08 Nationwide Industrial Casino & Racino Video gaming Income Evaluation.
A Amount of Adjustment
Oops! That giant hissing sound may be the gaming balloon that were growing over the years, slowly losing air. But, it hasn’t 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 complete of $36.2 billion, down some $800 million from 2007. It absolutely was the Racino sector that’s tempered this drop, because 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 greatest loser in 2008, dropping almost $1.3 billion, over fifty percent that stemmed from the Las Vegas Strip segment.
For probably the most part, casino operators were caught relatively flat-footed by the extent of the 2008 revenue downturn, because it wasn’t before the third and fourth quarters when it really nosedived. Riding the crest of year over year market growth across the country and the accessibility to ample credit and equity funds, new construction and expansion proliferated in recent years. Today, up against the realities of declining, or at best stagnant demand, many of these projects are actually considered over-leveraged and/or over-sized. Consequently many gaming companies are wanting 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 coping with your 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 of this publication.
Consequently of those conditions the gaming industry landscape is now strewn with impending fatalities. Among the 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.
“Just how long will these economic conditions persist, and are we at the end yet?” are questions no-one is apparently answering yet. What’s clear however is that most gaming jurisdictions will need to learn to handle an inferior pie.
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 complete article, including revenue tables can be obtained on our web page.토토사이트
A vital aspect that seemingly have arisen from the ashes of this current trend is that numerous casino projects were just too large to guide themselves. The input, with regards to investment dollars, wasn’t 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 costs connected with widening market penetration and occasioned-use, are significantly greater than those incurred to attract the base market.
As daytripper markets be more competitive, casino venues will need to rely more and more on their in-house hotel patrons, and size their properties (and expectations) accordingly. While Steve Wynn started a significant trend in creating up-market mega-destinations, there simply wasn’t enough demand on the Strip to warrant the many other similar projects that followed that targeted at the same niche.
The trick is always to strike a pleased 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 you will find no published detailed data of American Indian gaming revenues, anecdotal evidence generally seems to suggest that this segment has been as hard hit as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, representing a fall around 7 percent, or almost $114 million, significantly more than doubling the 3.5 percent drop from the season 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 based on a gaming revenue formula from the state’s 23 Indian gaming casinos, have already been declining every quarter in 2008 set alongside the previous year; decreasing .8 percent in the very first quarter, 7.5 percent in the next quarter, 9.5 percent in the 3rd 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 was an 8.7 percent decline in the 3rd quarter and an almost 10 percent decline in the fourth quarter of 2008, weighed against 2007. Gaming revenue trends at nearby Niagara Falls, Ontario were down 1.5% in 2008 weighed against 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 complete of $60.6 billion in sales in fiscal 2008, up about 3 percent from the prior year; yet some jurisdictions reported decreases, especially California, which showed an 8 percent drop. Inasmuch as some of these states are on various fiscal year ends, it would appear that the information doesn’t reflect the impact of third and/or fourth quarter results.
Based on 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 has been new gaming jurisdictions that have spawned much of the growth in annual casino/racino revenues over the years, and their impact is apt to continue into the near future.
Miami Dade voters approved a ballot issue that allows every one of three pari-mutuels to 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, whilst the Calder installation in Miami Gardens has yet to announced its plans. There are numerous other proposals being considered that could further expand casino development through the state.
The 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 newest facility is unlikely 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.
The state’s expanded lottery program that allows for the development of four casino gaming zones and slots at existing horse and dog tracks appears mired, as only 1 facility is presently under construction, while three other proposals were rescinded. The sole 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 near 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, along with a second phase as a result of open in 2011 with 875 slots and 20 table games. The state has extended the applying process for one other three zones until April, 2009.