National Industrial Internet casino and Racino Gaming Revenue Analysis

A Interval of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been increasing above the years, gradually getting rid of air. But, it has not been a tide that lowered all ships however, as some emerging and expanding gaming jurisdictions showed strong development in 2008.

All round, the business and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.5 percent drop in gaming revenues for 2008, generating a whole of $36.2 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, therefore bringing the Business sector market drop to $1.8 billion, or six.7 per cent. Nevada was the most significant loser in 2008, dropping practically $one.three billion, a lot more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, on line casino operators had been caught reasonably flat-footed by the extent of the 2008 earnings downturn, as it was not until the 3rd and fourth quarters when it genuinely nosedived. Using the crest of 12 months in excess of 12 months market growth across the country and the availability of ample credit and fairness money, new design and expansion proliferated in current many years. Today, faced with the realities of declining, or at best stagnant desire, numerous of these projects are now regarded more than-leveraged and/or more than-sized. As a result numerous gaming organizations are attempting to renegotiate their credit card debt – created far more tough by reduce valuations – while also paring down operational charges. The latter has turn into a very problematic conundrum when working with the competition, specifically in these jurisdictions that are now vying for marketplace shares with new rising on line casino projects in neighboring areas. A topic we discuss much more entirely in the Condition by Condition investigation part of this publication.

As a end result of these problems the gaming industry landscape is now strewn with impending fatalities. Among the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows each and every 7 days.

“How prolonged will these economic circumstances persist, and are we at the bottom nevertheless?” are questions no one particular appears to be answering nevertheless. What is obvious even so is that most gaming jurisdictions will have to find out how to deal with a smaller sized pie.

This investigation involves only gaming revenues of certified casinos and pari-mutuel retailers that offer you on line casino video games, and not Indian gaming operations, card rooms, or modest non-on line casino kind slot places. The complete post, including income tables is available on our internet webpage.

Input/Output Design

A essential factor that would seem to have arisen from the ashes of this present development is that numerous on line casino projects have been just also massive to help by themselves. The input, in conditions of expenditure pounds, was not proportional to the output, in conditions of internet profit following credit card debt service, in contrast to earlier accomplished final results. More and/or bigger is not constantly much better. Seeing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of more thorough features in many other jurisdictions. The flaw in this technique even so is that the expenses linked with widening industry penetration and occasioned-use, are considerably larger than these incurred to entice the foundation market.

As daytripper markets grow to be much more competitive, on line casino venues will have to depend more and a lot more on their in-residence resort patrons, and dimension their houses (and expectations) appropriately. Even though Steve Wynn started a key craze in producing up-industry mega-places, there just was not ample demand from customers on the Strip to warrant the several other equivalent initiatives that adopted that aimed at the same area of interest.

The trick is to strike a pleased medium in undertaking configurations which of training course require significantly less of a ‘seat-of-pants’ approach, and a single that is a lot more analyzed. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Despite the fact that there are no printed thorough knowledge of American Indian gaming revenues, anecdotal evidence appears to suggest that this phase has been as challenging strike as the Business sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a fall of about 7 percent, or practically $114 million, much more than doubling the three.five % drop from the yr before. This marketplace is apparently even now reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming reports that contributions dependent on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the earlier yr reducing .8 p.c in the 1st quarter, 7.5 per cent in the 2nd quarter, 9.five p.c in the 3rd quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, studies that even though calendar calendar year 2008 confirmed an virtually 2 percent growth fee in gaming revenues, there was an eight.7 p.c decrease in the third quarter and an almost ten p.c drop in the fourth quarter of 2008, compared with 2007. Gaming income tendencies at nearby Niagara Falls, Ontario have been down one.5% in 2008 compared with 2007.

Betking777 ‘s been a combined-bag for point out lotteries across the nation. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries produced a whole of $60.six billion in sales in fiscal 2008, up about three % from the previous year yet some jurisdictions documented decreases, most notably California, which confirmed an 8 p.c fall. Inasmuch as some of these states are on a variety of fiscal 12 months ends, it would appear that the data does not replicate the influence of 3rd and/or fourth quarter final results.

In accordance to information provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven p.c to $thirteen.7 billion in 2008, as opposed to $ billion in 2007.

Planned & Proposed New Expansions

As beforehand mentioned, it has been new gaming jurisdictions that have spawned a lot of the progress in yearly casino/racino revenues in excess of the many years, and their influence is apt to continue into the in close proximity to foreseeable future.

Miami Dade voters approved a ballot concern that allows every single of a few pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Canine Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has nevertheless to declared its plans. There are many other proposals becoming considered that would even more broaden on line casino improvement through the condition.

The condition 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 one,200+ game on line casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open up till 2010. There has also been some discussion about allowing an increase in per location gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

The state’s expanded lottery software that enables for the advancement of four on line casino gaming zones and slots at existing horse and canine tracks appears mired, as only 1 facility is presently under construction, whilst 3 other proposals had been 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 near to the point out line that its parking great deal is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk games, along with a next section owing to open up in 2011 with 875 slots and twenty table online games. The condition has prolonged the software method for the other 3 zones until April, 2009.

There is even now a great deal of ‘jockeying’ heading on, but the prospect of as a lot of as eight slot parlors and racinos appears to be back on the front-burner, but very likely not solved for the duration of the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most current becoming the 390 place M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new accommodations consist of two factors of the Town Heart project, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino development initiatives in Baton Rouge and Lake Charles, even though delayed, are documented to even now be on-monitor for opening this yr and/or early 2010.

There is a bill below thought that could a lot more than double Penn National’s slot equipment to 3,000, as nicely as a proposal that would eliminate the restriction that slots be situated within 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing nearby people to allow slots, may possibly be taking into consideration relocating to a far more hospitable town.

A referendum was accredited in November, 2008 that makes it possible for for the advancement 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 extreme as the point out had expected.

Grand Soleil Casino Vacation resort in Natchez had been slated to open up in 2008, but has run into different funding issues and although the resort portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back somewhat, is nonetheless on keep track of to open this calendar year.

New England
Massachusetts, a sleeping-large in phrases of market likely, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to be to muster the political assist. A current examine concluded by Dartmouth College estimates that Massachusetts resident expended a lot more than $920 million final calendar year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to develop casinos, however the matter is most likely to be revisited, especially if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by not too long ago agreeing to proceed augmenting purses with an additional tax. The governor however, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s four,500 VLT facility would finally be developed, the successful bidder indicated an inability to make the essential $370 million charge, citing the current lending weather, and throwing the venture back into the lap of the governor. Despite the fact that the market place need in the region could be deemed quite strong, the prospect of additional competitors from nearby Belmont could have an affect on Aqueduct’s underlining financial feasibility, specially thinking about that a bit considerably less than thirty% of the web earn is retained by the operator.

Programs to relocate Monticello Raceway into a resort complex are being reconsidered probably owing to each the possible opening of at the very least one particular or perhaps two racino operations in the NY metro spot, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Nevertheless yet another gaming proposal is currently being set forth in Ohio, after very last year’s version was turned down by the voters. This plan calls for one particular casino each in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment decision essential of $250 million, as nicely as an first licensing payment of $fifty million, and a 33 per cent tax on gaming income.

The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers project 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 up in the Slide of 2009, and consist of 300 game titles, 140 rooms and a vast selection of facilities.

Legislators are proposing a voter referendum that would amend the condition constitution to let casino gambling in selected locations, as properly as let 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 supply. Point out authorities has proffered the notion of making it possible for the resort to offer you casino online games, but this work is in also early a phase to have any traction a single way or an additional.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the using of lands into believe in on behalf of federally recognized American Indian tribes has further stymied some new Class III gaming projects throughout the region. In addition, there were eleven Indian on line casino initiatives turned down by the DOI last calendar year simply because of its new rule that casinos need to be near adequate to a reservation that tribal customers can perform at them. It has been suggested that the new Obama administration may well be more sympathetic to the growth of Indian gaming projects, but this issue has but to be addressed.

In the meantime, there are other Class III assignments in the various phases of growth. The Seneca on line casino venture in Buffalo, NY, even though running a modest momentary facility, has delayed an previously beneath construction long lasting facility right up until the industry rebounds. They have also expressed an interest in developing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could impact their plans for larger initiatives. There are new Indian gaming projects established to open up in Michigan and Oklahoma this yr, and other individuals are in the planning stage. Texas may allow the reopening of Indian gaming facilities and permit other location and there are ideas afoot by the Navajos in Arizona to build additional casinos. California is poised to open two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming income in Atlantic Metropolis has declined seven.6 %, from $4.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is obtaining alone in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast have been situated in Atlantic Metropolis, in which it appeared as if it may well actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Gradually even so its market share was becoming encroached upon, initial by the improvement of a big 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 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 about 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 possessing to redefine its mission statement to “spot resort.”

The only issue with this technique nonetheless is that it is sick-outfitted to pull it off. For all intents and reasons, Atlantic City is beneath-roomed and/or more than-gamed. There is simply not ample day-tripper industry to go around, and their successful buying and selling spot is tightening, as the peripheral populations northward now/will have more ready entry to a widened source in New York (Yonkers, and soon 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 actual aggressive advantages are its hotel capability and the availability of table online games, even though the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In purchase to sufficiently contend as a location resort the town demands to produce added guest rooms and not essentially gaming potential. By comparison, the Las Vegas Strip houses – accurate gaming destinations, in that they do not have considerably of a working day-vacation market place, apart from for the ‘locals’ – have an regular of .87 gaming positions per visitor place even though Atlantic City’s common is two.seventy four positions for each guest space.

It is not a coincidence that Atlantic City’s two biggest hotels, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, have been the minimum impacted by the most current downturn. The Borgata knowledgeable a gaming profits fall of 1.six percent, whilst Harrah’s Marina reported a 4.9 % boost when compared to 2007. Moreover, the toughest hit venues, specifically 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, like the the Trump homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.

With a regular increase in gaming revenues by way of 2006, the city seemed prime for more growth, which precipitated preparing for four new vacation resort tasks, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $two.five billion project continues to be an iron skeleton, Pinnacle Enjoyment has declared it may well seek to sell its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Discipline airport website.


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