2008 Nationwide Business Casino as well as Racino Games Earnings Analysis

A Period of time of Adjustment

Oops! That large hissing audio is the gaming balloon that had been developing over the several years, little by little dropping air. But, it has not been a tide that lowered all ships even so, as some emerging and increasing gaming jurisdictions showed robust expansion in 2008.

All round, the industrial and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.5 p.c decline in gaming revenues for 2008, generating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a gain of almost $1 billion in 2008, therefore bringing the Business sector industry drop to $1.8 billion, or six.seven %. Nevada was the most significant loser in 2008, dropping virtually $1.three billion, far more than 50 % of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, casino operators were caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not until finally the third and fourth quarters when it really nosedived. Using the crest of year more than calendar year market place expansion across the region and the availability of enough credit rating and equity resources, new construction and enlargement proliferated in current a long time. Today, confronted with the realities of declining, or at ideal stagnant need, a lot of of these tasks are now deemed over-leveraged and/or above-sized. As a outcome several gaming companies are attempting to renegotiate their financial debt – produced a lot more challenging by decrease valuations – while also paring down operational costs. The latter has turn into a really problematic conundrum when working with the competition, particularly in these jurisdictions that are now vying for marketplace shares with new rising casino projects in neighboring locations. A matter we talk about a lot more completely in the Point out by Point out evaluation part of this publication.

As a result of these problems the gaming industry landscape is now strewn with impending fatalities. Amid the more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the checklist grows every 7 days.

“How lengthy will these economic circumstances persist, and are we at the base however?” are queries no a single appears to be answering yet. What is obvious however is that most gaming jurisdictions will have to understand how to deal with a more compact pie.

Observe:
This analysis includes only gaming revenues of certified casinos and pari-mutuel outlets that offer you casino video games, and not Indian gaming operations, card rooms, or little non-on line casino variety slot locations. The complete article, like earnings tables is obtainable on our net website page.

Input/Output Product

A key factor that appears to have arisen from the ashes of this existing craze is that several casino projects had been just too huge to assistance on their own. The enter, in terms of expenditure pounds, was not proportional to the output, in phrases of net earnings soon after financial debt support, compared to formerly accomplished final results. Much more and/or even bigger is not always better. Seeing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of a lot more extensive amenities in a lot of other jurisdictions. The flaw in this strategy nevertheless is that the costs related with widening market place penetration and occasioned-use, are substantially increased than people incurred to entice the base market place.

As daytripper marketplaces turn into a lot more competitive, casino venues will have to rely much more and a lot more on their in-house lodge patrons, and measurement their homes (and anticipations) appropriately. Even though Steve Wynn started out a key development in generating up-industry mega-destinations, there simply was not sufficient demand on the Strip to warrant the numerous other comparable tasks that adopted that aimed at the exact same niche.

The trick is to strike a satisfied medium in venture configurations which of course demand significantly less of a ‘seat-of-pants’ strategy, and a single that is a lot more studied. A shameless plug for development consultants like ourselves.

Other Gaming Pursuits

Even though there are no published comprehensive info of American Indian gaming revenues, anecdotal proof seems to recommend that this section has been as tough hit as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, representing a drop of about 7 percent, or virtually $114 million, much more than doubling the 3.five % fall from the calendar year before. This market place is apparently still reeling from the ripple-influence of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming reports that contributions primarily based on a gaming income method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in comparison to the prior 12 months decreasing .eight p.c in the 1st quarter, seven.5 per cent in the second quarter, 9.5 % in the 3rd quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming qualities report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reviews that whilst calendar year 2008 showed an nearly 2 percent progress fee in gaming revenues, there was an 8.7 percent drop in the third quarter and an almost 10 % decrease in the fourth quarter of 2008, in contrast with 2007. Gaming revenue tendencies at nearby Niagara Falls, Ontario have been down one.five% in 2008 in comparison with 2007.

It is been a mixed-bag for point out lotteries across the nation. The North American Affiliation of Condition & Provincial Lotteries reviews that U.S. lotteries generated a complete of $sixty.6 billion in sales in fiscal 2008, up about three p.c from the preceding yr but some jurisdictions reported decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on various fiscal yr finishes, it would seem to be that the knowledge does not replicate the impact of 3rd and/or fourth quarter benefits.

According to data provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven p.c to $13.7 billion in 2008, as opposed to $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned significantly of the development in once-a-year on line casino/racino revenues above the years, and their effect is apt to keep on into the in close proximity to foreseeable future.

Florida
Miami Dade voters accepted a ballot issue that makes it possible for every of a few pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has however to announced its ideas. There are several other proposals getting considered that would more expand on line casino development during the point out.

https://www.happyluke.casino but not least acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ sport casino found in Des Plaines just east of O’Hare. The new facility is not probably to open until finally 2010. There has also been some discussion about allowing an improve in for each area 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 permits for the development of 4 on line casino gaming zones and slots at present horse and dog tracks seems mired, as only a single facility is presently underneath design, although a few other proposals had been 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 close to the condition line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk video games, together with a next section owing to open in 2011 with 875 slots and 20 table games. The condition has extended the application process for the other 3 zones till April, 2009.

Kentucky
There is still a lot of ‘jockeying’ likely on, but the prospect of as many as eight slot parlors and racinos seems to be back again on the front-burner, but most likely not solved throughout the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most modern getting the 390 place M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Hard Rock and new lodges contain two factors of the Metropolis Center task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino improvement assignments in Baton Rouge and Lake Charles, even though delayed, are reported to nonetheless be on-observe for opening this yr and/or early 2010.

Maine
There is a monthly bill under thing to consider that could a lot more than double Penn National’s slot machines to three,000, as effectively as a proposal that would take away the restriction that slots be found within 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood residents to let slots, may possibly be contemplating moving to a far more hospitable city.

Maryland
A referendum was accepted in November, 2008 that permits for the advancement of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot although it is not as intensive as the point out experienced anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has run into various funding concerns and while the lodge part is open up, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back somewhat, is nonetheless on monitor to open up this yr.

New England
Massachusetts, a sleeping-large in terms of industry possible, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to muster the political assistance. A latest study accomplished by Dartmouth College estimates that Massachusetts resident put in much more than $920 million last year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an choice to develop casinos, nevertheless the matter is most likely to be revisited, especially if Massachusetts decides to go ahead. There are also makes an attempt in Maine to rethink its options.

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 extra tax. The governor however, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot machines specifically at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would lastly be designed, the profitable bidder indicated an incapacity to make the required $370 million payment, citing the recent lending weather, and throwing the undertaking back again into the lap of the governor. Even though the market place need in the location could be deemed really strong, the prospect of extra competitiveness from nearby Belmont could have an affect on Aqueduct’s underlining financial feasibility, specifically thinking about that a bit significantly less than thirty% of the web earn is retained by the operator.

Plans to relocate Monticello Raceway into a resort complicated are getting reconsidered probably owing to equally the probable opening of at minimum a single or perhaps two racino functions in the NY metro region, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Ohio
Nevertheless an additional gaming proposal is getting put forth in Ohio, after previous year’s version was turned down by the voters. This strategy calls for a single casino each in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense essential of $250 million, as nicely as an initial licensing payment of $fifty million, and a 33 percent tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot services 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 Drop of 2009, and consist of 300 game titles, a hundred and forty rooms and a broad range of features.

Texas
Legislators are proposing a voter referendum that would amend the point out structure to allow on line casino gambling in selected areas, as properly as let gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. State federal government has proffered the idea of allowing the vacation resort to supply on line casino video games, but this hard work is in as well early a stage to have any traction one particular way or one more.

Indian Gaming
A current Supreme Courtroom ruling that restricts the getting of lands into have faith in on behalf of federally acknowledged American Indian tribes has more stymied some new Course III gaming assignments throughout the place. Furthermore, there ended up eleven Indian casino projects turned down by the DOI previous 12 months since of its new rule that casinos need to be in close proximity to ample to a reservation that tribal customers can function at them. It has been suggested that the new Obama administration may well be a lot more sympathetic to the advancement of Indian gaming tasks, but this issue has nevertheless to be resolved.

In the meantime, there are other Class III projects in the various levels of growth. The Seneca casino project in Buffalo, NY, whilst functioning a small momentary facility, has delayed an presently below construction long term facility until the market place rebounds. They have also expressed an curiosity in creating a casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could influence their plans for more substantial projects. There are new Indian gaming projects established to open in Michigan and Oklahoma this calendar year, and other individuals are in the organizing stage. Texas might let the reopening of Indian gaming facilities and let other location and there are strategies afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to 3 new Class III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming earnings in Atlantic Metropolis has declined 7.6 percent, from $4.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is locating itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up situated in Atlantic City, exactly where it appeared as if it may possibly really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Gradually however its marketplace share was being encroached upon, very first by the development of a large Class III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening all around Atlantic City’s foreseeable future potential clients. It really is reliance on day-trippers lulled it into a false feeling of protection, and it now finds by itself obtaining to redefine its mission assertion to “destination vacation resort.”

The only dilemma with this strategy even so is that it is sick-equipped to pull it off. For all intents and functions, Atlantic Metropolis is below-roomed and/or in excess of-gamed. There is just not ample day-tripper market to go all around, and their successful trading spot is tightening, as the peripheral populations northward now/will have far more all set entry to a widened offer 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 obtain, the city’s only genuine aggressive rewards are its resort capacity and the availability of desk online games, despite the fact that the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In order to adequately contend as a destination resort the city needs to develop extra visitor rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip homes – true gaming locations, in that they do not have much of a day-vacation market place, except for the ‘locals’ – have an common of .87 gaming positions for each guest space while Atlantic City’s common is 2.seventy four positions for each visitor room.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, have been the minimum impacted by the latest downturn. The Borgata skilled a gaming earnings drop of 1.6 %, even though Harrah’s Marina reported a 4.nine percent improve in contrast to 2007. Additionally, the toughest 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, such as the the Trump homes and Resorts with the hoped for sale of the Tropicana has been even more delayed, and shedding valuation.

With a continual increase in gaming revenues by means of 2006, the town appeared key for more growth, which precipitated planning for four new resort initiatives, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion venture stays an iron skeleton, Pinnacle Enjoyment has introduced it may look for to sell its razed Sands web site, MGM Mirage has shelved its on line casino strategies, and Penn Nationwide appears to have stopped its pursuit of the Bader Subject airport website.

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