2008 Nationwide Industrial On line casino & Racino Video games Income Investigation

A Period of time of Adjustment

Oops! That big hissing sound is the gaming balloon that had been increasing over the years, slowly dropping air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and growing gaming jurisdictions confirmed powerful expansion in 2008.

General, the commercial and racetrack casino sectors (excluding Indian gaming), experienced a 3.five % decrease in gaming revenues for 2008, generating a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a obtain of almost $1 billion in 2008, thus bringing the Industrial sector market decline to $one.8 billion, or six.seven p.c. Nevada was the biggest loser in 2008, dropping practically $1.three billion, far more than half of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most portion, on line casino operators have been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it truly nosedived. Driving the crest of yr in excess of calendar year industry development across the country and the availability of ample credit rating and equity cash, new building and expansion proliferated in current many years. These days, confronted with the realities of declining, or at very best stagnant demand from customers, several of these tasks are now regarded as more than-leveraged and/or over-sized. As a end result several gaming firms are making an attempt to renegotiate their credit card debt – manufactured more difficult by lower valuations – whilst also paring down operational fees. The latter has turn into a really problematic conundrum when dealing with the competitiveness, specially in those jurisdictions that are now vying for marketplace shares with new emerging on line casino projects in neighboring locations. A topic we talk about a lot more completely in the State by Point out analysis area of this publication.

As a result of these situations the gaming sector landscape is now strewn with impending fatalities. Amid the much more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the record grows every single 7 days.

“How lengthy will these economic circumstances persist, and are we at the bottom but?” are inquiries no one particular seems to be answering nevertheless. What is very clear however is that most gaming jurisdictions will have to learn how to offer with a scaled-down pie.

Be aware:
This examination consists of only gaming revenues of licensed casinos and pari-mutuel shops that supply on line casino game titles, and not Indian gaming functions, card rooms, or tiny non-casino sort slot areas. The complete write-up, like earnings tables is offered on our internet webpage.

Input/Output Model

A important aspect that seems to have arisen from the ashes of this present craze is that many casino projects had been just as well large to support on their own. The enter, in conditions of expenditure bucks, was not proportional to the output, in conditions of web earnings right after financial debt support, in contrast to beforehand reached benefits. Much more and/or bigger is not constantly far better. Seeing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of much more thorough facilities in several other jurisdictions. The flaw in this approach nevertheless is that the expenses connected with widening market penetration and occasioned-use, are substantially greater than individuals incurred to attract the base market.

As daytripper marketplaces turn out to be much more competitive, on line casino venues will have to rely more and much more on their in-residence lodge patrons, and size their houses (and expectations) appropriately. Although Steve Wynn started out a main craze in creating up-market mega-destinations, there basically was not ample desire on the Strip to warrant the many other equivalent assignments that adopted that aimed at the identical area of interest.

The trick is to strike a pleased medium in undertaking configurations which of course call for significantly less of a ‘seat-of-pants’ technique, and a single that is much more analyzed. A shameless plug for improvement consultants like ourselves.

Other Gaming Actions

Although there are no revealed comprehensive information of American Indian gaming revenues, anecdotal proof seems to recommend that this segment has been as challenging hit as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, symbolizing a drop of about 7 percent, or nearly $114 million, much more than doubling the 3.5 per cent fall from the 12 months ahead of. This marketplace is apparently nevertheless reeling from the ripple-influence of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section 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 compared to the earlier year lowering .8 per cent in the initial quarter, seven.five p.c in the second quarter, 9.5 per cent in the 3rd quarter, and 16.one per cent in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, studies that whilst calendar 12 months 2008 showed an practically two percent progress fee in gaming revenues, there was an eight.seven percent decrease in the 3rd quarter and an virtually 10 % decline in the fourth quarter of 2008, in contrast with 2007. Gaming earnings traits at close by Niagara Falls, Ontario have been down 1.5% in 2008 when compared with 2007.

It’s been a combined-bag for condition lotteries across the country. The North American Association of Condition & Provincial Lotteries reports that U.S. lotteries generated a total of $60.six billion in income in fiscal 2008, up about 3 per cent from the earlier yr but some jurisdictions described decreases, most notably California, which showed an 8 p.c drop. Inasmuch as some of these states are on a variety of fiscal calendar year finishes, it would look that the data does not replicate the affect of third and/or fourth quarter final results.

In accordance to information supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven percent to $13.7 billion in 2008, versus $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned significantly of the growth in annual on line casino/racino revenues more than the several years, and their affect is apt to proceed into the close to potential.

Florida
Miami Dade voters authorized a ballot issue that makes it possible for every single of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Puppy Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to announced its plans. There are numerous other proposals being deemed that would further broaden on line casino improvement throughout the point out.

Illinois
The condition last but not least got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ recreation on line casino found in Des Plaines just east of O’Hare. The new facility is not likely to open up until finally 2010. There has also been some discussion about making it possible for an enhance in per spot gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that enables for the improvement of four casino gaming zones and slots at present horse and pet tracks seems mired, as only one particular facility is presently beneath development, whilst three other proposals ended up rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so close to the state line that its parking great deal is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk game titles, alongside with a 2nd section thanks to open up in 2011 with 875 slots and 20 table video games. The condition has extended the application method for the other 3 zones right up until April, 2009.

Kentucky
There is still a good deal of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos seems to be again on the entrance-burner, but likely not settled throughout the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most modern being the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new resorts include two components of the City Middle task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino growth initiatives in Baton Rouge and Lake Charles, whilst delayed, are reported to nevertheless be on-track for opening this 12 months and/or early 2010.

Maine
There is a bill beneath consideration that could much more than double Penn National’s slot devices to three,000, as effectively as a proposal that would get rid of the restriction that slots be situated within five miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional people to permit slots, could be contemplating moving to a far more hospitable city.

Maryland
A referendum was authorized in November, 2008 that permits for the development of 5 casinos with a complete of fifteen,000 slots, and now the bidding war is afoot though it is not as extreme as the state had predicted.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into various financing problems and while the resort portion is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled again fairly, is still on monitor to open up this calendar year.

New England
Massachusetts, a sleeping-huge in terms of industry likely, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to muster the political assist. A current study finished by Dartmouth University estimates that Massachusetts resident put in more than $920 million final year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an choice to build casinos, even so the subject matter is likely to be revisited, especially if Massachusetts decides to go forward. 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 continue augmenting purses with an further tax. The governor even so, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would finally be produced, the profitable bidder indicated an incapability to make the required $370 million fee, citing the existing lending local weather, and throwing the task back again into the lap of the governor. Although the industry desire in the location could be deemed really robust, the prospect of added competitiveness from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, particularly taking into consideration that slightly significantly less than thirty% of the web win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort complex are being reconsidered maybe owing to the two the possible opening of at minimum one or maybe two racino functions in the NY metro location, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Ohio
But another gaming proposal is being place forth in Ohio, after very last year’s version was turned down by the voters. This prepare phone calls for a single casino every single in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision necessary of $250 million, as nicely as an preliminary licensing charge of $50 million, and a 33 p.c tax on gaming revenue.

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 whilst Philadelphia’s two slot facilities even now wallow in a political mire, but are expected to begin building this 12 months.

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

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to enable on line casino gambling in designated areas, as nicely as let gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer you. Condition government has proffered the notion of enabling the vacation resort to offer casino online games, but this work is in also early a stage to have any traction a single way or an additional.

Indian Gaming
A current Supreme Court ruling that restricts the taking of lands into believe in on behalf of federally recognized American Indian tribes has further stymied some new Class III gaming initiatives throughout the country. In addition, there had been eleven Indian casino initiatives rejected by the DOI very last calendar year since of its new rule that casinos must be near sufficient to a reservation that tribal associates can function at them. It has been recommended that the new Obama administration may possibly be more sympathetic to the improvement of Indian gaming projects, but this issue has nevertheless to be resolved.

In the meantime, there are other Course III assignments in the numerous levels of advancement. The Seneca on line casino undertaking in Buffalo, NY, even though working a modest short-term facility, has delayed an already beneath development long term facility until finally the market rebounds. They have also expressed an curiosity in developing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could impact their ideas for greater initiatives. There are new Indian gaming initiatives established to open in Michigan and Oklahoma this calendar year, and others are in the organizing stage. Texas could enable the reopening of Indian gaming services and permit other venue and there are programs afoot by the Navajos in Arizona to construct added casinos. California is poised to open up two to three new Course III casinos in 2009/10.

pgslot Squeeze

Whole gaming profits in Atlantic City has declined 7.six p.c, from $four.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is obtaining by itself in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast had been situated in Atlantic City, the place it appeared as if it may truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly even so its market share was currently being encroached upon, 1st by the improvement of a big Course III gaming operation in Connecticut, and then one more slots operations in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening all around Atlantic City’s long term prospects. It truly is reliance on day-trippers lulled it into a fake perception of security, and it now finds by itself possessing to redefine its mission assertion to “location vacation resort.”

The only difficulty with this method even so is that it is unwell-geared up to pull it off. For all intents and reasons, Atlantic City is below-roomed and/or above-gamed. There is merely not enough working day-tripper industry to go around, and their efficient buying and selling location is tightening, as the peripheral populations northward now/will have a lot more all set access to a widened offer in New York (Yonkers, and before long 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 competitive rewards are its lodge ability and the availability of desk games, though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a spot resort the metropolis wants to create additional guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip homes – correct gaming places, in that they do not have much of a day-trip industry, other than for the ‘locals’ – have an common of .87 gaming positions for each visitor area whilst Atlantic City’s average is 2.seventy four positions for each visitor space.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, ended up the minimum impacted by the most current downturn. The Borgata experienced a gaming revenue drop of 1.6 p.c, although Harrah’s Marina noted a four.9 p.c enhance in contrast to 2007. Furthermore, the most difficult strike venues, namely 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, including the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a constant rise in gaming revenues via 2006, the city seemed prime for even more development, which precipitated organizing for four new resort initiatives, each of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion undertaking continues to be an iron skeleton, Pinnacle Amusement has declared it may seek out to market its razed Sands web site, MGM Mirage has shelved its casino programs, and Penn National appears to have stopped its pursuit of the Bader Area airport internet site.

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