2017 Net Gaming Revenues for the Southeastern States

Year-Over-Year Net Revenues for Commercial Casinos and Racinos Reported to State Gaming Agencies in the southeastern states

2016 2017 y-o-y +/(-) $  y-o-y +/(-) % Arkansas  $322,766,635 $349,639,881 $26,873,246 8.32% Florida $545,954,766 $546,586,992 $632,226 0.12% Louisiana $2,538,530,264 $2,561,399,716 $22,869,052 0.90% Mississippi $2,122,287,544 $2,080,088,835 ($42,198,709) -2.00% Totals $5,529,539,209 $5,537,715,424 $8,176,217 0.15%

This report is produced by the Southern Economist, llc, a Florida based firm providing consulting services to the casino and racino industries in the nine southeastern United States. Data provided in this report is gathered from the four state agencies listed below. These four states have commercial, non-American Indian casinos within their boundaries. Florida, Louisiana and Mississippi have American Indian casinos within their boundaries, however, American Indian entities are not required to report their revenues to their respective state agencies. The states of Alabama and North Carolina each have American Indian casinos which, likewise, are not required to report revenues to state agencies. The states of Georgia and Tennessee do not have casinos or racinos operating within their boundaries.

Florida, Louisiana and Mississippi gaming revenues were negatively affected by two of the most devastating hurricanes in the history of the United States. Hurricane Harvey made landfall August 25^th and drenched Texas and Louisiana for five days. The storm was responsible for 103 deaths and an estimated $125 Billion in damages. Hurricane Irma made landfall September 9^th at the southwestern tip of Florida with 130 mile-an-hour winds along with massive rains and storm surges. At one point during the storm it covered the entire state of Florida. Irma traveled along the Gulf Coast of Florida then made landfall again on the Gulf Coast of Mississippi on

On September 12^th, Hurricane Irma was responsible for 100 deaths in United States and over $66 Billion in damages. We have not quantified the losses in damages and/or revenues to the three states affected, however we are impressed that the year-over-year gaming revenues for Florida, Louisiana and Mississippi casinos and racinos were good in spite of the storms.

Southern Economist, llc members personally, physically visit each of the 79 commercial and American Indian casinos and racinos in the southeastern states. We provide quarterly and annual revenue reports for each of the four state agency reporting states and provide customized reports on request. For further detail of gaming revenues and/or facilities reviews, contact us at jamesmcgregorsr@gmail.com or call 904.859.7344.

Sources:  Alabama, Electronic Games of Skill Summary Reports; Florida Racinos Monthly Slot Revenues, UNLV Center for Gaming Research; Louisiana Gaming Control Board Revenue Reports; and Mississippi Gaming Commission Monthly Adjusted Gross Gaming Revenue Reports.

2017 Florida Net Racino Slots Revenues Show Slight Increase

In the first half of 2017, we see a slight increase of 1.1% in Net Revenues from slot machines at racinos. However, the decline in the rate of growth for Florida racino slot machine net revenues continues.  (See our March 2017 revenues report for 2016 year-end numbers.) 

Table:  Florida Racino Slot Net Revenues, 2015-2017

Jan-Jun	Net Revenue*	YoY +/(-)	Promo**	YoY +/(-)
2017	$290,180,990	1.1%	$49,821,203	8.7%
2016	286,880,554	2.3%	45,822,841	10.2%
2015	280,464,109	6.1%	41,566,061	9.5%

* Net Revenue: Dollar amount of money retained by slot machines after paying jackpots.

** Promo: Total dollar amount of promotional credits played at the eight Florida locations.

Source:  University of Nevada Las Vegas, Center for Gaming Research, July 2017.

Slowing Revenue Growth in Florida Racino Slots

2016 Florida Revenues from Slots at Racino: Net Revenues Increase while Growth Slows

The charts and listings below tell the story of slowing growth and more expensive revenues in calendar year 2016 for the 8 Florida Racinos.

2017 proposed legislation for the Florida Racino Industry should require a significant review of what is happening with the eight existing Florida Racinos. The statistics are not indicative of a growth industry. 

Chart 1: Calendar Year Numbers for the 8 Florida Racinos

Chart 1 shows five of the eight Racinos with a decrease in Net Revenues, two with increases and one re-opening with new revenues in 2016.

Casino	Net Revenues	Y/Y % change	Hold %	Promo %	Market Share %
Gulfstream	$47,241,009	-3.49%	6.01%	24.52%	8.65%
Mardi Gras	45,767,506	-5.51%	6.75%	23.12%	8.38%
Pompano	142,287,479	-3.41%	8.17%	17.68%	26.06%
Flagler	81,069,957	-2.92%	6.11%	3.57%	14.85%
Calder	74,370,902	-0.15%	7.18%	25.69%	13.62%
Miami Jai Alai	61,782,543	0.80%	5.40%	16.70%	11.32%
Hialeah Park	70,813,899	6.18%	5.81%	11.80%	12.97%
Dania Jai Alai *	20,046,515	*	6.57%	17.12%	3.67%
Statewide	$543,379,810	2.88%	6.53%	16.75%

*Note – Dania Jai Alai re-opened in January 2016.  It was closed for remodeling during calendar year 2015.

 

Chart 2: Rate of Growth in Net Revenues

Statewide Net Revenues increased 2.88%, a dramatic slowdown from the previous two years. Further, this increase included the re-opening of Dania Jai Alai which added over $20 million to the statewide total in 2016 with zero in 2015. Statewide Net Revenues for 2015 were $530,661,905, an increase of $15,292,861 over 2014. Absent the Dania Net Revenues, statewide Net Revenues would have decreased $4,753,654 or 0.89%.

• Years 2015 to 2016  =  2.88% (with the addition of Dania Jai Alai)
• Years 2014 to 2015  =  4.97%
• Years 2013 to 2014  =  8.11%

Chart 3: Net Revenue Growth per Additional Promotion Credit Invested for the 8 Florida Racinos combined

(ie,how much new net revenue was produced by each additional Promotional Credit?)

Charts 3 and 4 show that the effect of Net Revenue growth per additional promotional credits decreased significantly from 2014 and 2015.

	Additional Promo	New $ Net Rev	New Net/Promo
2015 – 2016	$         10,341,990	$     15,292,861	$                1.47
2014 – 2015	$           4,841,127	$     25,133,659	$                5.19
2013 – 2014	$             -849,240	$     37,941,445	***

***In 2014 Florida Racinos provided $849,240 fewer Promotional Credits than they did in 2013, yet they produced an additional $37,941,445 in additional Net Revenues.

In 2015 Florida Racinos provided $4,841,127 more Promotional Credits than they provided in 2014, and they produced an additional $25,133,659 additional Net Revenues, or + $5.19 per Promotional Credit provided.

In 2016 Florida Racinos provided $10,341,990 more Promotional Credits than they provided in 2015, and they produced an additional $15,292,861 additional Net Revenues, or $1.47 per promotional Credit provided. Promotional Credits in 2016 were only 28.3 % as effective in producing Net Revenues as they were in 2015 and significantly less than in 2014.

Chart 4: Promotional Credits as a Percent of Net Revenue

• 2016 = 16.75%  y/y + 9.55%
• 2015 = 15.29%  y/y + 1.32%
• 2014 = 15.09%

Chart 5: Hold % = Net Revenues as a percent of total Credits In

Chart 5 shows a slight decrease in the Hold % for the overall Florida Racino facilities.

• 2016 = 6.53% (-)
• 2015 = 6.60%  +
• 2014 = 6.35%

Source:  University Libraries, University of Nevada Las Vegas

Louisiana Casino/Racino Revenue Declines As Predicted

Last year, we predicted this would happen: Louisiana Gaming Control Board revenue figures for the first half of 2016 show a 4.4% decline from the same months of 2015. 

The cause as we see it is the ongoing economic devastation of the oil and gas sector. In our February 2015 post we stated: “Louisiana has the largest concentration of crude oil refineries, natural gas processing plants and petrochemical facilities in the Western Hemisphere. It is America’s 3^rd largest producer of petroleum and 3^rd leading state in petroleum refining.  Louisiana is the 2^nd largest producer of natural gas. It supplies over 25% of total US production.  While Texas leads the US in most of the categories of oil and gas production, Texas does not have casinos or racinos – so in the parking lots of casinos and racinos across the Shreveport/Bossier City and Lake Charles regions, you’ll see as many Texas license plates as Louisiana plates.”

“The halting of projects, firing of workers and deferring of investments will certainly change the economies of Texas and Louisiana and negatively affect the casino and racino business in all four Louisiana regions.” We further predicted declines in each region as:

·         Lake Charles: down 2% to 3%

·         Shreveport/Bossier City: down 4% to 6%

·         New Orleans and Baton Rouge regions: down 2% to 4% each

Actual 2015 results: 

·         Shreveport/Bossier City:  down .52%

·         Baton Rouge: up 3.9%

·         New Orleans: down 3.2%

·         Lake Charles:* up 26.25%

*Lake Charles numbers include the Golden Nugget which opened in December 2014. 

So what happened in the first half of 2016?

	Jan-Jun 2015	Jan-Jun 2016	$ Change	% Change
Shreveport/Bossier City	$373,598,857	$352,677,057	($20,921,800)	-5.6%
Baton Rouge	$196,980,177	$189,776,756	($7,203,421)	-3.7%
New Orleans	$316,596,288	$297,900,382	($18,695,906)	-5.9%
Lake Charles	$459,745,006	$433,728,972	($26,016,034)	-5.7%
Total Louisiana	$1,346,920,328	$1,274,083,167	($72,837,161)	-5.4%

Further declines are most likely. According to Zacks Investment Management (May 7, 2016): “Does the Energy Collapse Resemble Tech’s 2000 Bubble Bursting? At last count there were 59 chapter 11 bankruptcy filings from companies in the oil and gas business. The energy sector, as a whole, has felt the hit profoundly with earnings falling (-) 56.4% in Q3 2015 and (-) 78.6% in Q4 2015. For Q1 2016, the damage is estimated to be even worse, with the current Zach’s estimate being a (-) 114.5% drop in Q1. Additionally, with a handful of other small players likely in line at bankruptcy court, it may not be long before 69 filings seen by telecom during the dot-com burst in 2000.”

Further, a recent Forbes article reads, “All told, 69 oil and gas producers with $34.3 Billion in cumulative secured and unsecured debt have gone under. Since share prices peaked in 2014, the oil bust has wiped out about $1 Trillion in equity, with the Dow Jones U.S. Oil & Gas Index off 40%.”

There’s more to come: “Despite the modest recovery in energy prices (in 2016), all indications suggest many more producer bankruptcy filings will occur during 2016” writes Haynes & Boone.  According to Deloitte: “About a third of global oil and gas companies, or about 175 of them, are at risk of insolvency.”  Bernstein Research estimates that by 2019 we’ll see more than $70 Billion in defaults amid more than $400 Billion in high-yield debt.”  -- That would indicate we’re only halfway through the bankruptcies.

We will continue to monitor and report the oil and gas sector and its effect on the Louisiana casino and racino revenues. We predict that there is more to come and that our previous projections are likely modest.