redefine its mission statement to “spot resort.”

The only difficulty with this technique nonetheless is that it is sick-geared up to pull it off. For all intents and functions, Atlantic City is beneath-roomed and/or more than-gamed. There is simply not adequate day-tripper marketplace to go around, and their effective investing spot is tightening, as the peripheral populations northward now/will have a lot more prepared access to a widened provide in New York (Yonkers, and shortly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only actual competitive benefits are its hotel capability and the availability of table games, although the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a spot resort the metropolis wants to produce extra guest rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip houses – true gaming places, in that they do not have significantly of a day-journey market, besides for the ‘locals’ – have an common of .87 gaming positions for each visitor area although Atlantic City’s average is 2.74 positions for every visitor space.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, had been the least impacted by the most current downturn. The Borgata experienced a gaming income drop of one.6 %, whilst Harrah’s Marina reported a four.nine percent enhance in comparison to 2007. Furthermore, the toughest strike venues, particularly 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 properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a steady rise in gaming revenues via 2006, the town seemed prime for even more growth, which precipitated preparing for 4 new resort projects, every single of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion task continues to be an iron skeleton, Pinnacle Enjoyment has declared it might seek to sell its razed Sands website, MGM Mirage has shelved its casino plans, and Penn Nationwide seems to have stopped its pursuit of the Bader Area airport web site.