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The state's casinos, which operate more than 66,000 slot machines, have oftentimes served as a live case study for the gambling equipment sector.
Before the recession hit, manufacturers who were rushing to bring server-based slot machine technology to the market were able to test products and equipment on casino floors in California. The Barona Resort & Casino in San Diego had a whole bank of server-based games -- slot machines linked to a central system -- long before the equipment made it to the Strip.
It hasn't changed much, even in the lean times the industry has experienced in the past few years. Manufacturers still favor California. The Indian casinos welcome new gambling innovations quicker than most other jurisdictions, including Nevada.
"The slot machine floors in California are fresher and you could always find more cutting-edge technology," Roth Capital Partners gaming analyst Todd Eilers said.
Earlier this month, Eilers, who is based in scenic Newport Beach, Calif., led a bus tour, taking investors to four of the largest Indian casinos in Southern California. The analyst, who specializes in following the slot machine companies, said the economy has caught up with California's Indian casinos.
During the trip to Pechanga Resort & Casino in Riverside County and the San Diego area's Barona, Pala Casino Resort and Spa and Harrah's Rincon Casino & Resort casinos, investors were able to tour the casino floor and meet with management.
Revenue trends, they heard, were beginning to slow.
"Three out of the four properties we visited indicated they have seen a slowdown in customer spend in recent months but nothing severe," Eilers said. "Given the current uncertainty in the market, we suspect capital budgets will likely remain tight this coming year although we still look for single-digit growth in slot replacement demand."
Revenue reports are tough to come by from Indian casinos and their tribal governments, which are sovereign nations and not publicly traded companies.
Southern California economist Alan Meister puts together an annual and comprehensive financial look at the nation's Indian gaming market for Casino City Publications.
The most recent numbers cover 2009 and California, which has 66 casinos according to Meister's study, and which continues to lead the nation in Indian gaming figures. That year, California's Indian casinos reported more than $6.94 billion in gaming revenues, roughly one-fourth of the annual revenues produced by tribal casinos nationally.
California's Indian casinos benefited from Nevada's troubles during the economic crisis. High gasoline prices kept Southern Californians home rather making an expensive weekend trip up Interstate 15. Several of the larger Indian casinos added amenities and increased the size of their slot machine floors through renegotiated compacts with the state.
In the north, large casinos near Sacramento have kept residents close to home, rather than making a long drive to Reno.
Recently, the ills affecting Las Vegas' locals gaming market -- high unemployment and a horrible housing crisis -- are having the same effect on California's Indian gaming community.
"There hasn't been a major event, such as a new casino, recently," Eilers said. "Also, the Las Vegas Strip has been heating up. California has kind of gone flattish and things have slowed down a bit."
Eilers took investors to Pechanga, which has one of the market's largest gaming floors with roughly 5,000 slot machines. Pala and Harrah's Rincon are within a few miles from each other in far northern San Diego County. Barona, in east San Diego County, might be one of the state's most profitable gambling halls, he said.
As for an analysis of the products offered by equipment manufacturers, Eilers said the four casinos' slot machine floor managers offered several opinions:
• Ainsworth Gaming and Bally Technologies have the strongest-performing games over the last couple of quarters.
• International Game Technology is producing better content and providing attractive sales discounts.
• Japan-based Konami Gaming is holding steady after expanding aggressively in California over the last couple of years.
• WMS Industries fell from its top position and is likely to see reduced shipments relative to last year. Aristocrat has also declined.
• Multimedia Games of Austin, Texas, put video lottery-style games in a couple of the casinos. The company, which was licensed in Nevada last week, placed its Las Vegas-style slot machines in casinos on a trial basis.
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