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2008 National Commercial Casino & Racino Gaming Revenue Analysis

A time of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been growing over the years, slowly losing air. But, it will never be a tide that lowered all delivers however, as some emerging and increasing 토토사이트 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 thousand, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a gain of almost $1 thousand in 2008, thereby bringing the Commercial sector market decline to $1. 8 thousand, or 6. 7 percent. Nevada was the biggest loser in 2008, dropping almost $1. 3 thousand, more than half of which stemmed from the Nevada Line portion.

Hunkering Down

For the most part, casino operators were caught relatively flat-footed by the extent of the 2008 revenue economic downturn, as it was not before the third and fourth quarters when it really nosedived. Riding the crest of year over year market growth across the nation and the availability of ample credit and justness funds, new construction and expansion proliferated in recent years. Today, in face of the realities of regressing, or at best stagnant demand, many of these projects are now considered over-leveraged and/or over-sized. As a result many gaming companies are attempting to renegotiate their debt – made more difficult by lower value – while also paring down in business costs. The latter has become a very problematic conundrum when dealing with the competition, especially in those jurisdictions that are 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 of this publication.

As a result of these conditions the gaming industry landscape is now strewn with approaching fatalities. Among the more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Tales Gaming, Tropicana Entertainment, Herbst Gaming; and the list grows weekly.

“How long will these economic conditions continue to persist, and are we in 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 how to deal with a smaller quiche.

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 video slot locations. The whole article, including revenue tables is available on our web page.

Input/Output Model

A key aspect that seems to have arisen from the ashes of this current trend is that many casino projects were just too large to support themselves. The input, in terms of investment dollars, was not proportional to the output, in terms of net profit after debt service, compared to previously achieved results. More and/or bigger is not always better. Seeing the rise in non-gaming revenue at the Nevada Line resorts, gave traction to the development of more comprehensive amenities in many other jurisdictions. The downside in this strategy however is that the costs associated with widening market puncture and occasioned-use, are significantly higher than those borne to attract the beds base market.

As daytripper markets are more competitive, casino venues will have to rely more and more on their in-house hotel clients, and size their properties (and expectations) accordingly. While Bob Wynn started a major trend in creating up-market mega-destinations, there simply was not enough demand on the Line to warrant the many other similar projects that followed that aimed at the same niche.

The secret to success is to strike a happy medium in project configurations; which of course require less of a ‘seat-of-pants’ approach, and one that is 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 appears to suggest that this portion has been as hard hit as the Commercial sector. The two Connecticut Indian gaming installations report video slot revenue of $1. 6 thousand in 2008, comprising a drop of 7 percent, or almost $114 million, more than doubling the 3. 5 percent drop from the year before. Forex trading is apparently still reeling from the ripple-effect of a casino expansion in Rhode Island, and the opening of video slot operations in New york and Philadelphia.

The Arizona Department of Gaming reports that contributions based on a gaming revenue formula from the state’s twenty-three Indian gaming casinos, have been regressing every fraction in 2008 compared to the previous year; decreasing. 8 percent in the first fraction, 7. 5 percent in the second fraction, 9. 5 percent in the third fraction, and 16. 1 percent in the fourth fraction.

Some SEC credit 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 was an 8. 7 percent decline in the third fraction and an almost 10 percent decline in the fourth fraction 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 nation. The Us Association of State & Provincial Lotteries reports that You. S. lotteries generated a total of $60. 6 thousand in sales in budgetary 2008, up about 3 percent from the previous year; yet some jurisdictions reported decreases, such as California, which showed an 8 percent drop. Inasmuch as some of these states are on various budgetary year ends, it would seem that the data does not reflect the impact of third and/or fourth fraction results.

According to data provided by Equibase, horse racing pari-mutuel revenues continue their unpredictable manner, falling 7 percent to $13. 7 thousand in 2008, versus $14. 7 thousand in 2007.

Planned & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have inspired the creation of a lot of the growth in annual casino/racino revenues over the years, and their impact is more likely to continue into the near future.

Florida
Miami Dade voters approved a ballot issue enabling each of three pari-mutuels to have a casino facility all the way to 2, 000 slot machines. The Flagler Dog Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has yet to announced its plans. There are numerous other recommendations being considered that would further expand casino development throughout the state.

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