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

2016 Louisiana Casino/Racino Gaming Revenues: Q4 Up but Overall Decline Continues

2016 Louisiana Casino/Racino Gaming Revenues

Fourth Quarter improvement, but the decline continues

Fourth Quarter 2016 year-over-year gaming revenues for Louisiana casinos and racinos were an improvement over the first three quarters, but overall they were below the same 2015 fourth quarter.  Our charts below display both 4^th quarter and the full year revenue comparisons for the years 2015 and 2016.

These declines are now in excess of our projections detailed in our September 1, 2016 blog note and our blog notes from 2014.  Further, we continue with our assertion that the likely cause of declines is in gaming revenues is the continuing low oil and natural gas prices thereby depressing Louisiana and Texas oil and gas industries. 

Our second assertion is that within each market there is the beginning of stagnation of revenues due to an excess of casino and racino facilities and significant separation between large, new, effectively operated facilities and others.

Our on-site visits to each of the Louisiana casinos and racinos in 2014, 2015 and 2016 have provided additional evidence of this decline, separation and stagnation. 

With a continuation of troubles in the Louisiana and Texas energy sector, future declines would add to the likelihood of one or more casino and racino facilities being shuttered, sold or having a reorganization of ownership some time during the next three to six months.

Chart 1 – What happened in Q4 2016 ?

	Oct-Dec 2015	Oct-Dec 2016	$ Change	% Change
Shreveport/ Bossier City	$172,063,872	$162,924,445	($9,139,427)	-5.31%
Baton Rouge	93,787,445	99,128,389	$5,340,944	5.69%
New Orleans	147,840,863	142,072,503	($5,768,360)	-3.90%
Lake Charles	216,375,032	224,498,189	$8,123,157	3.75%
Total Louisiana	$630,067,212	$628,623,526	($1,443,686)	-0.23%

  

Chart 2 – And what happened in the calendar year 2016 ?

	Jan-Dec 2015	Jan-Dec 2016	$ Change	% Change
Shreveport/ Bossier City	$729,505,081	$688,750,938	($40,754,143)	-5.59%
Baton Rouge	379,520,470	379,176,289	($344,181)	-0.09%
New Orleans	626,185,220	582,788,969	($43,396,251)	-6.93%
Lake Charles	907,446,804	887,814,468	($19,632,336)	-2.16%
Total Louisiana	$2,642,657,575	$2,538,530,664	($104,126,911)	-3.94%

Year-over- comparisons show continued declines in each of the four market areas with an overall slower decline in fourth quarter revenues.  We will continue to publish quarterly revenue reports along with results of our visits to facilities in each region.

Specific facility studies and requests are available by request to jamesmcgregorsr@gmail.com or calling 904-859-7344. 

Stay tuned.       

Louisiana Casino/Racino Gaming Revenues Continue Their Decline

Third Quarter 2016 year-over-year gaming revenues for Louisiana casinos and racinos continued their decline.  Our charts below display both 3^rd quarter and the first three quarter’s revenue comparisons for the years 2015 and 2016.

These declines are now in excess of our projections detailed this September and in our 2015 focus on how oil and gas prices impact casino revenues.  Further, they emphasize the likely cause of declines being in large part our contention that the cause is the continuing low oil and natural gas prices. 

Our on-site visits to each of the Louisiana casinos and racinos in 2014, 2015 and 2016 have provided additional evidence of this decline.

With a continuation of troubles in the Louisiana and Texas energy sector, future declines will add further likelihood of one or more casino and racino facilities being shut some time during the next six months.

Chart 1 – What happened in the most recent 2016 quarter?

	July-Sept 2015	July-Sept 2016	Change	% Change
Shreveport/Bossier City	$183,842,352	$173,149,436	($10,692,916)	-5.82%
Baton Rouge	91,752,848	90,271,144	($1,481,704)	-1.61%
New Orleans	161,748,069	142,816,084	($18,931,985)	-11.70%
Lake Charles	231,325,746	229,587,307	($1,738,439)	-0.75%
TOTAL LA	$668,669,015	$635,823,971	($32,845,044)	-4.91%

Chart 2 – And what happened in the first nine months of 2016 ?

	Jan-Sept 2015	Jan-Sept 2016	Change	% Change
Shreveport/Bossier City	$557,441,209	$         525,826,493	($31,614,716)	-5.67%
Baton Rouge	285,733,025	280,047,900	($5,685,125)	-1.99%
New Orleans	478,344,357	440,716,466	($37,627,891)	-7.87%
Lake Charles	691,070,772	663,316,279	($27,754,493)	-4.02%
TOTAL LA	$2,012,589,363	$     1,909,907,138	($102,682,225)	-5.10%

Year-over- comparisons show continued declines in each of the four market areas with third quarter improvements in Lake Charles and a slight improvement in Baton Rouge.  The comparisons show the continued significant declines in New Orleans. 

Stay tuned.       

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.