Racino Gaming Revenue Analysis

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A Period of AdjustmentOops! That giant hissing sound is that the gaming balloon which was growing over time, slowly losing air. However, it has not been a tide that lowered all boats nevertheless, as a few emerging and expanding gambling jurisdictions demonstrated strong increase in 2008. It had been the Racino sector that’s tempered this drop, as they showed a profit of nearly $1 billion in 2008, thereby bringing the industrial industry market decrease to $1.8 billion, or 6.7 percent. Nevada was the largest loser in 2008, dropping almost $1.3 billion, over half of which originated from the Las Vegas Strip segment.Hunkering DownFor the most part, casino operators have been caught comparatively flat-footed by the extent of the 2008 revenue recession, as it was not until the fourth and third quarters when it really nosedived. Riding the crest of year market expansion across the country and the availability of ample credit and equity funds, new construction and expansion proliferated in recent decades. Today, confronted with the realities of declining, or at best stagnant demand, a number of these jobs are now considered over-leveraged and/or over-sized. As a result many gaming companies are trying to renegotiate their debt made more difficult by lower valuations – while also paring down operational costs. The latter has come to be an extremely problematic conundrum when dealing with the competition, particularly in those authorities which are now vying for market shares with new emerging casino projects in neighboring regions. A subject we discuss more fully in the State by State analysis section of this publication.As a consequence of these conditions the gaming industry landscape is now strewn with deaths that are impending. “How long will these economic conditions persist, and are we in the bottom yet?” Are questions no one seems to be replying yet. What is clear however is that most gaming jurisdictions will have to understand how to deal with a smaller pie.Notice:This analysis includes only gaming earnings of licensed casinos and pari-mutuel sockets that offer casino games, rather than Indian gaming operations, card rooms, or little non-casino kind slot places. The whole article, including revenue tables can be obtained on our internet page. Input/Output ModelA vital part which seems to have arisen from the ashes of this current trend is that lots of casino projects were just too big to encourage themselves. The input, in terms of investment dollars, was not proportional to the outcome signal, in terms of net gain after debt service, compared to previously attained results. More and/or bigger is not necessarily better. Seeing the rise in non-gaming earnings at the Las Vegas Strip hotels, gave impetus to the development of comprehensive amenities in a number of different jurisdictions. The defect in this strategy however is that the costs associated with expanding market penetration and occasioned-use, are significantly higher than those incurred to attract the base market.Since daytripper markets become more competitive, casino venues will need to rely more and more in their in-house hotel patrons, and dimensions 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 numerous other similar projects that followed that aimed in the same niche.The trick is to hit a happy medium in project configurations; that of course require less of a’seat-of-pants’ strategy, and one that is studied. A shameless plug for development consultants like ourselves.Other Gambling ActivitiesEven though there are no published detailed data of American Indian gaming revenues, anecdotal evidence appears to indicate that this section has been as hard hit as the industrial sector. The Arizona Department of Gaming reports that donations based on a gaming earnings formula from the state’s 23 Indian gaming casinos, have been decreasing annually in 2008 compared to the previous season; decreasing.8 percent in the first 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 gambling properties report comparable reductions. Gambling revenue tendencies at nearby Niagara Falls, Ontario were down 1.5percent in 2008 compared with 2007.

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