Nationwide Professional Internet casino and also Racino Gaming Revenue Investigation

A Time period of Adjustment

Oops! That large hissing audio is the gaming balloon that experienced been growing more than the several years, slowly and gradually dropping air. But, it has not been a tide that lowered all ships even so, as some rising and expanding gaming jurisdictions showed powerful progress in 2008.

Total, the industrial and racetrack on line casino sectors (excluding Indian gaming), skilled a 3.5 p.c drop in gaming revenues for 2008, making a overall 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 virtually $one billion in 2008, therefore bringing the Professional sector industry drop to $one.eight billion, or per cent. Nevada was the most significant loser in 2008, dropping nearly $1.3 billion, far more than fifty percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most portion, on line casino operators have been caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it really nosedived. Driving the crest of 12 months in excess of yr market place growth across the nation and the availability of ample credit rating and equity resources, new design and expansion proliferated in latest many years. Today, faced with the realities of declining, or at very best stagnant demand from customers, a lot of of these projects are now considered more than-leveraged and/or in excess of-sized. As a consequence a lot of gaming organizations are making an attempt to renegotiate their debt – made a lot more challenging by lower valuations – whilst also paring down operational costs. The latter has turn out to be a quite problematic conundrum when dealing with the competitors, specially in people jurisdictions that are now vying for industry shares with new emerging on line casino tasks in neighboring locations. A matter we talk about a lot more fully in the Condition by Point out examination area of this publication.

As a end result of these problems the gaming industry 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 Amusement, Herbst Gaming and the list grows each and every 7 days.

“How long will these financial situations persist, and are we at the bottom but?” are queries no one appears to be answering but. What is very clear however is that most gaming jurisdictions will have to find out how to deal with a smaller pie.

Be aware:
This investigation includes only gaming revenues of certified casinos and pari-mutuel shops that supply casino video games, and not Indian gaming functions, card rooms, or little non-casino kind slot areas. The total report, like income tables is obtainable on our net page.

Enter/Output Product

A essential factor that seems to have arisen from the ashes of this current craze is that several on line casino assignments were just too huge to assist them selves. The input, in terms of investment dollars, was not proportional to the output, in phrases of web revenue soon after debt services, in contrast to beforehand attained benefits. A lot more and/or greater is not constantly better. Looking at the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of more extensive features in numerous other jurisdictions. The flaw in this technique however is that the charges related with widening industry penetration and occasioned-use, are substantially higher than individuals incurred to attract the foundation industry.

As daytripper marketplaces turn into much more aggressive, casino venues will have to depend much more and a lot more on their in-home hotel patrons, and dimension their properties (and expectations) appropriately. While Steve Wynn started out a significant pattern in generating up-market mega-destinations, there simply was not sufficient need on the Strip to warrant the several other comparable initiatives that followed that aimed at the identical area of interest.

The trick is to strike a happy medium in undertaking configurations which of program demand much less of a ‘seat-of-pants’ technique, and 1 that is a lot more studied. A shameless plug for growth consultants like ourselves.

Other Gaming Pursuits

Although there are no released detailed info of American Indian gaming revenues, anecdotal proof seems to suggest that this phase has been as hard hit as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $one.six billion in 2008, symbolizing a fall of about 7 per cent, or practically $114 million, more than doubling the 3.5 p.c drop from the year just before. This market place is evidently nonetheless 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 Department of Gaming reviews that contributions based mostly on a gaming income system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the earlier calendar year reducing .eight p.c in the first quarter, seven.five p.c in the second quarter, nine.five p.c in the 3rd quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reviews that while calendar 12 months 2008 showed an virtually two percent expansion price in gaming revenues, there was an eight.7 % drop in the third quarter and an nearly ten p.c decrease in the fourth quarter of 2008, in contrast with 2007. Gaming profits developments at nearby Niagara Falls, Ontario were down 1.five% in 2008 when compared with 2007.

It’s been a mixed-bag for state lotteries across the place. The North American Association of Condition & Provincial Lotteries stories that U.S. lotteries created a complete of $sixty.6 billion in income in fiscal 2008, up about three % from the preceding calendar year yet some jurisdictions described decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on different fiscal year finishes, it would seem to be that the data does not reflect the influence of third and/or fourth quarter outcomes.

In accordance to data offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping seven p.c to $13.7 billion in 2008, compared to $14.7 billion in 2007.

Prepared & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned considerably of the expansion in once-a-year casino/racino revenues in excess of the a long time, and their affect is apt to continue into the near future.

Miami Dade voters accredited a ballot situation that allows every single of three pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has yet to declared its plans. There are numerous other proposals currently being considered that would additional expand on line casino advancement all through the condition.

The point out lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ match casino situated in Des Plaines just east of O’Hare. The new facility is not very likely to open up until 2010. There has also been some discussion about allowing an improve in per location gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

The state’s expanded lottery system that enables for the advancement of 4 on line casino gaming zones and slots at existing horse and canine tracks appears mired, as only a single facility is presently under construction, while a few other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is situated so near to the point out line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk game titles, along with a next section owing to open in 2011 with 875 slots and twenty table games. The condition has prolonged the software process for the other 3 zones till April, 2009.

There is nevertheless a good deal of ‘jockeying’ heading on, but the prospect of as numerous as eight slot parlors and racinos appears to be back on the entrance-burner, but likely not resolved in the course of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most modern getting the 390 space M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new hotels incorporate two factors of the City Heart undertaking, and the Fountainebleau.

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

There is a monthly bill below thought that could a lot more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would get rid of the restriction that slots be found within five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local residents to let slots, may be considering transferring to a a lot more hospitable town.

A referendum was accepted in November, 2008 that makes it possible for for the improvement of five casinos with a complete of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the state experienced predicted.

Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has run into various financing troubles and even though the resort portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s W88 in Biloxi, even though scaled again somewhat, is nevertheless on monitor to open up this year.

New England
Massachusetts, a sleeping-giant in terms of marketplace prospective, is still maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to muster the political assistance. A modern study accomplished by Dartmouth College estimates that Massachusetts resident invested more than $920 million very last yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an selection to create casinos, nevertheless the matter is most likely to be revisited, specially if Massachusetts decides to go ahead. There are also tries 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 not too long ago agreeing to proceed augmenting purses with an additional tax. The governor even so, has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it seemed as if Aqueduct’s four,500 VLT facility would ultimately be designed, the profitable bidder indicated an incapability to make the necessary $370 million fee, citing the recent lending climate, and throwing the undertaking again into the lap of the governor. Even though the market place desire in the spot could be considered quite powerful, the prospect of additional competition from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially thinking about that somewhat less than 30% of the net earn is retained by the operator.

Plans to relocate Monticello Raceway into a resort intricate are getting reconsidered maybe owing to equally the probable opening of at least one 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.

Nevertheless yet another gaming proposal is being put forth in Ohio, right after very last year’s edition was turned down by the voters. This prepare phone calls for one on line casino every single in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment required of $250 million, as nicely as an original licensing payment of $fifty million, and a 33 per cent tax on gaming revenue.

The Sands in Bethlehem is because of 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 services nevertheless wallow in a political mire, but are expected to start off construction this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and contain three hundred online games, 140 rooms and a wide variety of features.

Legislators are proposing a voter referendum that would amend the state structure to enable on line casino gambling in specified areas, as properly as permit gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. Condition government has proffered the notion of making it possible for the resort to provide casino game titles, but this work is in as well early a stage to have any traction 1 way or another.

Indian Gaming
A current Supreme Courtroom ruling that restricts the using of lands into trust on behalf of federally regarded American Indian tribes has more stymied some new Class III gaming initiatives across the place. Moreover, there ended up eleven Indian on line casino assignments rejected by the DOI previous yr since of its new rule that casinos need to be around adequate to a reservation that tribal members can perform at them. It has been proposed that the new Obama administration may possibly be much more sympathetic to the improvement of Indian gaming initiatives, but this issue has nevertheless to be dealt with.

Meanwhile, there are other Class III tasks in the a variety of phases of growth. The Seneca casino venture in Buffalo, NY, even though working a little temporary facility, has delayed an already beneath design long lasting facility till the market place rebounds. They have also expressed an fascination in establishing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could affect their ideas for larger projects. There are new Indian gaming projects set to open in Michigan and Oklahoma this year, and other individuals are in the preparing phase. Texas may allow the reopening of Indian gaming services and let other location and there are programs afoot by the Navajos in Arizona to build additional casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming income in Atlantic Metropolis has declined 7.six %, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is finding itself in an extreme comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up situated in Atlantic City, in which it seemed as if it may well actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly however its marketplace share was being encroached on, initial by the advancement of a huge Class III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

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

The only problem with this technique however is that it is sick-equipped to pull it off. For all intents and functions, Atlantic City is below-roomed and/or above-gamed. There is basically not enough day-tripper marketplace to go close to, and their powerful trading area is tightening, as the peripheral populations northward now/will have much more completely ready obtain to a widened supply in New York (Yonkers, and soon at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only true aggressive positive aspects are its resort capacity and the availability of desk games, although the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In get to sufficiently compete as a vacation spot resort the metropolis requirements to build extra visitor rooms and not essentially gaming capability. By comparison, the Las Vegas Strip qualities – true gaming places, in that they do not have much of a working day-excursion industry, apart from for the ‘locals’ – have an common of .87 gaming positions for each guest space while Atlantic City’s common is two.seventy four positions for each visitor area.

It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, each of which included new rooms in 2008, had been the the very least impacted by the most current downturn. The Borgata skilled a gaming revenue drop of one.six percent, while Harrah’s Marina noted a four.9 percent enhance in contrast to 2007. Moreover, the toughest hit 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 houses and Resorts with the hoped for sale of the Tropicana has been even more delayed, and dropping valuation.

With a constant increase in gaming revenues via 2006, the metropolis appeared prime for additional development, which precipitated planning for 4 new vacation resort initiatives, every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion undertaking continues to be an iron skeleton, Pinnacle Enjoyment has declared it may look for to market its razed Sands website, MGM Mirage has shelved its casino ideas, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport web site.

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