David Mckee's Stiffs & Georges - Maryland

Ohio slots slip sliding away?

Mon, 19 Oct 2009 17:21:00 -0700

A sample conducted by the tag team of TruthPac and Strategic Polling finds support for the Ohio casino initiative backed by Penn National Gaming polling below 50%. Casinos still have a slight edge (48%/43%, with 8% undecided) ... so in theory the ballot measure should squeak through, so long as the undecideds split down the middle.

If, however, "likely voters" means so-called "values voters," then Issue 3 could be in serious trouble. Only 30% of Democrats polled were against putting casinos in Toledo, Cincinnati, Columbus and Cleveland -- but 58% of Republicans gave it the thumbs-down. It should be noted, though, that a Dayton Daily News poll released three weeks ago had Issue 3 winning in a 59%/38% wipeout.

From the mailbag: An East Coast reader writes, "I live in Washington, D.C. Only a tiny 1%-2% of the D.C. television market is in West Virginia, yet I'm surprised to be seeing several TV ads to legalize table games in Charlestown, West Virginia -- home of a racino (I've never been there). I hadn't even known that was on the ballot. Anyway, if they are buying D.C. TV for a Jefferson County, W.V. issue, they sure are spending boatloads of money -- not too surprising, I guess."

Well, this did come as a bit of a surprise to me ... but it makes sense in retrospect. Not in terms of influencing votes: However, with table games an inevitability in Pennsylvania, a push for casinos in Ohio, slot parlors (slowly) ramping up in Maryland, etc., the advertising blitz is probably a means of preparing ground for after the election. Should table games be voted in, D.C.-area gamblers will know Charlestown has them and may think twice about driving to Pennsylvania and points northeast.

Hope for Boardwalk?

Tue, 13 Oct 2009 16:08:00 -0700

As you know, S&G puts more stock in year/year comparisons than sequential ones, but the most recent set from Atlantic City affords a slender reed of hope. With the help of tighter slots, A.C. held its September decline to 6%, the lowest of 2009 and the smallest drop in over a year. Even perpetual dog Resorts International had a good month, up 4% y/y.

Both in dollar volume ($63 million) and growth (6%), the leader was -- no surprise -- Borgata. In fact, the Boyd Gaming property made more than the four lowest-grossing properties (Resorts, Atlantic City Hilton, Trump Plaza, Trump Marina) combined. The two lesser Trump properties slipped below the Colony Capital ones, so one doesn't know whether to feel good for Colony or sorry for Trump Entertainment Resorts. The handover of Resorts Int'l continues to proceed slowly, as regulators enter uncharted waters with understandable caution.

Percentage-wise, Showboat, the Hilton and the Plaza had the worst of it, while gainers included Harrah's Atlantic City (3%) and even the Tropicana (1%). But the bloom is off the Trump Taj Mahal rose; it fell back to the middle of the pack, grossing $36 million.

One unexpected factor in the city's bump was a late-September, gay-themed promotion at the four Harrah's Entertainment properties. For all the lip service paid, year after year, to diversifying Atlantic City's appeal, Don Marrandino and his Harrah's colleagues backed up the talk with meaningful action.

Dead casino walking: Trump Marina

Back at Trump, its CEO, Mark Juliano declares "The real question is how long until we get back to the results we saw in past years, which is the question everyone in every business has." No, the real question is: On what planet is Mr. Juliano living? And: Do they have oxygen up there?

The math is inexorable. Excluding three months of sub-2% growth, Atlantic City's revenues have going one way -- down -- for the last seven quarters, often by double-digit margins. Casinos in Pennsylvania continue to ramp up, Delaware is talking very seriously about casino expansion, slot parlors in Maryland are in train and then there's prospect of additional competition from the greater New York City area.

Instead of asking "Where are the snows of yesteryear," S&G modestly suggests the Boardwalk's casino braintrust ought to be thinking about how to move forward into a future of diminished (i.e., more realistic) expectations.

Up the road, now that the novelty factor has worn off of Sands Bethlehem (above), the $724 million casino remains mired in fifth place. The solution? More and bigger promotions, it would appear. Judging by the lukewarm response to Sands and to Rivers Casino, the Pennsylvania market isn't big enough to support casinos built with Vegas-sized budgets.

Big Trop shakeup

Thu, 24 Sep 2009 17:16:00 -0700

During his absent-minded interregnum as Tropicana Las Vegas CEO Scott Butera nearly denuded the casino of on-property entertainment. Only the hasty re-signing of Xtreme Magic left the Trop with a show in the house. Over time, Butera's people added a slew of second- and third-tier acts.

"Too much," said some. Those "some" would appear to include new CEO Alex Yemenidjian. Virtually unpublicized Beatles tribute act Penny Lane? Gone. Impressionist Rich Natole? Going soon. Bobby Slayton? Going a little later, perhaps. (Anthony Cools' track record as a producer is looking dire.) Although I've heard good things about the new venue created for Soprano's Last Supper and Hypnosis Unleashed, apparently they will be relocated elsewhere within the Trop.

To no one's surprise, Dirk Arthur will yield the prime-time slot (where he was, in all honesty, a placeholder) to incoming Wayne Newton. The Wayner will keep the Tiffany Theater warm until a Trop-owned show replaces Newton's morbidly titled Once Before I Go.

The Harmon Theater's ill-publicized Tickled Pink has also closed and it sounds as though that place is experiencing cash-flow problems. Normally, I'd be sanguine that departing acts would soon find new homes elsewhere in town. However, in these desperate times, entertainment has been one of the first items on the chopping block, so the evicted performers can probably use all the positive vibes they can get.

Casino explosion in Ohio? Not only will Buckeye State voters get to say "aye" or "nay" to Gov. Ted Strickland's creation of racinos, the state could get as many as 11 gambling venues -- not the seven Strickland envisions. Another ballot measure (pushed by Penn National Gaming) would authorize four casinos in four major Ohio cities. Minimum capital investment will be $250 million and the tax rate would be set at -- Ouch! -- 33%. Somehow, I doubt that will scare anybody away.

And they're off! Congratulations to Ocean Downs, the first racino approved in Maryland. By June, reels should be spinning on the first 200 of an eventual 800 slots, to be fully phased in within 11 months.

Case Bets: Ohio, Trump, Fahrenkopfian outrage

Thu, 06 Aug 2009 18:33:00 -0700

With racinos a done deal in Ohio, a suddenly frisky Harrah's Entertainment is shopping around for a Cleveland-area track. If anything, I'm surprised competing companies haven't beaten Harrah's to the punch, but it seems to have sucker-punched its rivals. Good on it.

Donald Trump's fire-sale acquisition of Trump Entertainment Resorts is far from a done deal, according to the Wall Street Journal. Bondholders who stand to have $1.25 billion flushed away in the Trump/Mark Juliano sweetheart transaction may be able to throw in a spanner in the works.

Casinos spread the wealth -- or do they? A Journal of Economic Studies report queries the premise, saying casino expansion dilutes local wage bases. However, casino companies -- and some academic allies -- aren't taking this lying down. Both Penn National and Cordish Gaming are making vigorous arguments to the contrary, as is one Frank J. Fahrenkopf.

Case Bets: Packer & Ho, Sands Bethlehem, MGM Mirage, Ameristar, Penn, Harrah's, etc.

Wed, 03 Jun 2009 14:40:00 -0700

• Smashing guitars -- but not over each other's noggins -- James Packer and Lawrence Ho christened City of Dreams. The younger Ho downplayed expectations of foot traffic, saying his $2.4 billion megaresort could get by on far fewer visitors than the nearby (and comparably expensive) Venetian Macao, which draws 70K visitors daily.

• After a record-setting opening, Sands Bethlehem fell into fourth place during last week's casino action in Pennsylvania. Not surprisingly, Philadelphia Park and Harrah's Chester led the state.

• Beau Rivage is safe. Although MGM Mirage was peddling several of its regional casinos, J.P. Morgan reports that "we have heard from some bidders that this process is close to dead, so we don’t expect to hear asset sales chatter in the near to medium term."

• While yours truly was critical of staffing cuts at Ameristar Casinos, they appear to be paying off. The company projects flat revenue comparisons in 2009 but better cash-flow margins, pegging the savings as $40 million-$48 million, annualized.

• When in doubt, Penn National Gaming falls back on what it knows: racinos. It's angling for the Laurel Park concession left on the table when Magna Entertainment collapsed. Both Penn and rival David Cordish appear to be trying to chisel a loophole into Maryland's slot-parlor law, which limits companies to one slot house apiece. Penn is already committed to Cecil County but wants Laurel Park ... as does Cordish, who has a pre-standing commitment to the Arundel Mills area. The latter project has run into serious opposition. Expect a nip-and-tuck fight for Laurel Park.

• Penn is evidently getting cold feet in Ohio, however.

• Casino expansion in Iowa will have to wait until 2010, at the earliest. This delay is a disguised blessing. The Hawkeye State market has been holding its own during the recession but the timing for diluting the market with four new casinos could scarcely be worse.

• If wishes were horses, Harrah's Entertainment would be galloping along the shores of the Yangtze River this very minute. Seriously, would you lend Harrah's more money? Would you give an alcoholic the keys to your wine cellar? Well, you might get the empties back so you could redeem the deposit on the bottle.

Case Bets: Seminoles, Iverson, Harrah's, PartyGaming, Station's luck, etc.

Wed, 15 Apr 2009 16:01:00 -0700

Down in Florida, the tide may be turning in favor of the Seminole Tribe. Both the Florida Retail Federation and Restaurant Lodging Association have thrown their support behind the status quo, as represented by Gov. Charlie Crist's Class III casino compact. Crist's unilateral gambling expansion has the not-so-small problem of being unconstitutional but this latest turn of events ratchets up the pressure on solons to pass a version of the compact that meets judicial muster.

That'll be no problem with the state Senate but the uptight House would like to roll back the Seminoles to slots-only status (and would get rid of the casinos altogether, if only they could in their benighted heart of hearts). The table-game genie isn't going back into the bottle -- at least not until the federal courts have their say -- so the Solomonic question at hand is how to level the playing field for private-sector racinos without sacrificing the Seminole tax revenue that Crist secured. Easier said than done, obviously.

"Is too!" "Is not!" Both MGM Grand Detroit and Greektown are refuting a report in the Detroit News (with which MGM has taken issue before) that they'd 86'd former Philadelphia 76er Allen Iverson from their casinos. Let's face it, the man is a boor but he's a wealthy boor, so neither casino is likely to turn him away as long as he only bounces basketballs, not checks.

Headless casino. Not only did Harrah's Entertainment sack the GM and five other execs at Harrah's Reno, it won't be replacing them. At almost any other company, running a casino by remote control would come as a surprise but Harrah's has the reputation of employing a ruthlessly standardized business model. Besides, the company has to free up some dough to pay its new Internet/World Series of Poker guru Mitch Garber, whose former employer, PartyGaming.com, just cut a deal with the feds.

The luck of the Fertittas. Dodging yet another bullet, Station Casinos extended negotiations with its debtors by another month. While some form of bankruptcy at Station is inevitable, the company continues to fend off a takeover attempt by Boyd Gaming. However, Station says that when it comes to the terms offered to unsecured creditors, it's hanging tough. If that's the case, what's to discuss? (Or is Station being more flexible than it's letting on publicly?) My money, so to speak, is still on Station brass and co-owners Colony Capital retaining possession of Station and at a substantial discount to its market value, too.

An obscure racino company is cleaning house and relocating from Las Vegas (where it had no logical business being headquartered) and back East, where all its business is. The board of Empire Resorts really wasn't minding the store, was it?

The company might at least saved a bundle on long-distance charges if it had condescended to have its corporate offices in New York State, where its physical operations were, and not in tax haven Green Valley. But don't cry for outsted CEO David Hanlon, who parachutes out with 100 grand and plus another hundred large for nine months of "consulting services." These days, nothing succeeds like failure -- provided it's done on a grand scale.

Update: These are the same clowns whose Maryland slot application got tossed because they didn't bother to include the mandatory application fee when they filed.

Pennsylvania's biggest gaming screwup is history ... sort of. Former Mount Airy casino owner Louis DeNaples is guilty as hell of hanging out with the wrong crowd but innocent of perjury and will maintain one degree of separation from the casino, which remains in the DeNaples family. The Pennsylvania Gaming Control Board can claim a semblance of victory but the four-and-a-half-year imbroglio is a lingering embarrassment to a body whose vetting process has been inarguably the sloppiest in the U.S.

The PGCB needs to pay more attention to background checks and less to "juice" (see Barden, Don) -- and also to develop questionnaires that aren't so "imprecise and potentially confusing" they could open applicants to charges of perjury. It would also behoove Pennsylvania to quit "stovepiping" PGCB and state police investigations. Were it not for a lack of information-sharing (prohibiting by Keystone Kop, er, State law), this whole mess would probably have been avoided.

Casino Vote '08: Dan Lee's the big winner

Wed, 05 Nov 2008 16:36:00 -0700

JP Morgan has proclaimed Pinnacle Entertainment "the biggest winner this election day." By voting to both lift the cap on buy-ins and the close Missouri to additional casinos, Show-Me State voters delivered a gift to Pinnacle CEO Dan Lee, who has massively invested in the greater St. Louis market and can now reap the benefits of higher wagers and artificially limited competition. Anybody contemplating the investment risk that Pinnacle has been lately (with at least $2.85 billion in outstanding projects) can sleep a little more soundly tonight.

But, as Morgan analysts point out, the stomping of a pro-casino initiative in Ohio redounds to the benefit of Pinnacle's Belterra casino (and Penn National's Argosy Lawrenceburg riverboat). While the Ohio vote reflects a certain amount of anti-casino sentiment, this was one of those ballot measures where the devil was in the details. It polled well in the immediate region, which has been hard-hit with job losses (5,000 of which casino backers promised to replace) but it was "no sale" upstate. An otherwise leftward-trending electorate was unpersuaded.

Specifically, there was a "trap door" in the enabling language that might have let Lakes Entertainment slip its tax obligations if tribal casinos open in the Buckeye State (a long shot, but one voters weren't willing to hazard), not to mention that the casino was to be allowed to operate with scant oversight. Oh, and the license fee ($15 million) wasn't chicken feed, but it's considerably less than what casinos are ponying up elsewhere -- like Kansas -- where no monopolies are promised. The face-saving spin was that "misleading ads" were to blame -- like that's anything new in politics.

Details were the bane in Maine, too, where Olympia Gaming found itself on the losing end of a casino plebiscite. Maine voters have taken a go-slow approach to casino expansion in their state, also voting down a racino at Scarborough Downs. There also seems to have been some "payback" involved -- from Down Easters who had seen their own casino aspirations crushed five years ago. If they couldn't have a casino, those upstart resort communities were going to be SOL, too. So there!

Pat LaMarche expresses her considered opinion of Maine's electoral process.

Lowering the legal gambing age to 19 stuck in voters' craw, as did certain other special privileges which were to be extended to the Oxford County casino and to Gary Goett's Olympia. Project booster Pat LaMarche sniffed that folks in Maine were "very unfriendly" and says she's going to take her ball and LaMarche right next door to New Hampshire.

On the other hand, LaMarche is the bete noire of intolerant religious wack jobs, so that's something in her favor.

Having a win/win day, was also the good fortune of Ameristar Casinos, which will see some relief in Colorado, in addition to prevailing in Missouri. In return for helping the state's community-college system, Colorado casinos get some new goodies that -- we hope -- will ameliorate the effects of the state's smoking ban.

It's a mixed bag, albeit more positive than negative, for Penn National. It headed off the Ohio threat but finds its flagship property in West Virginia facing competitive pressure not only from Pennsylvania but soon from Maryland, even though the latter's ramp-up is roughly four years away. Penn astutely protected its flank by optioning strategically placed real estate near Baltimore, in its first move after its LBO imploded last summer.

(Amusingly, both sides in the Maryland fight used President-elect Obama as a "product placement" in their literature. They knew a good "branding opportunity" when they saw one.)

Hopefully the Maryland Lege will revisit (read: reduce) the confiscatory 67% tax rate. Otherwise, brace yourself for Ye Olde Shack O'Slots, as no sane businessman would invest heavily in a casino with such a narrow operating margin. By establishing a Maryland beachhead, Penn is probably thinking more in terms of capturing "leakage" from its other nearby properties, not having visions of $$$ dancing in its head.

Former governor, sometime racino proponent and "Casino Jack" Abramoff beneficiary Robert Leroy "Bob" Ehrlich Jr. (R) hoped to "see us kill this turkey," but that sounds like sour grapes from the one-term blunder, er, wonder. Gov. Martin O'Malley (D) moved the ball across the goal line with 59% support, whereas Ehrlich couldn't get it upfield in four tries -- even in the post-9/11 economy. It may nearly be Thanksgiving but the only turkey in sight is Ehrlich (or is that a thinly disguised Steve Carell?)

Speaking of "Casino Jack", add him to the "losers" column of our S&G "Winners & Losers" with a capital "L." From the jailhouse, convicted felon Abramoff tried to 'Swift Boat' his archnemesis, John McCain, but the effort sank without leaving the pier. What a schlemil.

Loose change: Voters also gave their assent to a lottery in Arkansas and expanded table games at Greenbrier Resort in West Virginia. So I'd score that as two lost battles (Ohio, Maine), one decisive victory (Maryland) and incremental wins in four other skirmishes.

On balance, a good day.

Maryland slots: the pros & the cons

Tue, 04 Nov 2008 12:50:00 -0700

They're extensively debated in an excellent new blog, the thoughtful Gaming Atlantic. If a 67% tax rate (that's no typo) sounds like throwing the baby out with the bathwater, you're in good company. At least the slot holds will be low by Vegas standards: 87%.