2008 National Business On line casino as well as Racino Online games Revenue Analysis

A Period of Adjustment

Oops! That huge hissing seem is the gaming balloon that experienced been growing in excess of the a long time, slowly getting rid of air. But, it has not been a tide that lowered all ships however, as some emerging and increasing gaming jurisdictions showed robust growth in 2008.

Overall, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a three.five p.c decrease 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 acquire of virtually $1 billion in 2008, thus bringing the Business sector marketplace decline to $one.8 billion, or 6.seven p.c. Nevada was the most significant loser in 2008, dropping nearly $1.three billion, much more than 50 % of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, casino operators ended up caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the third and fourth quarters when it truly nosedived. Riding the crest of year in excess of year market place progress throughout the region and the availability of ample credit history and fairness funds, new construction and enlargement proliferated in modern a long time. Today, confronted with the realities of declining, or at greatest stagnant demand, several of these assignments are now regarded as over-leveraged and/or above-sized. As a end result several gaming companies are attempting to renegotiate their financial debt – made much more challenging by decrease valuations – although also paring down operational charges. The latter has grow to be a really problematic conundrum when working with the competition, especially in those jurisdictions that are now vying for market place shares with new emerging casino initiatives in neighboring locations. A matter we discuss far more totally in the State by Condition investigation area of this publication.

As a consequence of these conditions the gaming market landscape is now strewn with impending fatalities. Among the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows each week.

“How lengthy will these economic situations persist, and are we at the bottom but?” are questions no a single appears to be answering yet. What is distinct however is that most gaming jurisdictions will have to understand how to offer with a scaled-down pie.

This analysis consists of only gaming revenues of licensed casinos and pari-mutuel retailers that supply casino online games, and not Indian gaming functions, card rooms, or tiny non-on line casino variety slot locations. The complete write-up, such as revenue tables is offered on our web webpage.

Enter/Output Product

A essential factor that appears to have arisen from the ashes of this existing pattern is that a lot of on line casino initiatives have been just way too huge to support them selves. The input, in phrases of investment decision pounds, was not proportional to the output, in phrases of internet earnings following personal debt services, compared to previously accomplished benefits. A lot more and/or bigger is not always greater. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more thorough features in numerous other jurisdictions. The flaw in this method nevertheless is that the costs connected with widening market place penetration and occasioned-use, are drastically higher than those incurred to entice the foundation market.

As daytripper markets turn out to be more aggressive, casino venues will have to count far more and a lot more on their in-property lodge patrons, and size their houses (and expectations) appropriately. Even though Steve Wynn started a main pattern in producing up-marketplace mega-locations, there simply was not adequate desire on the Strip to warrant the numerous other related tasks that followed that aimed at the same market.

The trick is to strike a happy medium in project configurations which of program demand less of a ‘seat-of-pants’ technique, and one particular that is a lot more studied. A shameless plug for development consultants like ourselves.

Other Gaming Actions

Despite the fact that there are no printed thorough data of American Indian gaming revenues, anecdotal evidence seems to recommend that this section has been as tough hit as the Industrial sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, symbolizing a drop of about seven p.c, or practically $114 million, much more than doubling the 3.5 % drop from the year prior to. This market place is seemingly nonetheless reeling from the ripple-result of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Office of Gaming reports that contributions based on a gaming income formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the preceding 12 months decreasing .eight percent in the very first quarter, seven.five percent in the 2nd quarter, 9.five percent in the 3rd quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, stories that although calendar calendar year 2008 confirmed an nearly two percent progress rate in gaming revenues, there was an 8.seven % decrease in the 3rd quarter and an nearly ten p.c drop in the fourth quarter of 2008, in comparison with 2007. Gaming earnings trends at nearby Niagara Falls, Ontario ended up down one.5% in 2008 when compared with 2007.

It’s been a mixed-bag for condition lotteries across the place. The North American Affiliation of Condition & Provincial Lotteries reports that U.S. lotteries produced a whole of $60.6 billion in product sales in fiscal 2008, up about three percent from the preceding 12 months but some jurisdictions described decreases, most notably California, which confirmed an eight p.c fall. Inasmuch as some of these states are on various fiscal yr finishes, it would look that the knowledge does not replicate the affect of 3rd and/or fourth quarter benefits.

According to knowledge provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling seven per cent to $13.7 billion in 2008, vs . $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned a lot of the growth in yearly casino/racino revenues more than the a long time, and their influence is apt to carry on into the in close proximity to future.

Miami Dade voters accepted a ballot issue that enables each and every of a few pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Puppy Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has yet to declared its programs. There are many other proposals being considered that would additional broaden on line casino advancement during the state.

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

The state’s expanded lottery program that permits for the development of 4 on line casino gaming zones and slots at existing horse and canine tracks seems mired, as only a single facility is presently beneath development, while 3 other proposals were rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is positioned so near to the state line that its parking great deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table video games, alongside with a second stage thanks to open in 2011 with 875 slots and 20 table online games. The state has extended the software process for the other three zones until April, 2009.

There is nevertheless a lot of ‘jockeying’ going on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be again on the entrance-burner, but most likely not solved during the present legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most modern becoming the 390 space M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Difficult Rock and new lodges include two parts of the City Middle project, and the Fountainebleau.

Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, while delayed, are reported to even now be on-monitor for opening this yr and/or early 2010.

There is a invoice beneath thought that could more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would eliminate the restriction that slots be found inside of 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing regional citizens to enable slots, may be considering transferring to a more hospitable city.

A referendum was authorized in November, 2008 that allows for the advancement of 5 casinos with a whole of 15,000 slots, and now the bidding war is afoot though it is not as intense as the state had expected.

Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has operate into a variety of financing issues and although the resort portion is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back somewhat, is even now on track to open up this 12 months.

New England
Massachusetts, a sleeping-big in conditions of marketplace prospective, is still maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t appear to muster the political support. A latest research accomplished by Dartmouth College estimates that Massachusetts resident spent 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 just lately declined an selection to build casinos, even so the matter is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also makes an attempt 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 just lately agreeing to carry on augmenting purses with an further tax. The governor however, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by making it possible for the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s four,500 VLT facility would finally be developed, the profitable bidder indicated an incapacity to make the necessary $370 million price, citing the recent lending local climate, and throwing the task again into the lap of the governor. Even though the marketplace need in the region could be regarded really sturdy, the prospect of additional opposition from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, specifically contemplating that slightly much less than 30% of the internet earn is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort intricate are getting reconsidered probably owing to equally the probable opening of at minimum 1 or possibly two racino functions in the NY metro location, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

But an additional gaming proposal is currently being place forth in Ohio, soon after last year’s version was turned down by the voters. This strategy phone calls for one particular on line casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure essential of $250 million, as well as an initial licensing fee of $50 million, and a 33 p.c tax on gaming earnings.

The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 whilst Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are anticipated to commence construction this calendar year.

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and include 300 online games, 140 rooms and a vast range of facilities.

Legislators are proposing a voter referendum that would amend the state constitution to let casino gambling in selected places, as effectively as allow gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Condition govt has proffered the notion of permitting the resort to supply on line casino games, but this hard work is in way too early a stage to have any traction one particular way or another.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the using of lands into have confidence in on behalf of federally recognized American Indian tribes has further stymied some new Course III gaming assignments throughout the nation. Additionally, there were eleven Indian on line casino initiatives rejected by the DOI previous year due to the fact of its new rule that casinos have to be near enough to a reservation that tribal members can function at them. It has been advised that the new Obama administration may well be a lot more sympathetic to the growth of Indian gaming tasks, but this issue has yet to be tackled.

In the meantime, there are other Course III initiatives in the different levels of improvement. The Seneca on line casino undertaking in Buffalo, NY, while working a tiny short-term facility, has delayed an currently beneath design long term facility until finally the marketplace rebounds. They have also expressed an curiosity in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could effect their strategies for greater tasks. There are new Indian gaming projects established to open up in Michigan and Oklahoma this 12 months, and other individuals are in the planning phase. Texas might let the reopening of Indian gaming facilities and permit other location and there are strategies afoot by the Navajos in Arizona to build extra casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Overall gaming revenue in Atlantic Metropolis has declined 7.six %, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is discovering itself in an powerful comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast were located in Atlantic City, in which it seemed as if it might truly even eclipse the Las Vegas Strip’s yearly gaming revenues.

Little by little nonetheless its market place share was currently being encroached on, 1st by the development of a big Class III gaming operation in Connecticut, and then another slots operations in Rhode Island, and then online video 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 operations in Philadelphia, the noose is tightening around Atlantic City’s long term potential clients. It’s reliance on working day-trippers lulled it into a untrue feeling of security, and it now finds alone possessing to redefine its mission assertion to “vacation spot resort.”

The only issue with this method even so is that it is ill-outfitted to pull it off. For all intents and functions, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is simply not adequate working day-tripper industry to go close to, and their powerful trading area is tightening, as the peripheral populations northward now/will have a lot more ready entry to a widened offer in New York (Yonkers, and before long at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only actual aggressive advantages are its resort capacity and the availability of desk games, although the latter is probably to eventuate in Pennsylvania, and probably Delaware. In purchase to adequately compete as a destination vacation resort the city requirements to develop extra guest rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip qualities – accurate gaming places, in that they do not have a lot of a working day-vacation marketplace, besides for the ‘locals’ – have an average of .87 gaming positions per visitor space while Atlantic City’s average is two.seventy four positions for every guest room.

It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, both of which additional new rooms in 2008, ended up the the very least impacted by the latest downturn. The Borgata skilled a gaming revenue fall of 1.6 %, although Harrah’s Marina documented a 4.9 percent improve in comparison to 2007. In addition, the toughest hit venues, namely 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, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a regular rise in gaming revenues by means of 2006, the city seemed key for even more improvement, which precipitated organizing for 4 new vacation resort projects, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion project remains an iron skeleton, Pinnacle Entertainment has introduced it might seek to promote its razed Sands web site, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport website.

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