2008 National Commercial Casino online & Racino Video games Earnings Evaluation

A Period of Adjustment

Oops! That giant hissing seem is the gaming balloon that had been growing in excess of the several years, slowly and gradually shedding air. But, it has not been a tide that lowered all ships even so, as some emerging and growing gaming jurisdictions confirmed robust development in 2008.

Total, the commercial and racetrack casino sectors (excluding Indian gaming), seasoned a three.5 percent decrease in gaming revenues for 2008, making a whole of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of nearly $one billion in 2008, thus bringing the Industrial sector market decrease to $one.eight billion, or six.seven per cent. Nevada was the greatest loser in 2008, dropping almost $one.3 billion, far more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, on line casino operators ended up caught reasonably flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the 3rd and fourth quarters when it really nosedived. Driving the crest of year in excess of yr industry growth throughout the place and the availability of sufficient credit score and equity money, new design and enlargement proliferated in current several years. These days, faced with the realities of declining, or at ideal stagnant demand from customers, a lot of of these initiatives are now deemed in excess of-leveraged and/or in excess of-sized. As a result many gaming companies are trying to renegotiate their debt – created far more difficult by lower valuations – while also paring down operational costs. The latter has grow to be a extremely problematic conundrum when dealing with the competition, specifically in these jurisdictions that are now vying for market place shares with new rising on line casino initiatives in neighboring areas. A subject matter we discuss a lot more fully in the Condition by Condition investigation section of this publication.

As a outcome of these conditions the gaming business landscape is now strewn with impending fatalities. Between the a lot more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows every week.

“How lengthy will these financial problems persist, and are we at the bottom however?” are concerns no one seems to be answering however. What is distinct nonetheless is that most gaming jurisdictions will have to find out how to deal with a smaller sized pie.

Note:
This examination involves only gaming revenues of accredited casinos and pari-mutuel retailers that offer casino game titles, and not Indian gaming functions, card rooms, or little non-on line casino kind slot locations. The whole write-up, like earnings tables is offered on our internet webpage.

Enter/Output Design

A essential factor that appears to have arisen from the ashes of this recent craze is that a lot of on line casino tasks were just as well big to help on their own. The enter, in terms of investment decision dollars, was not proportional to the output, in conditions of net earnings following personal debt support, when compared to beforehand accomplished results. Much more and/or even bigger is not constantly far better. Seeing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of more comprehensive facilities in a lot of other jurisdictions. The flaw in this method nevertheless is that the costs connected with widening industry penetration and occasioned-use, are drastically greater than people incurred to attract the base industry.

As daytripper markets grow to be much more competitive, on line casino venues will have to rely much more and more on their in-property hotel patrons, and size their houses (and expectations) appropriately. Even though Steve Wynn started out a significant development in producing up-industry mega-places, there just was not sufficient demand from customers on the Strip to warrant the many other comparable initiatives that adopted that aimed at the identical niche.

The trick is to strike a content medium in venture configurations which of course need significantly less of a ‘seat-of-pants’ method, and one particular that is much more analyzed. A shameless plug for growth consultants like ourselves.

Other Gaming Activities

Even though there are no published in depth knowledge of American Indian gaming revenues, anecdotal evidence seems to suggest that this phase has been as tough strike as the Professional sector. The two Connecticut Indian gaming installations report slot income of $1.6 billion in 2008, symbolizing a fall of about seven %, or practically $114 million, a lot more than doubling the three.five per cent fall from the yr just before. This market is apparently even now reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming reviews that contributions based mostly on a gaming revenue formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the previous yr reducing .eight per cent in the initial quarter, 7.five per cent in the next quarter, nine.5 p.c in the third quarter, and sixteen.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that even though calendar 12 months 2008 showed an practically 2 per cent expansion charge in gaming revenues, there was an 8.7 % drop in the third quarter and an almost 10 % decrease in the fourth quarter of 2008, in comparison with 2007. Gaming earnings tendencies at nearby Niagara Falls, Ontario had been down 1.five% in 2008 in comparison with 2007.

It really is been a blended-bag for condition lotteries throughout the place. The North American Association of State & Provincial Lotteries studies that U.S. lotteries created a total of $60.six billion in sales in fiscal 2008, up about 3 per cent from the prior calendar year yet some jurisdictions reported decreases, most notably California, which confirmed an eight % drop. Inasmuch as some of these states are on numerous fiscal 12 months ends, it would seem to be that the knowledge does not reflect the impact of 3rd and/or fourth quarter outcomes.

According to information presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 p.c to $thirteen.7 billion in 2008, versus $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As earlier observed, it has been new gaming jurisdictions that have spawned a lot of the growth in annual on line casino/racino revenues above the many years, and their influence is apt to keep on into the close to future.

Florida
Miami Dade voters accepted a ballot concern that allows each of a few pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to announced its ideas. There are quite a few other proposals being considered that would further broaden on line casino growth throughout the point out.

Illinois
The point out 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,two hundred+ sport on line casino found in Des Plaines just east of O’Hare. The new facility is not likely to open up right up until 2010. There has also been some dialogue about making it possible for an boost in for every place 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 software that allows for the growth of 4 on line casino gaming zones and slots at current horse and puppy tracks appears mired, as only a single facility is presently beneath design, while three other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so near to the condition line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table video games, along with a second stage because of to open in 2011 with 875 slots and twenty table games. The point out has prolonged the software approach for the other 3 zones till April, 2009.

Kentucky
There is nevertheless a great deal of ‘jockeying’ going on, but the prospect of as several as eight slot parlors and racinos seems to be again on the entrance-burner, but most likely not settled for the duration of the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most recent currently being the 390 space M Resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new resorts consist of two elements of the Town Heart venture, and the Fountainebleau.

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

Maine
There is a invoice under consideration that could much more than double Penn National’s slot devices to three,000, as well as a proposal that would eliminate the restriction that slots be located in five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional residents to allow slots, may be taking into consideration moving to a a lot more hospitable city.

Maryland
A referendum was authorized in November, 2008 that enables for the growth of five casinos with a complete of 15,000 slots, and now the bidding war is afoot although it is not as extreme as the point out had anticipated.

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open in 2008, but has operate into various funding problems and even though the resort part is open, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled again fairly, is nevertheless on keep track of to open up this calendar year.

New England
Massachusetts, a sleeping-large in terms of market prospective, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not look to muster the political help. A latest review completed by Dartmouth College estimates that Massachusetts resident put in a lot more than $920 million 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 alternative to produce casinos, nonetheless the subject is most likely to be revisited, specially if Massachusetts decides to go ahead. There are also attempts in Maine to rethink 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 carry on augmenting purses with an extra tax. The governor however, has appointed a new panel to examine the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would finally be developed, the successful bidder indicated an lack of ability to make the essential $370 million payment, citing the current lending local weather, and throwing the undertaking back into the lap of the governor. Even though the marketplace demand from customers in the area could be regarded really sturdy, the prospect of further competition from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, specifically thinking about that slightly considerably less than thirty% of the internet get is retained by the operator.

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

Ohio
Yet one more gaming proposal is currently being set forth in Ohio, soon after very last year’s model was turned down by the voters. This strategy phone calls for one particular casino every in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment required of $250 million, as effectively as an first licensing payment of $fifty million, and a 33 percent tax on gaming income.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers task in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot services still wallow in a political mire, but are expected to commence design this year.

South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and incorporate three hundred online games, one hundred forty rooms and a vast range of features.

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

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

Indian Gaming
A modern Supreme Courtroom ruling that restricts the taking of lands into have confidence in on behalf of federally recognized American Indian tribes has even more stymied some new Course III gaming assignments across the country. In addition, there have been eleven Indian on line casino projects rejected by the DOI previous yr simply because of its new rule that casinos have to be close to sufficient to a reservation that tribal members can work at them. It has been recommended that the new Obama administration may well be far more sympathetic to the growth of Indian gaming projects, but this concern has but to be tackled.

Meanwhile, there are other Class III initiatives in the numerous phases of advancement. The Seneca on line casino undertaking in Buffalo, NY, while working a little temporary facility, has delayed an previously under design permanent facility until the market place rebounds. They have also expressed an fascination in creating a casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could affect their ideas for bigger tasks. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this calendar year, and others are in the planning stage. Texas may allow the reopening of Indian gaming services and allow other venue and there are ideas afoot by the Navajos in Arizona to assemble further casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming earnings in Atlantic Town has declined 7.6 percent, from $four.9 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 sbobet88 in the Northeast ended up situated in Atlantic Town, the place it appeared as if it may really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly and gradually nonetheless its market share was getting encroached on, 1st by the advancement of a massive Class III gaming procedure 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 just lately Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening all around Atlantic City’s long term prospective customers. It’s reliance on working day-trippers lulled it into a false perception of safety, and it now finds itself having to redefine its mission assertion to “destination resort.”

The only problem with this method even so is that it is ill-geared up to pull it off. For all intents and purposes, Atlantic Town is beneath-roomed and/or over-gamed. There is simply not adequate day-tripper industry to go about, and their effective buying and selling spot is tightening, as the peripheral populations northward now/will have a lot more ready entry to a widened source in New York (Yonkers, and before long 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 genuine competitive rewards are its hotel capability and the availability of desk games, even though the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In get to adequately contend as a destination resort the metropolis wants to develop added visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip houses – real gaming places, in that they do not have significantly of a working day-trip marketplace, apart from for the ‘locals’ – have an average of .87 gaming positions per visitor space while Atlantic City’s typical is two.74 positions per guest space.

It is not a coincidence that Atlantic City’s two biggest hotels, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, were the least impacted by the most current downturn. The Borgata seasoned a gaming earnings fall of one.six p.c, whilst Harrah’s Marina reported a four.nine per cent boost in contrast to 2007. Furthermore, the hardest strike venues, specifically 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, such as the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and losing valuation.

With a steady increase in gaming revenues by means of 2006, the city seemed key for additional development, which precipitated preparing for four new vacation resort projects, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion venture stays an iron skeleton, Pinnacle Amusement has introduced it might find to promote its razed Sands website, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide seems to have stopped its pursuit of the Bader Discipline airport website.

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