Nationwide Industrial Internet casino and Racino Game playing Earnings Evaluation

A Time period of Adjustment

Oops! That huge hissing sound is the gaming balloon that experienced been developing over the a long time, little by little dropping air. But, it has not been a tide that lowered all ships however, as some rising and increasing gaming jurisdictions confirmed powerful expansion in 2008.

All round, the business and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.five % decline in gaming revenues for 2008, generating a whole of $36.two billion, down some $800 million from 2007. livecasino was the Racino sector that has tempered this fall, as they showed a achieve of almost $1 billion in 2008, thus bringing the Commercial sector market place decrease to $one.8 billion, or six.seven %. Nevada was the largest loser in 2008, dropping virtually $one.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators have been caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not till the third and fourth quarters when it genuinely nosedived. Riding the crest of 12 months over calendar year marketplace progress across the country and the availability of enough credit rating and equity funds, new design and expansion proliferated in modern years. These days, confronted with the realities of declining, or at greatest stagnant need, a lot of of these assignments are now regarded above-leveraged and/or over-sized. As a consequence numerous gaming companies are attempting to renegotiate their financial debt – produced a lot more challenging by lower valuations – even though also paring down operational charges. The latter has become a quite problematic conundrum when working with the competition, specifically in individuals jurisdictions that are now vying for market shares with new rising casino assignments in neighboring regions. A subject we discuss far more completely in the Condition by Point out evaluation area of this publication.

As a outcome of these problems the gaming sector landscape is now strewn with impending fatalities. Amid the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every week.

“How prolonged will these financial conditions persist, and are we at the bottom however?” are questions no one appears to be answering nevertheless. What is clear however is that most gaming jurisdictions will have to discover how to offer with a more compact pie.

Be aware:
This evaluation involves only gaming revenues of licensed casinos and pari-mutuel stores that offer you on line casino game titles, and not Indian gaming functions, card rooms, or modest non-on line casino kind slot places. The entire report, like earnings tables is obtainable on our net website page.

Enter/Output Product

A important facet that would seem to have arisen from the ashes of this current pattern is that a lot of on line casino tasks have been just too large to help by themselves. The input, in phrases of investment bucks, was not proportional to the output, in phrases of web revenue following credit card debt provider, compared to formerly reached benefits. A lot more and/or greater is not always better. Viewing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of more thorough amenities in several other jurisdictions. The flaw in this method however is that the fees associated with widening industry penetration and occasioned-use, are drastically larger than individuals incurred to attract the foundation market place.

As daytripper markets become much more competitive, casino venues will have to rely far more and far more on their in-property resort patrons, and size their qualities (and expectations) accordingly. Whilst Steve Wynn began a major craze in generating up-industry mega-destinations, there merely was not adequate demand on the Strip to warrant the a lot of other similar assignments that adopted that aimed at the same niche.

The trick is to strike a content medium in undertaking configurations which of training course call for less of a ‘seat-of-pants’ method, and one particular that is far more studied. A shameless plug for growth consultants like ourselves.

Other Gaming Routines

Despite the fact that there are no released in depth information of American Indian gaming revenues, anecdotal proof appears to recommend that this phase has been as challenging hit as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, symbolizing a drop of about seven per cent, or virtually $114 million, more than doubling the 3.five percent drop from the year before. This marketplace is seemingly even now reeling from the ripple-effect of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming reports that contributions based mostly on a gaming income method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the earlier calendar year decreasing .eight p.c in the first quarter, seven.5 percent in the next quarter, 9.five % in the 3rd quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming properties report comparable decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that while calendar yr 2008 confirmed an virtually two percent growth price in gaming revenues, there was an 8.7 percent drop in the third quarter and an nearly 10 p.c decline in the fourth quarter of 2008, compared with 2007. Gaming profits tendencies at close by Niagara Falls, Ontario had been down one.five% in 2008 compared with 2007.

It really is been a blended-bag for condition lotteries across the country. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries created a total of $60.six billion in sales in fiscal 2008, up about 3 p.c from the previous calendar year nevertheless some jurisdictions described decreases, most notably California, which confirmed an eight p.c fall. Inasmuch as some of these states are on different fiscal year finishes, it would seem that the knowledge does not reflect the influence of third and/or fourth quarter final results.

According to knowledge presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven % to $thirteen.seven billion in 2008, compared to $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned much of the development in yearly casino/racino revenues over the a long time, and their influence is apt to carry on into the around foreseeable future.

Florida
Miami Dade voters approved a ballot issue that permits every of 3 pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Dog Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has but to declared its strategies. There are numerous other proposals being considered that would further broaden on line casino growth through the state.

Illinois
The state last but not least obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ game on line casino found in Des Plaines just east of O’Hare. The new facility is not likely to open right up until 2010. There has also been some dialogue about enabling an enhance in for every spot gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery system that enables for the improvement of 4 casino gaming zones and slots at current horse and dog tracks appears mired, as only 1 facility is presently under development, although three other proposals ended up rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so shut to the state line that its parking lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk game titles, alongside with a next phase owing to open up in 2011 with 875 slots and twenty table online games. The state has prolonged the application method for the other 3 zones till April, 2009.

Kentucky
There is even now a good deal of ‘jockeying’ likely on, but the prospect of as several as 8 slot parlors and racinos appears to be again on the front-burner, but likely not fixed for the duration of the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most current currently being the 390 room M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new accommodations consist of two elements of the City Centre undertaking, and the Fountainebleau.

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

Maine
There is a invoice under thing to consider that could far more than double Penn National’s slot machines to three,000, as well as a proposal that would eliminate the restriction that slots be situated within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby people to permit slots, may possibly be thinking about relocating to a far more hospitable city.

Maryland
A referendum was accredited in November, 2008 that permits for the advancement of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot although it is not as extreme as the condition had anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open up in 2008, but has operate into a variety of financing troubles and even though the resort part is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back relatively, is even now on monitor to open this yr.

New England
Massachusetts, a sleeping-big in conditions of market place prospective, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to appear to muster the political assist. A latest review completed by Dartmouth University estimates that Massachusetts resident invested much more than $920 million last calendar year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to develop casinos, even so the subject is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by recently agreeing to continue augmenting purses with an further tax. The governor nevertheless, 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 devices especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would finally be developed, the profitable bidder indicated an inability to make the needed $370 million payment, citing the present lending local weather, and throwing the venture back into the lap of the governor. Even though the market demand in the area could be considered fairly robust, the prospect of extra competitiveness from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, specifically taking into consideration that a bit much less than thirty% of the net win is retained by the operator.

Strategies to relocate Monticello Raceway into a vacation resort complicated are currently being reconsidered perhaps owing to equally the possible opening of at least 1 or maybe two racino operations in the NY metro region, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
However an additional gaming proposal is becoming place forth in Ohio, soon after final year’s version was turned down by the voters. This prepare phone calls for a single casino every in the state’s biggest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision required of $250 million, as effectively as an original licensing price of $50 million, and a 33 per cent tax on gaming income.

Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot amenities still wallow in a political mire, but are anticipated to begin building this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and incorporate 300 game titles, a hundred and forty rooms and a vast variety of facilities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to let casino gambling in specified areas, as well 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 submitted for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer you. Point out government has proffered the idea of making it possible for the resort to offer you on line casino game titles, but this hard work is in also early a stage to have any traction one way or an additional.

Indian Gaming
A current Supreme Court docket ruling that restricts the getting of lands into have confidence in on behalf of federally recognized American Indian tribes has additional stymied some new Course III gaming initiatives throughout the country. In addition, there ended up eleven Indian casino tasks rejected by the DOI previous year since of its new rule that casinos should be around ample to a reservation that tribal members can operate at them. It has been advised that the new Obama administration may possibly be far more sympathetic to the improvement of Indian gaming initiatives, but this situation has however to be resolved.

Meanwhile, there are other Course III initiatives in the different stages of advancement. The Seneca casino project in Buffalo, NY, whilst working a modest short-term facility, has delayed an previously under building long term facility till the industry rebounds. They have also expressed an fascination in creating a casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could affect their plans for more substantial tasks. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this calendar year, and other people are in the preparing phase. Texas may allow the reopening of Indian gaming facilities and let other venue and there are plans afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic City has declined seven.six %, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining itself in an intense comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, in which it looked as if it may possibly really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly nevertheless its marketplace share was being encroached upon, first by the development of a massive Class III gaming procedure in Connecticut, and then yet another slots operations 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 planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening all around Atlantic City’s potential potential customers. It really is reliance on day-trippers lulled it into a false perception of safety, and it now finds by itself getting to redefine its mission statement to “spot resort.”

The only problem with this approach nevertheless is that it is sick-geared up to pull it off. For all intents and purposes, Atlantic City is beneath-roomed and/or more than-gamed. There is basically not ample working day-tripper market to go close to, and their efficient trading location is tightening, as the peripheral populations northward now/will have much more completely ready obtain to a widened source in New York (Yonkers, and quickly at Aqueduct and possibly 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 lodge potential and the availability of desk online games, despite the fact that the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In get to adequately contend as a location resort the metropolis wants to develop further visitor rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip qualities – accurate gaming locations, in that they do not have much of a day-vacation market, other than for the ‘locals’ – have an regular of .87 gaming positions for every guest space whilst Atlantic City’s common is 2.74 positions per visitor room.

It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, each of which included new rooms in 2008, ended up the the very least impacted by the latest downturn. The Borgata skilled a gaming income drop of one.6 per cent, whilst Harrah’s Marina documented a four.nine p.c improve compared to 2007. Additionally, the toughest strike 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 homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.

With a regular rise in gaming revenues through 2006, the metropolis appeared primary for more growth, which precipitated planning for four new vacation resort projects, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.five billion venture stays an iron skeleton, Pinnacle Enjoyment has announced it may well look for to promote its razed Sands internet site, MGM Mirage has shelved its on line casino programs, and Penn National appears to have stopped its pursuit of the Bader Field airport site.

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