2008 Countrywide Business Gambling casino & Racino Game titles Earnings Evaluation

A Period of time of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been developing above the years, gradually getting rid of air. But, it has not been a tide that reduced all ships nevertheless, as some emerging and growing gaming jurisdictions confirmed robust progress in 2008.

General, the business and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.5 % decline in gaming revenues for 2008, producing a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a gain of virtually $one billion in 2008, thus bringing the Business sector marketplace decline to $1.8 billion, or six.seven percent. Nevada was the biggest loser in 2008, dropping practically $1.three billion, far more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, casino operators had been caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not until finally the 3rd and fourth quarters when it truly nosedived. Riding the crest of 12 months above calendar year marketplace growth across the place and the availability of sufficient credit score and fairness money, new design and expansion proliferated in recent several years. These days, confronted with the realities of declining, or at very best stagnant demand from customers, many of these tasks are now regarded in excess of-leveraged and/or more than-sized. As a outcome numerous gaming businesses are trying to renegotiate their financial debt – created far more tough by reduced valuations – although also paring down operational costs. The latter has turn into a very problematic conundrum when dealing with the competition, specially in those jurisdictions that are now vying for industry shares with new rising casino tasks in neighboring places. A subject matter we discuss far more entirely in the Point out by Point out evaluation area of this publication.

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

“How prolonged will these financial circumstances persist, and are we at the base yet?” are queries no one particular appears to be answering yet. What is distinct even so is that most gaming jurisdictions will have to find out how to deal with a more compact pie.

Be aware:
This investigation involves only gaming revenues of certified casinos and pari-mutuel outlets that offer you on line casino game titles, and not Indian gaming functions, card rooms, or tiny non-on line casino variety slot locations. The complete report, which includes earnings tables is obtainable on our web web page.

Enter/Output Product

A crucial factor that looks to have arisen from the ashes of this recent trend is that a lot of casino initiatives ended up just as well massive to help themselves. The enter, in terms of expenditure pounds, was not proportional to the output, in phrases of net income after credit card debt services, in comparison to beforehand accomplished outcomes. More and/or larger is not usually far better. Seeing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of much more extensive amenities in several other jurisdictions. The flaw in this approach even so is that the charges connected with widening marketplace penetration and occasioned-use, are considerably increased than those incurred to attract the foundation market.

As daytripper marketplaces become much more competitive, casino venues will have to rely far more and a lot more on their in-property lodge patrons, and dimension their homes (and expectations) accordingly. Even though Steve Wynn began a main craze in creating up-market mega-places, there basically was not sufficient need on the Strip to warrant the several other similar assignments that adopted that aimed at the exact same specialized niche.

The trick is to strike a satisfied medium in task configurations which of system need considerably less of a ‘seat-of-pants’ technique, and 1 that is much more researched. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Although there are no revealed comprehensive info of American Indian gaming revenues, anecdotal proof appears to advise that this phase has been as difficult strike as the Industrial sector. The two Connecticut Indian gaming installations report slot income of $one.six billion in 2008, representing a fall of about 7 p.c, or nearly $114 million, more than doubling the three.5 percent drop from the 12 months prior to. This market is seemingly even now reeling from the ripple-result 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 reviews that contributions primarily based on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the prior calendar year decreasing .eight p.c in the initial quarter, 7.5 % in the next quarter, nine.5 % in the 3rd quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reports that whilst calendar yr 2008 confirmed an almost 2 percent progress fee in gaming revenues, there was an 8.7 per cent decline in the 3rd quarter and an virtually 10 percent decline in the fourth quarter of 2008, in comparison with 2007. Gaming revenue tendencies at close by Niagara Falls, Ontario have been down one.5% in 2008 in contrast with 2007.

It’s been a mixed-bag for point out lotteries across the region. The North American Affiliation of State & Provincial Lotteries reports that U.S. lotteries created a overall of $sixty.6 billion in revenue in fiscal 2008, up about three p.c from the preceding year however some jurisdictions noted decreases, most notably California, which confirmed an 8 % fall. Inasmuch as some of these states are on different fiscal 12 months ends, it would seem that the information does not reflect the effect of 3rd and/or fourth quarter final results.

According to knowledge provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping seven percent to $thirteen.seven billion in 2008, as opposed to $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As previously mentioned, it has been new gaming jurisdictions that have spawned much of the progress in annual casino/racino revenues in excess of the years, and their affect is apt to keep on into the in close proximity to long term.

Florida
Miami Dade voters authorized a ballot concern that allows every of three pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Track and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has yet to announced its programs. There are many other proposals being regarded as that would further broaden on line casino advancement throughout the state.

Illinois
The point out last but not least got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,200+ match 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 dialogue about enabling an increase in per area gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that permits for the growth of four casino gaming zones and slots at current horse and puppy tracks seems mired, as only 1 facility is presently underneath building, whilst three other proposals ended up 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 located so near to the state line that its parking good deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk video games, along with a next section thanks to open in 2011 with 875 slots and twenty desk games. The state has extended the application process for the other 3 zones till April, 2009.

Kentucky
There is even now a good deal of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos appears to be back again on the entrance-burner, but likely not solved for the duration of the existing legislative session.

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

Louisiana
Pinnacle Entertainment’s new casino improvement projects in Baton Rouge and Lake Charles, although delayed, are noted to nevertheless be on-monitor for opening this calendar year and/or early 2010.

Maine
There is a invoice beneath thought that could more than double Penn National’s slot machines to three,000, as nicely as a proposal that would remove the restriction that slots be found inside of five miles of the track. Scarborough Downs, which has been unsuccessful in convincing nearby people to enable slots, could be taking into consideration moving to a far more hospitable town.

Maryland
A referendum was accredited in November, 2008 that enables 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 condition experienced predicted.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has operate into numerous funding issues and whilst the lodge part is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled again considerably, is still on keep track of to open this calendar year.

New England
Massachusetts, a sleeping-giant in terms of industry possible, is still 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 support. A modern examine finished by Dartmouth College estimates that Massachusetts resident expended much more than $920 million last year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to produce casinos, however the topic is likely to be revisited, particularly if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its alternatives.

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 nonetheless, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would lastly be designed, the successful bidder indicated an incapability to make the necessary $370 million payment, citing the current lending local climate, and throwing the venture back into the lap of the governor. Though the market place demand in the area could be deemed really strong, the prospect of additional competition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly thinking about that somewhat much less than 30% of the net acquire is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered maybe owing to both the possible opening of at minimum a single or maybe two racino functions in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
Nevertheless an additional gaming proposal is being put forth in Ohio, following very last year’s model was turned down by the voters. This strategy calls for one casino each in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision needed of $250 million, as properly as an preliminary licensing price of $fifty million, and a 33 percent tax on gaming revenue.

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

South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and include three hundred online games, one hundred forty rooms and a wide variety of amenities.

Texas
Legislators are proposing a voter referendum that would amend the state structure to permit casino gambling in specified regions, as well as permit gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. State govt has proffered the idea of permitting the vacation resort to provide casino online games, but this energy is in also early a phase to have any traction one way or an additional.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the taking of lands into trust on behalf of federally acknowledged American Indian tribes has more stymied some new Class III gaming initiatives across the nation. Additionally, there have been eleven Indian on line casino tasks turned down by the DOI very last yr because of its new rule that casinos have to be near enough to a reservation that tribal customers can operate at them. It has been suggested that the new Obama administration may be much more sympathetic to the improvement of Indian gaming initiatives, but this situation has however to be resolved.

In the meantime, there are other Class III tasks in the different levels of development. The Seneca casino task in Buffalo, NY, whilst working a modest short-term facility, has delayed an already underneath development everlasting facility until finally the market place rebounds. They have also expressed an curiosity in establishing a casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could influence their strategies for greater projects. There are new Indian gaming projects set to open up in Michigan and Oklahoma this year, and others are in the preparing phase. Texas may possibly let 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/ten.


The Nor’easter Squeeze

Whole gaming revenue in Atlantic Metropolis has declined 7.six percent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is discovering by itself in an intensive comp-war with the Pennsylvania venues. At Freebet in the Northeast were found in Atlantic City, where it appeared as if it may well really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Little by little nonetheless its marketplace share was being encroached upon, very first by the improvement of a massive Course III gaming procedure 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 lately Pennsylvania.

Now, with the prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening about Atlantic City’s potential potential clients. It really is reliance on day-trippers lulled it into a bogus sense of protection, and it now finds alone possessing to redefine its mission assertion to “destination vacation resort.”

The only dilemma with this approach even so is that it is unwell-geared up to pull it off. For all intents and functions, Atlantic Town is below-roomed and/or over-gamed. There is simply not sufficient day-tripper industry to go around, and their efficient trading area is tightening, as the peripheral populations northward now/will have far more prepared accessibility to a widened supply in New York (Yonkers, and shortly at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only genuine aggressive rewards are its resort potential and the availability of table game titles, although the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In get to sufficiently contend as a location vacation resort the metropolis requirements to create added guest rooms and not always gaming ability. By comparison, the Las Vegas Strip houses – correct gaming places, in that they do not have considerably of a day-excursion market, other than for the ‘locals’ – have an common of .87 gaming positions for each guest room whilst Atlantic City’s typical is 2.74 positions per guest room.

It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, have been the the very least impacted by the most recent downturn. The Borgata skilled a gaming revenue fall of one.six p.c, although Harrah’s Marina reported a four.9 p.c boost compared to 2007. Furthermore, the hardest strike venues, namely 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, which includes the the Trump homes and Resorts with the hoped for sale of the Tropicana has been further delayed, and losing valuation.

With a continual rise in gaming revenues by way of 2006, the metropolis appeared primary for even more improvement, which precipitated arranging for four new resort initiatives, each of which have now been indefinitely delayed. Revel Amusement Group’s $2.five billion undertaking remains an iron skeleton, Pinnacle Amusement has declared it may well look for to market its razed Sands website, MGM Mirage has shelved its casino strategies, and Penn Nationwide seems to have stopped its pursuit of the Bader Subject airport website.

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