2008 Nationwide Commercial Casino online and Racino Games Profits Analysis

A Period of time of Adjustment

Oops! That large hissing seem is the gaming balloon that had been increasing above the a long time, gradually dropping air. But, it has not been a tide that lowered all ships nevertheless, as some rising and expanding gaming jurisdictions confirmed strong expansion in 2008.

General, the industrial and racetrack casino sectors (excluding Indian gaming), seasoned a three.five % decrease in gaming revenues for 2008, creating 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 gain of virtually $1 billion in 2008, thereby bringing the Professional sector market place drop to $1.8 billion, or six.7 per cent. Nevada was the biggest loser in 2008, dropping practically $one.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most portion, casino operators have been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not until the third and fourth quarters when it really nosedived. Using the crest of calendar year more than 12 months market expansion across the region and the availability of sufficient credit and fairness money, new building and growth proliferated in modern several years. Right now, confronted with the realities of declining, or at ideal stagnant demand, a lot of of these assignments are now considered in excess of-leveraged and/or above-sized. As a consequence several gaming firms are trying to renegotiate their debt – made much more tough by lower valuations – whilst also paring down operational expenses. The latter has turn into a really problematic conundrum when working with the competition, especially in these jurisdictions that are now vying for market shares with new rising on line casino projects in neighboring areas. A matter we discuss far more entirely in the Condition by State examination section of this publication.

As a end result of these problems the gaming sector landscape is now strewn with impending fatalities. Amongst the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the checklist grows each and every 7 days.

“How long will these financial situations persist, and are we at the base nevertheless?” are inquiries no one particular appears to be answering but. What is clear however is that most gaming jurisdictions will have to learn how to offer with a smaller sized pie.

Be aware:
This analysis contains only gaming revenues of licensed casinos and pari-mutuel shops that supply on line casino online games, and not Indian gaming operations, card rooms, or little non-on line casino type slot places. The whole report, such as profits tables is available on our internet website page.

Enter/Output Product

A important factor that would seem to have arisen from the ashes of this present craze is that a lot of on line casino projects were just too massive to assist on their own. The input, in conditions of expense dollars, was not proportional to the output, in terms of web profit soon after personal debt service, compared to earlier attained benefits. Much more and/or bigger is not always far better. Seeing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of more extensive facilities in numerous other jurisdictions. The flaw in this method nevertheless is that the costs linked with widening market penetration and occasioned-use, are drastically larger than individuals incurred to draw in the base market.

As daytripper markets turn into a lot more competitive, casino venues will have to count a lot more and more on their in-residence resort patrons, and dimensions their properties (and expectations) accordingly. Although Steve Wynn began a major pattern in generating up-industry mega-locations, there merely was not sufficient need on the Strip to warrant the many other related assignments that followed that aimed at the identical 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 one particular that is much more examined. A shameless plug for improvement consultants like ourselves.

Other Gaming Pursuits

Despite the fact that there are no printed detailed information of American Indian gaming revenues, anecdotal proof seems to suggest that this section has been as challenging strike as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, representing a drop of about 7 per cent, or virtually $114 million, much more than doubling the three.5 % drop from the yr before. This industry is evidently nonetheless reeling from the ripple-impact of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming stories that contributions based mostly on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the prior yr lowering .8 % in the initial quarter, 7.5 percent in the 2nd quarter, 9.five p.c in the third quarter, and sixteen.one % in the fourth quarter.

Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, studies that while calendar 12 months 2008 confirmed an virtually 2 percent development rate in gaming revenues, there was an 8.7 per cent drop in the 3rd quarter and an nearly 10 percent drop in the fourth quarter of 2008, compared with 2007. Gaming income traits at nearby Niagara Falls, Ontario ended up down 1.five% in 2008 compared with 2007.

It really is been a combined-bag for condition lotteries throughout the nation. The North American Association of Condition & Provincial Lotteries reviews that U.S. lotteries created a overall of $sixty.6 billion in revenue in fiscal 2008, up about three % from the previous 12 months but some jurisdictions noted decreases, most notably California, which confirmed an 8 per cent drop. Inasmuch as some of these states are on various fiscal year ends, it would look that the information does not replicate the impact of 3rd and/or fourth quarter results.

In accordance to knowledge supplied by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 per cent to $thirteen.seven billion in 2008, as opposed to $14.seven billion in 2007.

Planned & Proposed New Expansions

As previously mentioned, it has been new gaming jurisdictions that have spawned a lot of the development in yearly on line casino/racino revenues above the many years, and their influence is apt to proceed into the close to long term.

Florida
Miami Dade voters approved a ballot situation that permits every of three pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has yet to introduced its ideas. There are many other proposals currently being considered that would even more grow casino improvement through the condition.

Illinois
The point out lastly acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ game casino located in Des Plaines just east of O’Hare. The new facility is not most likely to open until 2010. There has also been some discussion about allowing an boost in for each place 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 enables for the improvement of 4 casino gaming zones and slots at current horse and puppy tracks appears mired, as only a single facility is presently beneath building, although a few other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is positioned so close to the condition line that its parking good 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 table online games, alongside with a 2nd section thanks to open in 2011 with 875 slots and twenty desk video games. The state has extended the application process for the other three zones right up until April, 2009.

Kentucky
There is even now a good deal of ‘jockeying’ going on, but the prospect of as numerous as eight slot parlors and racinos appears to be back on the front-burner, but probably not solved during the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most current becoming the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new lodges incorporate two factors of the Town Middle project, and the Fountainebleau.

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

Maine
There is a invoice under thought that could more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would get rid of the restriction that slots be positioned in 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing nearby residents to let slots, might be taking into consideration shifting to a a lot more hospitable city.

Maryland
A referendum was accepted in November, 2008 that permits for the improvement of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as extreme as the state had expected.

Mississippi
Grand Soleil Casino Resort in Natchez had been slated to open in 2008, but has operate into a variety of funding troubles and even though the resort part is open up, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back again somewhat, is nonetheless on observe to open up this 12 months.

New England
Massachusetts, a sleeping-large in phrases of industry prospective, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to look to muster the political help. A modern examine completed by Dartmouth College estimates that Massachusetts resident put in much more than $920 million very last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to create casinos, however the subject is very likely to be revisited, specifically if Massachusetts decides to go forward. There are also tries in Maine to reconsider its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by recently agreeing to proceed augmenting purses with an added tax. The governor even so, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would ultimately be developed, the profitable bidder indicated an incapability to make the essential $370 million charge, citing the recent lending local climate, and throwing the project back again into the lap of the governor. Despite the fact that the marketplace need in the region could be regarded as fairly sturdy, the prospect of additional competitiveness from close by Belmont could have an effect on Aqueduct’s underlining economic feasibility, specially contemplating that somewhat much less than 30% of the web get is retained by the operator.

Plans to relocate Monticello Raceway into a resort complex are being reconsidered maybe owing to equally the probable opening of at the very least one or perhaps two racino functions in the NY metro location, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
However another gaming proposal is becoming set forth in Ohio, right after previous year’s variation was turned down by the voters. This plan calls for 1 on line casino each and every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure essential of $250 million, as nicely as an original licensing fee of $fifty million, and a 33 per cent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are expected to start building this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and consist of three hundred online games, 140 rooms and a wide selection of facilities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to permit on line casino gambling in designated locations, 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 filed for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer. Point out govt has proffered the notion of allowing the vacation resort to provide casino online games, but this energy is in way too early a stage to have any traction one way or another.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the having of lands into believe in on behalf of federally regarded American Indian tribes has even more stymied some new Class III gaming tasks across the place. Moreover, there were eleven Indian on line casino projects turned down by the DOI very last yr simply because of its new rule that casinos must be in close proximity to enough to a reservation that tribal members can work at them. sbobet has been suggested that the new Obama administration might be more sympathetic to the development of Indian gaming tasks, but this situation has but to be resolved.

Meanwhile, there are other Course III tasks in the different levels of growth. The Seneca on line casino task in Buffalo, NY, while working a modest short term facility, has delayed an presently below construction long term facility right up until the market place rebounds. They have also expressed an desire in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could effect their ideas for larger initiatives. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this 12 months, and other individuals are in the planning stage. Texas may possibly allow the reopening of Indian gaming services and enable other venue and there are strategies afoot by the Navajos in Arizona to construct added casinos. California is poised to open two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Overall gaming profits in Atlantic Metropolis has declined 7.6 per cent, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining by itself in an intense comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been situated in Atlantic Town, exactly where it appeared as if it might truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually even so its market place share was becoming encroached on, first by the growth of a large Course III gaming operation in Connecticut, and then yet another slots operations in Rhode Island, and then video clip 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 sooner or later two functions in Philadelphia, the noose is tightening all around Atlantic City’s foreseeable future potential clients. It is reliance on day-trippers lulled it into a untrue feeling of protection, and it now finds alone obtaining to redefine its mission statement to “vacation spot resort.”

The only issue with this strategy nevertheless is that it is ill-geared up to pull it off. For all intents and functions, Atlantic City is underneath-roomed and/or above-gamed. There is basically not sufficient day-tripper marketplace to go around, and their effective investing region is tightening, as the peripheral populations northward now/will have a lot more all set entry to a widened offer in New York (Yonkers, and shortly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only real aggressive rewards are its resort ability and the availability of table game titles, although the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a spot vacation resort the city demands to build added guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip houses – accurate gaming places, in that they do not have considerably of a working day-trip industry, except for the ‘locals’ – have an typical of .87 gaming positions per visitor area whilst Atlantic City’s common is 2.74 positions for each visitor place.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, both of which additional new rooms in 2008, ended up the the very least impacted by the most current downturn. The Borgata seasoned a gaming earnings drop of 1.six p.c, whilst Harrah’s Marina reported a four.9 per cent improve in comparison to 2007. Additionally, the most difficult 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, including the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a continual rise in gaming revenues by way of 2006, the city seemed prime for even more development, which precipitated arranging for four new vacation resort assignments, each of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion undertaking remains an iron skeleton, Pinnacle Amusement has declared it may seek to market its razed Sands site, MGM Mirage has shelved its on line casino plans, and Penn National seems to have stopped its pursuit of the Bader Subject airport internet site.