2008 Countrywide Industrial On line casino & Racino Games Revenue Examination

A Period of time of Adjustment

Oops! That big hissing audio is the gaming balloon that had been increasing in excess of the a long time, slowly and gradually getting rid of air. But, it has not been a tide that decreased all ships nevertheless, as some emerging and expanding gaming jurisdictions showed powerful development in 2008.

Overall, the business and racetrack on line casino sectors (excluding Indian gaming), seasoned 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 fall, as they showed a obtain of virtually $one billion in 2008, thereby bringing the Professional sector industry decline to $one.eight billion, or six.seven per cent. Nevada was the most significant loser in 2008, dropping almost $one.3 billion, a lot more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, on line casino operators ended up caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not until the 3rd and fourth quarters when it really nosedived. Riding the crest of 12 months in excess of yr market growth across the place and the availability of enough credit score and fairness funds, new building and growth proliferated in latest years. Nowadays, confronted with the realities of declining, or at very best stagnant desire, numerous of these projects are now considered more than-leveraged and/or in excess of-sized. As a consequence numerous gaming organizations are making an attempt to renegotiate their financial debt – produced far more challenging by decrease valuations – although also paring down operational costs. The latter has turn into a really problematic conundrum when dealing with the competitors, particularly in individuals jurisdictions that are now vying for market shares with new emerging on line casino projects in neighboring locations. A subject matter we talk about much more entirely in the State by State analysis section of this publication.

As a end result of these situations the gaming industry landscape is now strewn with impending fatalities. Amid the a lot more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows every 7 days.

“How extended will these economic circumstances persist, and are we at the base yet?” are inquiries no a single appears to be answering nevertheless. What is obvious nonetheless is that most gaming jurisdictions will have to find out how to deal with a more compact pie.

This evaluation consists of only gaming revenues of certified casinos and pari-mutuel outlets that supply casino online games, and not Indian gaming functions, card rooms, or small non-casino sort slot locations. The whole post, including earnings tables is accessible on our internet website page.

Enter/Output Product

A important element that seems to have arisen from the ashes of this current craze is that several on line casino initiatives ended up just way too large to assistance by themselves. The input, in terms of expense dollars, was not proportional to the output, in conditions of internet earnings following personal debt provider, when compared to beforehand achieved benefits. Far more and/or larger is not usually greater. Observing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the development of far more extensive amenities in several other jurisdictions. The flaw in this method however is that the charges connected with widening market place penetration and occasioned-use, are substantially higher than these incurred to attract the base market place.

As daytripper marketplaces become far more aggressive, casino venues will have to rely far more and much more on their in-home resort patrons, and dimension their homes (and anticipations) accordingly. Although Steve Wynn started a major craze in making up-market place mega-locations, there simply was not sufficient demand from customers on the Strip to warrant the many other equivalent projects that adopted that aimed at the very same market.

The trick is to strike a happy medium in task configurations which of program call for significantly less of a ‘seat-of-pants’ approach, and one particular that is much more researched. A shameless plug for advancement consultants like ourselves.

Other Gaming Actions

Despite the fact that there are no printed comprehensive data of American Indian gaming revenues, anecdotal evidence appears to recommend that this segment has been as difficult strike as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, symbolizing a fall of about seven percent, or practically $114 million, more than doubling the 3.five % fall from the 12 months prior to. This market place is apparently still reeling from the ripple-influence of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming stories that contributions based mostly on a gaming earnings system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the earlier calendar year lowering .eight p.c in the initial quarter, seven.5 percent in the 2nd quarter, 9.5 percent in the third quarter, and 16.1 % in the fourth quarter.

Some SEC reporting Indian gaming houses report similar decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that while calendar calendar year 2008 showed an practically 2 p.c progress charge in gaming revenues, there was an 8.seven percent decrease in the 3rd quarter and an almost 10 p.c decrease in the fourth quarter of 2008, compared with 2007. Gaming income traits at nearby Niagara Falls, Ontario had been down one.5% in 2008 in contrast with 2007.

It is been a mixed-bag for point out lotteries across the nation. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries produced a complete of $60.6 billion in revenue in fiscal 2008, up about three % from the preceding 12 months yet some jurisdictions noted decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on different fiscal calendar year finishes, it would seem to be that the information does not mirror the impact of third and/or fourth quarter outcomes.

In accordance to information provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 percent to $13.7 billion in 2008, versus $14.seven billion in 2007.

Prepared & Proposed New Expansions

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

Miami Dade voters approved a ballot problem that allows each and every of three pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Puppy Track 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 declared its plans. There are several other proposals getting regarded that would further grow on line casino growth throughout the point out.

The point out lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ recreation casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open until finally 2010. There has also been giải trí Winbet about making it possible for an enhance in for every place gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

The state’s expanded lottery program that allows for the development of 4 casino gaming zones and slots at current horse and pet tracks seems mired, as only a single facility is presently under building, although 3 other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the condition line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten table online games, together with a next phase thanks to open in 2011 with 875 slots and 20 desk online games. The point out has prolonged the software method for the other three zones until finally April, 2009.

There is nonetheless a good deal of ‘jockeying’ likely on, but the prospect of as many as 8 slot parlors and racinos appears to be again on the front-burner, but probably not solved for the duration of the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most current getting the 390 place M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Hard Rock and new resorts contain two parts of the Metropolis Centre project, and the Fountainebleau.

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

There is a monthly bill under thought that could more than double Penn National’s slot machines to three,000, as properly as a proposal that would eliminate the restriction that slots be positioned within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing local residents to allow slots, could be thinking about transferring to a far more hospitable city.

A referendum was accepted in November, 2008 that makes it possible for for the development of 5 casinos with a complete of fifteen,000 slots, and now the bidding war is afoot though it is not as intensive as the point out had anticipated.

Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has run into numerous funding issues and although the resort part is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back relatively, is still on observe to open up this 12 months.

New England
Massachusetts, a sleeping-large in conditions of marketplace potential, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot appear to muster the political assistance. A modern study completed by Dartmouth University estimates that Massachusetts resident expended more than $920 million last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to create casinos, however the subject is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider its alternatives.

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

New York
Just when it seemed as if Aqueduct’s four,500 VLT facility would last but not least be produced, the profitable bidder indicated an inability to make the needed $370 million payment, citing the existing lending local weather, and throwing the undertaking back again into the lap of the governor. Although the marketplace need in the area could be considered quite sturdy, the prospect of further competitiveness from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly considering that a bit considerably less than 30% of the web acquire is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort intricate are currently being reconsidered probably owing to the two the probable opening of at minimum one particular or possibly two racino functions in the NY metro region, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Nevertheless yet another gaming proposal is becoming put forth in Ohio, following last year’s edition was turned down by the voters. This prepare phone calls for 1 on line casino every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure necessary of $250 million, as properly as an first licensing payment of $50 million, and a 33 p.c tax on gaming income.

The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is envisioned to be operational in August, ’09 whilst Philadelphia’s two slot services even now wallow in a political mire, but are predicted to start off construction this yr.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and consist of 300 video games, a hundred and forty rooms and a broad assortment of facilities.

Legislators are proposing a voter referendum that would amend the point out structure to let on line casino gambling in selected regions, as nicely as permit gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer you. Condition govt has proffered the notion of enabling the resort to provide on line casino video games, but this energy is in way too early a phase to have any traction one particular way or yet another.

Indian Gaming
A modern Supreme Court ruling that restricts the getting of lands into trust on behalf of federally recognized American Indian tribes has more stymied some new Course III gaming tasks across the region. Furthermore, there ended up eleven Indian on line casino initiatives rejected by the DOI very last year due to the fact of its new rule that casinos should be in close proximity to ample to a reservation that tribal associates can perform at them. It has been advised that the new Obama administration may be a lot more sympathetic to the development of Indian gaming initiatives, but this issue has yet to be addressed.

In the meantime, there are other Class III initiatives in the a variety of stages of improvement. The Seneca casino undertaking in Buffalo, NY, even though running a tiny momentary facility, has delayed an presently under construction long lasting facility until the market rebounds. They have also expressed an interest in creating a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could effect their programs for larger projects. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this 12 months, and other folks are in the organizing stage. Texas could allow the reopening of Indian gaming services and enable other location and there are plans afoot by the Navajos in Arizona to construct added casinos. California is poised to open two to three new Class III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming profits in Atlantic Metropolis has declined 7.six %, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is locating itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been positioned in Atlantic Town, exactly where it seemed as if it might actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly nonetheless its marketplace share was becoming encroached on, 1st by the advancement of a big Course III gaming procedure in Connecticut, and then yet another slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently 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 foreseeable future prospects. It really is reliance on working day-trippers lulled it into a false perception of stability, and it now finds by itself getting to redefine its mission statement to “location resort.”

The only dilemma with this technique nonetheless is that it is sick-equipped to pull it off. For all intents and reasons, Atlantic City is beneath-roomed and/or over-gamed. There is simply not adequate day-tripper market to go close to, and their effective investing area is tightening, as the peripheral populations northward now/will have a lot more ready obtain 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 obtain, the city’s only actual aggressive rewards are its lodge ability and the availability of desk video games, even though the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In get to sufficiently compete as a location vacation resort the town wants to build added visitor rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip houses – real gaming places, in that they do not have much of a working day-trip market place, other than for the ‘locals’ – have an common of .87 gaming positions for every guest area whilst Atlantic City’s regular is 2.74 positions per visitor room.

It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, were the minimum impacted by the newest downturn. The Borgata skilled a gaming revenue fall of one.6 %, although Harrah’s Marina described a four.nine p.c enhance compared to 2007. Moreover, the hardest hit venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, including the the Trump homes and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a regular increase in gaming revenues by means of 2006, the metropolis appeared prime for further improvement, which precipitated organizing for four new resort tasks, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion project remains an iron skeleton, Pinnacle Enjoyment has introduced it might look for to sell its razed Sands website, MGM Mirage has shelved its on line casino plans, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport website.