Saturday, November 22, 2014

Florida Casinos and Racinos – What to Expect in 2015

I attended the Florida Gaming Congress held November 10th and 11th at the Hyatt Regency, Miami.  The conference was organized and produced by Spectrum Gaming.

Spectrum presented an outstanding slate of speakers and panelists which included Florida State Senators, past and present members of the Florida House of Representatives, senior leaders of owners and operators in the Florida Casino and Racino industries and significant members of the legal and finance industries involved in Florida gaming.

The primary focus was the future of the Casino and Racino Industry in Florida in light of the pending negotiation of the Seminole Compact renewal in 2015, and the development of the industry beyond.

Specific topics included:  
  • Casino and racino development in South Florida vs North Florida
  • Potential participation of Indian Casino development and racino facilities in North Florida
  • Expansion of the existing racinos in South Florida, entry of large destination resorts into Florida, and
  • Development of a Florida Gaming Commission.

The consensus was that whatever determinations and changes are made in 2015, they will be incremental rather than major. In upcoming posts, I’ll be writing on these discussions and further news and providing my ideas for 2015 and beyond. 

Monday, November 17, 2014

New Orleans Investment Conference – Will stagflation kill the local casino?

I recently attended the New Orleans Investment Conference. While this annual conference is targeted toward the individual investor, some of the take-aways can be applied to the casino and racino world.
The focus of the conference was on gold as an investment and even the potential return to the gold standard – neither of which really matters for our purposes. However, many of the panels delved further into some troubling markers and underlying problems in the US economy.
Former Fed Chairman and feature guest speaker Alan Greenspan  participated in  panel discussions  and a question and answer session. Unfortunately, much of his time was spent responding to questions about decisions he made during his tenure at the Fed. However, Greenspan did question the power of the Fed, said he “never said that the Central Bank was independent,” referred to their balance sheet as a “pile of tinder.” With the current US inflation rate lagging below the 2% target, Greenspan anticipates that the Fed will continue to take steps toward raising the inflation rate.
For me, the real message from the conference is in the declining value of the dollar, which leaves casino patrons with less discretionary income. Dr. Marc Faber drove this message home with his excellent 60 slides in 60 minutes presentation, painting a troubling picture of the current state of the economy. While the Fed is trying to reach the inflation target, growth is slowing, wages are steady or declining, and commodity prices are falling. He pointed out that millennials are earning less than their parents did, and baby boomers are poorer than their parents were in retirement. According to Dr. Faber, the median income has declined since the 1980s by around 36%.
He also pointed to a troubling statistic -- 31% of car loans are now subprime. While the risk to financial institutions is likely low, the risk to the individual is high. What does this mean for casinos? The average Joe no longer has discretionary income. Not only can he not afford to gamble, he can’t even afford the car that would take him to work.
In our regular travel to casinos across the southeast, we’ve seen cutbacks or even closure of many of the casinos targeting locals, while deluxe destination casinos are growing and expanding. With wage stagnation becoming a key concern, a strategy targeting the wealthy and ultra-wealthy may be the key to growth.

Tuesday, November 4, 2014

Louisiana Commercial Gaming Revenues: Destination Casinos Lead the Pack

We break the 19 commercial Louisiana casinos and racinos into four regions: Shreveport/Bossier City, Lake Charles, New Orleans and Baton Rouge.  Overall, Louisiana commercial gaming revenues have declined slightly since 2013.


Louisiana Commercial Casino/Racino Revenues*
 May-Sep 2014
 May-Sep 2013
% Change
Shreveport/ Bossier City
$313,484,299
$311,683,341
0.58%
Lake Charles 
$316,045,688
$321,531,644
-1.71%
New Orleans
$262,600,976
$266,726,610
-1.55%
Baton Rouge
$117,269,307
$119,892,991
-2.19%
Total
$1,009,400,270
$1,019,834,586
-1.02%
*Source: Louisiana Gaming Control Board Revenue Reports

We don’t feel that this small drop is cause for concern, though. When we look at revenue for the top casinos in the state, revenues have actually risen in the top three. Because racetrack seasons can vary wildly each year, the decline at Delta Downs in the Lake Charles region is not alarming.


Revenues at Louisiana's Top 5 Commercial Casinos/Racinos*
 May-Sep 2014
 May-Sep 2013
% Change
1
L’Auberge/ Lake Charles
$154,842,866
$148,547,589
4.24%
2
Harrah’s/ New Orleans
$139,076,767
$134,017,029
3.78%
3
Horseshoe/ Bossier City
$89,983,319
$85,197,064
5.62%
4
Delta Downs/ Lake Charles
$69,718,689
$77,301,439
-9.81%
5
L’Auberge/ Baton Rouge
$61,854,926
$63,637,087
-2.80%
Top Five LA Casino Totals
$515,476,567
$508,700,208
1.33%

*Source: Louisiana Gaming Control Board Revenue Reports

We see an upward trend in Louisiana destination casinos like L’Auberge. These luxury destinations attract the young, the wealthy, and the tourists. When casino revenues across the country are sluggish, this rise in luxury destination casinos is worth following.

Please note: Revenues for the four Native American Casinos in Louisiana are not included in this writing. Stay tuned for more information on this topic!  

Monday, November 3, 2014

Mississippi River Counties commercial casino revenue continues to decline

Mississippi gaming commission reports for September show that gaming revenue in the Mississippi counties continues to decrease year after year. Gulf Coast county facilities have regained their footing after a small decline in 2013 revenues. While the River Counties have regained their footing slightly – revenue was down close to ten percent in Jan-Sep 2013 and just under six percent over Jan-Sep 2014 – the decrease remains worth watching. 

The January 2014 closure of Harrah’s Tunica accounts for a portion of the decline, but it is a continuation of a longer-term trend. While the River counties have consistently held higher year-end gaming revenues for the past six years, we predict that the continued downward trend will show the Gulf counties with higher year-end revenue than the River counties for the first time since 2008.

There are 11 facilities in the Gulf Coast Counties after the mid-September 2014 closure of Margaritaville in Biloxi and 17 Mississippi River County facilities after the January 2014 closure of Harrah’s Tunica.

Mississippi Commercial Casino Revenues*
Gulf Coast Counties   
Mississippi River Counties
Total Mississippi
Jan-Sep 2014
$821,081,638
$758,316,423
$1,579,398,061
Jan-Sep 2013
$813,235,173
$805,909,064
$1,619,144,237
Jan-Sep 2012
$840,265,997
$892,914,520
$1,733,180,517
Increase/Decrease in Revenue
Gulf Coast Counties   
Mississippi River Counties
Total Mississippi
2013 to 2014
0.96%
-5.91%
-2.45%
2012 to 2013
-3.22%
-9.74%
-6.58%
2012 to 2014
-2.28%
-15.07%
-8.87%
Source: Mississippi Gaming Commission Reports



The above numbers do not include revenues of the three Native American facilities in Mississippi. Look for an upcoming blog on this topic!