Nationwide Professional Gambling casino plus Racino Gaming Revenue Evaluation

A Period of time of Adjustment

Oops! That big hissing audio is the gaming balloon that had been growing above the years, little by little losing air. But, it has not been a tide that reduced all ships however, as some emerging and growing gaming jurisdictions confirmed powerful progress in 2008.

Total, the business and racetrack casino sectors (excluding Indian gaming), skilled a 3.five per cent decline in gaming revenues for 2008, creating a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a achieve of almost $1 billion in 2008, thus bringing the Business sector market place drop to $1.8 billion, or six.7 %. Nevada was the biggest loser in 2008, dropping nearly $1.3 billion, a lot more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, on line casino operators were caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not until the third and fourth quarters when it really nosedived. Riding the crest of year over year market place expansion throughout the place and the availability of ample credit and fairness resources, new building and expansion proliferated in modern many years. Today, faced with the realities of declining, or at very best stagnant demand, a lot of of these initiatives are now considered more than-leveraged and/or above-sized. As a result a lot of gaming companies are trying to renegotiate their financial debt – produced more hard by reduced valuations – even though also paring down operational charges. The latter has turn out to be a really problematic conundrum when dealing with the competition, specially in people jurisdictions that are now vying for marketplace shares with new rising casino projects in neighboring locations. A subject matter we talk about much more completely in the State by Point out analysis section of this publication.

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

“How long will these economic circumstances persist, and are we at the bottom nevertheless?” are concerns no 1 appears to be answering nevertheless. What is very clear even so is that most gaming jurisdictions will have to understand how to deal with a scaled-down pie.

This investigation contains only gaming revenues of accredited casinos and pari-mutuel retailers that offer on line casino online games, and not Indian gaming functions, card rooms, or small non-on line casino type slot areas. The whole report, including revenue tables is accessible on our world wide web webpage.

Input/Output Design

A essential aspect that looks to have arisen from the ashes of this present development is that a lot of casino initiatives ended up just also big to support themselves. The input, in phrases of expenditure bucks, was not proportional to the output, in terms of internet earnings following financial debt support, when compared to earlier accomplished final results. More and/or even bigger is not usually better. Viewing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the growth of more thorough features in a lot of other jurisdictions. The flaw in this strategy even so is that the costs associated with widening market penetration and occasioned-use, are significantly increased than individuals incurred to appeal to the base market place.

As daytripper markets turn out to be more aggressive, on line casino venues will have to count far more and more on their in-property resort patrons, and dimensions their qualities (and anticipations) accordingly. Even though Steve Wynn started a significant trend in generating up-market mega-locations, there simply was not adequate need on the Strip to warrant the several other related tasks that adopted that aimed at the same market.

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

Other Gaming Routines

Even though there are no released detailed information of American Indian gaming revenues, anecdotal proof appears to suggest that this segment has been as difficult strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, symbolizing a drop of about seven %, or virtually $114 million, much more than doubling the 3.five p.c drop from the 12 months just before. This marketplace is seemingly nevertheless 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 Division of Gaming reviews that contributions based on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the preceding calendar year reducing .eight p.c in the initial quarter, 7.five per cent in the second quarter, 9.5 per cent in the third quarter, and sixteen.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that although calendar 12 months 2008 showed an almost 2 % development fee in gaming revenues, there was an per cent drop in the 3rd quarter and an virtually 10 % decline in the fourth quarter of 2008, in comparison with 2007. Gaming revenue developments at close by Niagara Falls, Ontario have been down one.5% in 2008 in contrast with 2007.

It is been a mixed-bag for point out lotteries across the nation. The North American Association of State & Provincial Lotteries reports that U.S. lotteries generated a total of $60.6 billion in income in fiscal 2008, up about 3 per cent from the previous year nevertheless some jurisdictions described decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on various fiscal yr finishes, it would seem that the data does not replicate the influence of third and/or fourth quarter final results.

According to info supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling 7 p.c to $ billion in 2008, compared to $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As earlier famous, it has been new gaming jurisdictions that have spawned considerably of the growth in annual casino/racino revenues over the years, and their impact is apt to continue into the in close proximity to foreseeable future.

Miami Dade voters authorized a ballot concern that permits every single of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Canine Monitor and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has nevertheless to announced its programs. There are many other proposals becoming deemed that would additional expand on line casino development all through the condition.

The point out lastly acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ match on line casino found in Des Plaines just east of O’Hare. The new facility is not most likely to open until finally 2010. There has also been some dialogue about allowing an increase in for each area gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

The state’s expanded lottery software that makes it possible for for the advancement of four casino gaming zones and slots at existing horse and pet tracks appears mired, as only one particular facility is presently under construction, whilst three other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the state line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table games, alongside with a next phase due to open up in 2011 with 875 slots and 20 desk online games. The condition has prolonged the software process for the other a few zones till April, 2009.

There is even now a whole lot of ‘jockeying’ likely on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be again on the front-burner, but likely not resolved for the duration of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most latest becoming the 390 space M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new resorts contain two parts of the Town Middle undertaking, and the Fountainebleau.

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

There is a monthly bill beneath thought that could more than double Penn National’s slot equipment to three,000, as well as a proposal that would eliminate the restriction that slots be found inside of 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional residents to enable slots, might be thinking about moving to a a lot more hospitable city.

A referendum was accredited 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 despite the fact that it is not as powerful as the point out experienced predicted.

Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has run into a variety of financing troubles and whilst the hotel part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back considerably, is nonetheless on observe to open this 12 months.

New England
Massachusetts, a sleeping-large in conditions of market potential, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to be to muster the political help. A modern study completed by Dartmouth University estimates that Massachusetts resident spent much more than $920 million final year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to create casinos, even so the subject is very likely to be revisited, specially 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 devices at racetracks by recently agreeing to proceed augmenting purses with an additional tax. The governor however, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would last but not least be developed, the successful bidder indicated an inability to make the required $370 million fee, citing the current lending local weather, and throwing the venture again into the lap of the governor. Although the marketplace need in the region could be regarded very strong, the prospect of added competition from nearby Belmont could have an influence on Aqueduct’s underlining financial feasibility, especially thinking about that slightly significantly less than 30% of the web get is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered possibly owing to each the probable opening of at the very least a single or possibly two racino functions in the NY metro region, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

Yet yet another gaming proposal is becoming set forth in Ohio, following very last year’s variation was turned down by the voters. This plan calls for one particular on line casino every single in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure necessary of $250 million, as effectively as an initial licensing charge of $50 million, and a 33 p.c tax on gaming earnings.

The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot amenities even now wallow in a political mire, but are predicted to begin building this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and contain 300 online games, a hundred and forty rooms and a broad range of features.

Legislators are proposing a voter referendum that would amend the condition structure to enable on line casino gambling in specified places, as effectively as enable gambling on American Indian lands in Texas and at existing 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 offer you. Point out govt has proffered the notion of making it possible for the vacation resort to offer you casino games, but this work is in too early a phase to have any traction a single way or another.

Indian Gaming
A modern Supreme Court docket ruling that restricts the having of lands into have confidence in on behalf of federally acknowledged American Indian tribes has even more stymied some new Course III gaming projects throughout the region. Furthermore, there have been eleven Indian on line casino projects rejected by the DOI previous calendar year because of its new rule that casinos have to be near ample to a reservation that tribal members can work at them. It has been proposed that the new Obama administration may possibly be more sympathetic to the development of Indian gaming projects, but this problem has yet to be dealt with.

Meanwhile, there are other Course III tasks in the different levels of development. The Seneca on line casino undertaking in Buffalo, NY, while operating a tiny temporary facility, has delayed an currently below design everlasting facility right up until the market rebounds. They have also expressed an interest in establishing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could affect their ideas for bigger projects. There are new Indian gaming projects established to open up in Michigan and Oklahoma this calendar year, and other people are in the organizing phase. Texas may permit the reopening of Indian gaming amenities and allow other venue and there are plans afoot by the Navajos in Arizona to construct further casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming earnings in Atlantic City has declined 7.six per cent, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is locating itself in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been found in Atlantic Metropolis, where it appeared as if it may possibly in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly and gradually nevertheless its market share was becoming encroached on, first by the development of a large Class III gaming procedure 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 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 around Atlantic City’s foreseeable future potential customers. It’s reliance on working day-trippers lulled it into a bogus feeling of stability, and it now finds itself possessing to redefine its mission statement to “spot resort.”

The only dilemma with this technique nonetheless is that it is sick-equipped to pull it off. For all intents and functions, Atlantic Metropolis is underneath-roomed and/or more than-gamed. There is merely not ample working day-tripper industry to go all around, and their effective buying and selling spot is tightening, as the peripheral populations northward now/will have far more completely ready access 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. than the ocean access, the city’s only real competitive positive aspects are its hotel potential and the availability of desk online games, even though the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a location resort the town wants to develop additional visitor rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip houses – real gaming locations, in that they do not have a lot of a working day-trip industry, besides for the ‘locals’ – have an typical of .87 gaming positions for each visitor space whilst Atlantic City’s average is 2.seventy four positions for each guest place.

It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, both of which included new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata skilled a gaming income fall of one.6 per cent, even though Harrah’s Marina reported a 4.9 % improve compared to 2007. Furthermore, the toughest hit 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, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a continual rise in gaming revenues by means of 2006, the town seemed primary for even more development, which precipitated planning for 4 new vacation resort assignments, every of which have now been indefinitely delayed. Revel Amusement Group’s $2.5 billion undertaking continues to be an iron skeleton, Pinnacle Entertainment has announced it might seek out to offer its razed Sands web site, MGM Mirage has shelved its on line casino programs, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport internet site.

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