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They burned the Monte Carlo ... and may get away with it
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They burned the Monte Carlo ... and may get away with it
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Posted At : December 31, 2008 09:39 AM | Posted By : D McKee
Related Categories: Harrah's,Station Casinos,Current,Tribal,Herbst Gaming,Don Barden,Isle of Capri,IGT,Sheldon Adelson,Technology,Pinnacle Entertainment,Morgans Hotel Group,Colony Capital,Economy,International,Marketing,Steve Wynn,Politics,MGM Mirage,Columbia Sussex,Regulation,Boyd Gaming,Wall Street,Cosmopolitan,Macau,Internet gambling
That's the number of predictions for 2009 issued by Spectrum Gaming Group, an Atlantic City-based outfit. They are, in no particular order:
• Advancements in technology that impact revenues and cut costs will continue to be attractive to operators even in an economic downturn.
• ... conversion of racetracks to racinos, as well as non-gaming expansions to existing racinos.
• ... elimination of jobs, both through cuts and attrition.
• ... moratorium on development of big-box gaming resorts due to economic downturn.
• Convenience-based gaming continues to achieve better year-over-year results than destination-based gaming.
• Corporate and property debt restructuring in wake of declining revenues.
• Eastern European countries will increase their efforts to meet EU regulations, including smoking bans.
• Gaming companies increase efforts to export their brands globally.
• Gaming equipment manufacturers continue to invest in games that appeal to a younger demographic, including lotteries, bingo and server-based technology.
• Increased legislative acceptance of allowing the deduction of issued electronic promotional gaming credits from the gross revenue tax/fee calculation.
• Increased use of electronic games, including the emergence of scalable electronic table games in which players at different locations on the floor wager on a single outcome.
• Increasing alliances between commercial gaming operators and outside investors, as well as between commercial and tribal operators.
• Internet gambling in U.S. will be a hot federal issue for the new administration and Congress; gaming companies will fund lobbying efforts on both sides.
• Major gaming operators commence deleveraging by selling off properties to emerging operators.
• More pronounced shift in market share among suppliers as operators attempt to shift away from IGT participation games.
• Native American tribal gaming revenue estimates remain on track to surpass U.S. commercial gaming totals.
• Prices for hotel rooms, shows and food and beverage will return to lower levels at large gaming resorts as operators need to fill their properties.
• Slow but continual advancement toward server-based gaming, as operators remain skeptical as to the potential financial returns on investment.
• States consider expanding or legalizing casino-style gaming to help fill state budget gaps.
• Support from China to ease visa restrictions, increasing flow of visitors into Macau.
• Uncertainty in various European countries concerning regulation, thus increasing cases being referred to the European Court of Justice.
We'll have to check back in a year, God willing, and see how clear Spectrum's crystal ball proved to be. There's nothing on that list that strikes me as off the beam and much of its seems dead on target. The only "WTF?" comes courtesy of a Spectrum exec who told a reporter, "In times like this, it's not like these are company-specific problems that can be attributed to some glaringly bad decision by the company."
I respectfully beg to differ. Choosing unreliable and/or overcommitted business partners (Boyd Gaming) was a decision. Opening in far-flung markets while your core properties were losing market share (Isle of Capri) was a decision. Taking on preposterous amounts of debt (Harrah's Entertainment) or simply assuming more debt than your cash flow and lavish spending tendencies can support (Station Casinos) were decisions. Trying to build metaresorts all at once (Boyd, MGM Mirage) was a decision. Rashly demolishing the Atlantic City Sands and thereby leaving yourself with empty, non-revenue-producing land (Pinnacle Entertainment), that's a decision.
Launching major projects that aren't fully capitalized (Las Vegas Sands, Cosmopolitan, Majestic Star) is a decision. Stubbdornly jeopardizing the license of the property that generates 40% of your cash flow (Columbia Sussex) is a decision. Making not one, but two major acquisitions at a time when your cash cow -- slot routes -- is giving less milk and then overpaying for some of the new assets (Herbst Gaming) is a decision.
Opening a $2.3 billion, years-in-the-making megaresort at the nadir-to-date of the economy (Wynn Las Vegas)? Now that, that was not a decision. That's playing the hand you were dealt.