December 4, 2022

08 Country wide Professional Casino & Racino Games Profits Investigation.

A Amount of Adjustment

Oops! That giant hissing sound may be the gaming balloon that were growing over time, slowly losing air. But, it has not been a tide that lowered all ships however, as some emerging and expanding gaming jurisdictions showed strong growth in 2008.

Overall, the commercial and racetrack casino sectors (excluding Indian gaming), experienced a 3.5 percent decline in gaming revenues for 2008, generating a total of $36.2 billion, down some $800 million from 2007. It had been the Racino sector that has tempered this drop, as they showed a gain of almost $1 billion in 2008, thereby bringing the Commercial sector market decline to $1.8 billion, or 6.7 percent. Nevada was the biggest loser in 2008, dropping almost $1.3 billion, more than half that stemmed from the Las Vegas Strip segment.

Hunkering Down

For the absolute most part, casino operators were caught relatively flat-footed by the extent of the 2008 revenue downturn, because it was not before the third and fourth quarters when it certainly nosedived. Riding the crest of year over year market growth across the country and the option of ample credit and equity funds, new construction and expansion proliferated in recent years. Today, faced with the realities of declining, or at best stagnant demand, many of these projects are now actually considered over-leveraged and/or over-sized. Consequently many gaming companies are attempting to renegotiate their debt – made more challenging by lower valuations – while also paring down operational costs. The latter has become a very problematic conundrum when working with the competition, especially in those jurisdictions which can be now vying for market shares with new emerging casino projects in neighboring areas. A topic we discuss more fully in the State by State analysis section with this publication.

Consequently of the conditions the gaming industry landscape has become strewn with impending fatalities. On the list of more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming; and the list grows each week.

“How long will these economic conditions persist, and are we at the bottom yet?” are questions no-one appears to be answering yet. What is clear however is that most gaming jurisdictions will have to learn to deal with a smaller pie.

Note:
This analysis includes only gaming revenues of licensed casinos and pari-mutuel outlets that offer casino games, and not Indian gaming operations, card rooms, or small non-casino type slot locations. The whole article, including revenue tables can be obtained on our web page.토토사이트

Input/Output Model

A vital aspect that seemingly have arisen from the ashes with this current trend is that numerous casino projects were just too big to aid themselves. The input, with regards to investment dollars, was not proportional to the output, with regards to net profit after debt service, in comparison to previously achieved results. More and/or bigger is not necessarily better. Seeing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the development of more comprehensive amenities in a number of other jurisdictions. The flaw in this strategy however is that the expense related to widening market penetration and occasioned-use, are significantly more than those incurred to attract the beds base market.

As daytripper markets be much more competitive, casino venues will have to rely more and more on the in-house hotel patrons, and size their properties (and expectations) accordingly. While Steve Wynn started a major trend in creating up-market mega-destinations, there simply was not enough demand on the Strip to warrant the countless other similar projects that followed that targeted at the exact same niche.

The trick is to strike a pleased medium in project configurations; which obviously require less of a ‘seat-of-pants’ approach, and one that’s more studied. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Although there are no published detailed data of American Indian gaming revenues, anecdotal evidence generally seems to suggest this segment has been as hard hit because the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, representing a decline of about 7 percent, or almost $114 million, a lot more than doubling the 3.5 percent drop from the year before. This market is apparently still reeling from the ripple-effect of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions predicated on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 compared to the previous year; decreasing .8 percent in the initial quarter, 7.5 percent in the next quarter, 9.5 percent in the third quarter, and 16.1 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, reports that while calendar year 2008 showed an almost 2 percent growth rate in gaming revenues, there clearly was an 8.7 percent decline in the third quarter and an almost 10 percent decline in the fourth quarter of 2008, compared with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario were down 1.5% in 2008 compared with 2007.

It’s been a mixed-bag for state lotteries across the country. The North American Association of State & Provincial Lotteries reports that U.S. lotteries generated a total of $60.6 billion in sales in fiscal 2008, up about 3 percent from the previous year; yet some jurisdictions reported decreases, especially California, which showed an 8 percent drop. Inasmuch as some of those states are on various fiscal year ends, it appears to be that the data doesn’t reflect the impact of third and/or fourth quarter results.

In accordance with data provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling 7 percent to $13.7 billion in 2008, versus $14.7 billion in 2007.

Planned & Proposed New Expansions

As previously noted, it’s been new gaming jurisdictions which have spawned a lot of the growth in annual casino/racino revenues over time, and their impact is apt to continue into the near future.

Florida
Miami Dade voters approved a ballot issue which allows all of three pari-mutuels to really have a casino facility of up to 2,000 slot machines. The Flagler Dog Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, as the Calder installation in Miami Gardens has yet to announced its plans. You’ll find so many other proposals being considered that will further expand casino development through the state.

Illinois
Their state finally got around to reissuing its tenth license, late in December, 2008; awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ game casino situated in Des Plaines just east of O’Hare. The brand new facility is not likely to open until 2010. There’s 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.

Kansas
The state’s expanded lottery program which allows for the development of four casino gaming zones and slots at existing horse and dog tracks appears mired, as only one facility is presently under construction, while three other proposals were rescinded. The only bidder on the Cherokee County contract, claimed it might not compete with the brand new Quapaw tribal casino in Oklahoma, which can be located so close to the state line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table games, plus a second phase as a result of open in 2011 with 875 slots and 20 table games. Their state has extended the applying process for the other three zones until April, 2009.