2008 National Commercial Casino & Racino Gaming Revenue Analysis

A Period of Adjustment

Oops! The giant hissing noise is the balloon of gaming that has been slowly losing air over the years. It hasn't been a wave that has lowered all boats, however, some new and expanding gaming jurisdictions have shown strong growth in 2008

Overall, gaming revenues in the commercial and racetrack sectors (excluding Indian gaming) fell by 3.5 percent for 2008. They generated a total of 36.2 billion dollars, down $800 million since 2007. Racinos have tempered the decline, with a gain in 2008 of nearly $1 billion. This brings the commercial sector down to $1.8 billion or 6.7%. Nevada suffered the largest loss in 2008 with a drop of almost $1.3 billion. More than half came from the Las Vegas Strip segment.

Hunkering down

Casino operators were largely caught off guard by the severity of the 2008 revenue decline, which was only felt in the third and fourth quarterly periods. In recent years, construction and expansions have been a flurry of activity as a result of the growth of the market in the United States and the abundance of credit and equity. Many of these projects have been deemed over-leveraged or over-sized due to the reality of a stagnant, or at least declining, demand. Many gaming companies are now trying to renegotiate debt, which is made harder by the lower valuations. They also try to reduce operational costs. This has created a conundrum for gaming companies, particularly in jurisdictions where new casino projects are emerging in nearby areas. This topic is discussed in greater detail in the State-by-State analysis section of this publication.

The gaming industry is awash with imminent deaths as a result. Station Casinos is one of the most notable firms in trouble. Others include Harrah's Entertainment and Greektown Holdings. Legends Gaming, Tropicana Entertainment and Herbst Gaming are also on the list.

Are we still at the bottom of this economic cycle? No one seems to have an answer yet. It is clear that gaming jurisdictions must learn to cope with a smaller market 에볼루션카지노.

Note:
This analysis only includes gaming revenues from licensed casinos and parimutuel outlets offering casino games. It does not include Indian gaming operations, small slot machines, or card rooms. Our website has the entire article including revenue tables.

Input/Output model

One of the key aspects that has emerged from this current trend, is that many casino project were too big to sustain themselves. In terms of dollars invested, the input was not in proportion to the output in terms net profit after debt servicing, when compared with previous results. It is not always the case that bigger and/or more is better. The rise of non-gaming revenues at Las Vegas Strip resorts prompted the development of comprehensive amenities in other jurisdictions. This strategy is flawed because the costs of expanding the market and attracting new customers are higher than the cost to reach the existing market.

Casino venues will need to size their properties and expectations accordingly as the daytripper market becomes more competitive. Steve Wynn's creation of upmarket mega-destinations was a trend that began a long time ago. However, the demand for these projects on the Strip simply wasn't there.

It is important to find a middle ground in terms of project configurations. This requires a more structured approach and less improvisation. A shameless plug for development consultants like ourselves.

Other Gaming Activities

The American Indian gaming sector has not been published with detailed information, but anecdotal data suggests that it is as badly hit as the commercial sector. In 2008, the two Connecticut Indian gaming facilities reported slot revenue of $1.6 Billion, a decrease of 7 percent or $114 Million, which is more than double the 3.5 Percent drop in 2007. The market is still reeling after the ripple effect of the Rhode Island casino expansion and the openings of slot machines in New York and Pennsylvania.

Arizona Department of Gaming reported that the contributions from the 23 Indian casinos in Arizona based on gaming revenue formulas have decreased every quarter since 2008, as compared to last year. The decreases were.8 percent for the first quarter; 7.5 percent for the second quarter; 9.5 percent for the third quarter and 16.1 percent during the fourth quarter.

Some SEC-reporting Indian gaming properties have reported similar declines. Seneca Gaming which operates three Class III Casinos in upstate New York reports that despite a growth of almost 2 percent in gaming revenue in 2008, the third quarter saw an 8.7 percent drop and the fourth quarter almost 10 percent. Niagara Falls in Ontario, which is nearby, saw a 1.5% decline in gaming revenue from 2007 to 2008.

The state lotteries have been mixed across the nation. North American Association of State & Provincial Lotteries states that U.S. lottery sales totaled $60.6 billion during fiscal 2008. This is an increase of about 3 percent over the previous year. However, some jurisdictions have reported declines. Most notably, California has shown a drop of 8 percent. As some of these states have different fiscal years, the data may not reflect the third or fourth quarter results.