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Howard Stutz

Gaming revenues fall in 12 states with commercial casinos

18 November 2008

LAS VEGAS, Nevada -- Gaming revenues in the 12 states with commercial casinos have tumbled 2.5 percent through the first nine months of 2008 and the trend worsened as the year progressed.

That was the bleak outlook painted by American Gaming Association CEO Frank Fahrenkopf Jr. as the Global Gaming Expo kicked off Tuesday at the Las Vegas Convention Center. The gaming industry's leading convention and trade show was expected to draw fewer attendees than in previous years because of the economic downturn.

Fahrenkopf said most of the show's break-out sessions will address the global and national economic crisis and how it is impacting casino operators and gambling equipment manufacturers.

"There is no way to discuss the gaming industry without looking at the current state of the economy," Fahrenkopf said.

During his annual hour-long media briefing on the state of the gaming industry, Fahrenkopf said gaming revenues fell 4.6 percent during the third quarter in the 12 states with commercial casinos, including Nevada.

Through September, commercial casinos had produced $25.105 billion in gaming revenues, 2.5 percent less than the $25.759 billion produced for the same nine months of 2007.

The 2008 numbers were helped by Pennsylvania, which saw the opening of several slot machine-only casinos during the year. The figures were hampered, however, by double-digit declines in Colorado and Illinois, which enacted smoking bans inside casinos.

"Evidence is clear that anytime smoking is banned, gaming revenues fall," Fahrenkopf said.

Other states had unique issues during the year. The Gulf Coast gaming states of Mississippi and Louisiana were impacted by hurricanes in August and September, floods during the summer hurt casinos in Iowa, Missouri and Illinois while Atlantic City casinos have seen revenues reduced because of competition from Pennsylvania.

Through September, Nevada gaming revenues are down 6.6 percent compared with 2007.

But the main issues, Fahrenkopf said, have been reduced consumer spending and the dried-up credit markets that have caused several gaming companies to curtail construction and expansion activities.

The economic crisis also hurts small companies that serve as vendors to the casino industry. As casino operators cut back on capital expenditures, other businesses feel the pinch.

Until liquidity issues are addressed and credit markets resume lending, Fahrenkopf said the casino industry will be challenged.

"Let's not kid ourselves, this is not going to clear up tomorrow," Fahrenkopf said. "Most of the experts are saying this will last well into next year."

Still, Fahrenkopf said there have been some bright spots. Maryland voters on Nov. 4 approved gaming expansion that will allow 15,000 slot machines to be placed in the state. Colorado and Missouri voters approved more open-ended gaming expansion while other states may be looking at gaming as a way of curtailing their budget shortfalls.

The election of Democrat Barack Obama as president should not have any impact on gaming nationally, he said.

Meantime, Fahrenkopf said the economic crisis could lead to some consolidation within the industry. Smaller companies, not able to weather the financial storms as well as their larger competitors, may end up being swallowed by the bigger businesses.

"Time will tell how this shakes out," Fahrenkopf said.

He laughed at a notion that the gaming industry could seek a government bailout such what the auto industry is seeking. He cited a National Public Radio report that said gaming companies employ more workers than the auto industry.

"I've worked with the folks on Capital Hill for a long time," Fahrenkopf said. "I really don't see that happening."

Fahrenkopf said Internet gaming will become an issue that Congress will face next year. The American Gaming Association members all have different stances on the matter and a study is being undertaken to formulate a position by the trade association.

There may be a congressional push to legalize portions of Internet gaming, such as poker, or study the matter to see if it can be taxed and regulated.

"This is the issue will keep us the busiest next year," he said.