2008 Countrywide Commercial Casino as well as Racino Game titles Profits Analysis

A Period of Adjustment

Oops! That big hissing audio is the gaming balloon that had been growing above the a long time, gradually dropping air. But, it has not been a tide that reduced all ships nevertheless, as some rising and expanding gaming jurisdictions confirmed strong growth in 2008.

Overall, the industrial and racetrack on line casino sectors (excluding Indian gaming), skilled a 3.five p.c decrease in gaming revenues for 2008, creating a total 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 almost $one billion in 2008, therefore bringing the Professional sector market place drop to $one.eight billion, or six.7 p.c. Nevada was the biggest loser in 2008, dropping almost $one.three billion, much more than half of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, on line casino operators have been caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the third and fourth quarters when it truly nosedived. Using the crest of calendar year above 12 months industry growth throughout the nation and the availability of ample credit and fairness resources, new development and enlargement proliferated in modern many years. Today, confronted with the realities of declining, or at best stagnant desire, a lot of of these projects are now deemed more than-leveraged and/or over-sized. As a end result many gaming companies are trying to renegotiate their financial debt – produced a lot more hard by reduced valuations – whilst also paring down operational charges. The latter has turn out to be a quite problematic conundrum when working with the competitiveness, specifically in those jurisdictions that are now vying for marketplace shares with new rising casino initiatives in neighboring areas. A subject we go over much more totally in the State by Condition examination segment of this publication.

As a outcome of these circumstances the gaming business landscape is now strewn with impending fatalities. Amid the much more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the checklist grows every 7 days.

“How lengthy will these financial problems persist, and are we at the base yet?” are concerns no 1 appears to be answering nevertheless. What is distinct even so is that most gaming jurisdictions will have to find out how to offer with a scaled-down pie.

This evaluation involves only gaming revenues of licensed casinos and pari-mutuel shops that supply on line casino game titles, and not Indian gaming operations, card rooms, or small non-on line casino variety slot locations. The whole article, such as profits tables is available on our internet webpage.

Input/Output Design

A essential element that appears to have arisen from the ashes of this recent trend is that a lot of on line casino assignments ended up just too massive to assist themselves. The enter, in phrases of investment pounds, was not proportional to the output, in conditions of web earnings right after debt service, in contrast to formerly accomplished benefits. More and/or even bigger is not constantly far better. Looking at the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of far more extensive features in many other jurisdictions. The flaw in this method nevertheless is that the charges linked with widening market penetration and occasioned-use, are significantly greater than those incurred to attract the base market.

As daytripper marketplaces turn out to be a lot more competitive, on line casino venues will have to rely more and far more on their in-residence resort patrons, and size their properties (and expectations) accordingly. While Steve Wynn commenced a significant craze in making up-industry mega-places, there just was not ample demand on the Strip to warrant the several other equivalent projects that adopted that aimed at the same niche.

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Other Gaming Routines

Although there are no released in depth info of American Indian gaming revenues, anecdotal evidence appears to propose that this segment has been as hard strike as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $1.six billion in 2008, symbolizing a fall of about seven %, or nearly $114 million, much more than doubling the 3.5 percent drop from the calendar year ahead of. This industry is evidently still reeling from the ripple-influence of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming stories that contributions primarily based on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the earlier yr decreasing .8 per cent in the 1st quarter, 7.5 per cent in the second quarter, nine.5 percent in the third quarter, and sixteen.one percent in the fourth quarter.

Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, stories that even though calendar year 2008 showed an practically 2 per cent progress charge in gaming revenues, there was an 8.seven p.c decline in the third quarter and an practically 10 p.c drop in the fourth quarter of 2008, in comparison with 2007. Gaming revenue developments at close by Niagara Falls, Ontario were down 1.five% in 2008 compared with 2007.

It’s been a mixed-bag for point out lotteries across the country. The North American Association of State & Provincial Lotteries stories that U.S. lotteries created a overall of $60.six billion in revenue in fiscal 2008, up about 3 per cent from the earlier year but some jurisdictions described decreases, most notably California, which showed an eight per cent drop. Inasmuch as some of these states are on different fiscal 12 months ends, it would seem to be that the data does not mirror the affect of 3rd and/or fourth quarter outcomes.

According to data provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 per cent to $thirteen.7 billion in 2008, as opposed to $14.7 billion in 2007.

Prepared & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned considerably of the growth in annual on line casino/racino revenues more than the many years, and their influence is apt to proceed into the around future.

Miami Dade voters authorized a ballot concern that enables every single of a few pari-mutuels to have a casino facility of up to 2,000 slot devices. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has however to announced its ideas. There are numerous other proposals getting regarded as that would further increase on line casino advancement all through the condition.

The condition ultimately got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,200+ recreation casino positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some discussion about enabling an boost in per area gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

The state’s expanded lottery software that makes it possible for for the improvement of four casino gaming zones and slots at current horse and dog tracks appears mired, as only one particular facility is presently under building, although 3 other proposals ended up 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 shut to the state line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk video games, together with a 2nd stage thanks to open up in 2011 with 875 slots and 20 table games. The condition has prolonged the software approach for the other 3 zones right up until April, 2009.

There is still a whole lot of ‘jockeying’ going on, but the prospect of as a lot of as eight slot parlors and racinos appears to be back again on the front-burner, but likely not solved during the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most recent being the 390 area M Resort in Henderson. There are expansions underway at both Caesars Palace and Challenging Rock and new hotels consist of two factors of the Town Centre undertaking, and the Fountainebleau.

Pinnacle Entertainment’s new casino advancement projects in Baton Rouge and Lake Charles, while delayed, are documented to nevertheless be on-keep track of for opening this year and/or early 2010.

There is a bill underneath consideration that could a lot more than double Penn National’s slot equipment to three,000, as well as a proposal that would eliminate the restriction that slots be located within five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional residents to allow slots, could be thinking about relocating to a more hospitable town.

A referendum was accredited in November, 2008 that enables for the growth of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the condition had anticipated.

Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open up in 2008, but has run into various funding problems and while the resort part is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again considerably, is nevertheless on observe to open up this 12 months.

New England
Massachusetts, a sleeping-huge in phrases of marketplace likely, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t seem to muster the political assist. A recent research accomplished by Dartmouth College estimates that Massachusetts resident invested far more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to build casinos, even so the topic is probably to be revisited, specially if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its options.

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

New York
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would finally be designed, the profitable bidder indicated an incapacity to make the essential $370 million charge, citing the existing lending weather, and throwing the task back into the lap of the governor. Despite the fact that the industry desire in the region could be regarded really strong, the prospect of further competitors from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, particularly considering that a bit much less than 30% of the net get is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort complicated are becoming reconsidered probably owing to equally the probable opening of at the very least 1 or probably two racino operations in the NY metro location, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Yet another gaming proposal is currently being set forth in Ohio, soon after final year’s model was turned down by the voters. This program phone calls for one casino every in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expense needed of $250 million, as effectively as an initial licensing fee of $fifty million, and a 33 % tax on gaming earnings.

The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers task in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are expected to commence construction this year.

South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and consist of 300 game titles, one hundred forty rooms and a extensive selection of features.

Legislators are proposing a voter referendum that would amend the point out structure to allow on line casino gambling in specified locations, as well as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Condition federal government has proffered the notion of enabling the vacation resort to offer on line casino video games, but this work is in also early a stage to have any traction one particular way or an additional.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the getting of lands into have confidence in on behalf of federally acknowledged American Indian tribes has further stymied some new Course III gaming projects throughout the country. Moreover, there had been eleven Indian casino projects turned down by the DOI last calendar year because of its new rule that casinos should be around adequate to a reservation that tribal members can function at them. It has been advised that the new Obama administration may be more sympathetic to the development of Indian gaming projects, but this issue has but to be tackled.

Meanwhile, there are other Course III projects in the various stages of development. The Seneca casino task in Buffalo, NY, even though running a small short-term facility, has delayed an presently below development long lasting facility right up until the marketplace rebounds. They have also expressed an desire in building a casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could impact their ideas for bigger projects. There are new Indian gaming assignments set to open in Michigan and Oklahoma this calendar year, and other people are in the arranging phase. Texas might enable the reopening of Indian gaming services and let other location and there are programs afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to 3 new Class III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming income in Atlantic Town has declined seven.6 per cent, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is finding alone in an extreme comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast have been situated in Atlantic Town, in which it looked as if it may possibly really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually nonetheless its market share was getting encroached on, very first by the advancement of a large Class III gaming procedure in Connecticut, and then an additional slots operations in Rhode Island, and then video 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 casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening all around Atlantic City’s long term potential customers. It’s reliance on working day-trippers lulled it into a bogus sense of stability, and it now finds itself getting to redefine its mission assertion to “vacation spot resort.”

The only issue with this approach nevertheless is that it is sick-equipped to pull it off. For all intents and reasons, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is just not enough working day-tripper marketplace to go about, and their efficient buying and selling location is tightening, as the peripheral populations northward now/will have more all set obtain to a widened source in New York (Yonkers, and soon at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only genuine competitive benefits are its resort capacity and the availability of table games, even though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In buy to adequately contend as a location resort the city requirements to build additional guest rooms and not always gaming capability. By comparison, the Las Vegas Strip properties – accurate gaming places, in that they do not have considerably of a day-trip marketplace, other than for the ‘locals’ – have an average of .87 gaming positions per visitor area even though Atlantic City’s average is 2.74 positions for every visitor area.

It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, had been the the very least impacted by the newest downturn. The Borgata skilled a gaming income fall of 1.six p.c, while Harrah’s Marina described a 4.9 per cent enhance when compared to 2007. In addition, the hardest strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity of rooms. In the meantime some of the venues are teetering on viability, like the the Trump properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a regular rise in gaming revenues via 2006, the city seemed primary for even more development, which precipitated preparing for four new vacation resort assignments, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.five billion venture stays an iron skeleton, Pinnacle Enjoyment has declared it might look for to promote its razed Sands site, MGM Mirage has shelved its casino ideas, and Penn National appears to have stopped its pursuit of the Bader Field airport web site.