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Quick-takes: The month's trends in a glance - January 2008

1 February 2008

Atlantic City newcomer Columbia Sussex has struggled in the city, but it isn't alone; the city's gaming revenue is down, the bus companies are carrying fewer people and, of course, the Donald is still struggling. All previous efforts to sell the Trump properties have apparently failed, his CFO has left, and the city is having second thoughts about a tax break. But the Donald is still being Donald; now he is touring Massachusetts and promising to bring the Trump magic to the Bay State. You would think people would want more details about that magic, like the name and location of one of his successful casinos.

The chief financial officer of Trump Entertainment Resorts is leaving the company to work for a competitor… It will be effective Dec. 14. Black will work for St. Louis-based Isle of Capri Casinos, Inc… That is where two former high-ranking Trump Entertainment executives, James Perry and Virginia McDowell, landed new jobs after leaving Atlantic City. (Wayne Parry, Associated Press, 12-3-07)

In his first major decision since taking office late last month, new mayor Scott Evans has put a controversial tax settlement with Donald Trump's three casinos on hold. The Press of Atlantic City reported Monday on its Web site that Evans wants more information about the $34 million settlement with Trump Entertainment Resorts that was approved by the City Council Nov. 1, before Evans became mayor. The settlement would have covered 19 tax appeals the company filed. Trump Entertainment had argued that the city assessed the properties too high. (Newsday, 12-3-07)

The owner of Wonderland Greyhound Park says he has opened preliminary talks with Donald Trump about developing a resort casino at the Revere dog track…If Trump does decide to go forward at Wonderland, he could be pitted against former business partner turned rival Richard Fields, who is the majority shareholder in the Suffolk Downs horse racing track in East Boston. (Associated Press, 12-3-07)

Although this report covers the last month of 2007, a new year has in fact arrived. 2008 will undoubtedly be known for many things – a heated presidential campaign and a new president; a heated campaign in California over Indian gaming compacts and the size of Indian casinos; a resolution of the same issue in Florida; and perhaps the year that gaming is finally authorized in Massachusetts and Maryland. Pennsylvania should have a couple more casinos while others will finally be under construction –just what Atlantic City needs.

For many casino operators (those in Illinois, Colorado and New Jersey) 2008 will be the year of the smoking ban. What will the impact be? I, for one, have no idea, but I can look at other places where a smoking ban is in place and see what has happened there – although one advocate of the ban in Nevada said he would personally have to review the financial records before he believed the losses that some are declaring. From the United Kingdom and Australia, we have numbers; we even have numbers from slot route operators and pub owners in Nevada (although the ban is limited in Nevada and does not include the casinos themselves). The news is not good, particularly when combined with increased competition as in New Jersey and Illinois. The weather and the remoteness of casinos in Colorado are as challenging as competition.

Illinois Gaming Board members are thinking about requiring every patron to hand over a driver's license or state-issued identification card for electronic scanning in order to check against a state list of "self-excluded" gamblers who have promised not to enter casinos...Casinos warn that broadening the ID checks to include all ages would scare away customers at a time when casinos already are bracing for the state's Jan. 1 indoor smoking ban. Gambling revenues – including taxes that go into state coffers – could decrease as much as 20 percent…an additional 8 percent to 10 percent drop-off in revenues could occur if casinos start checking every customer's ID. (Mike Ramsey, Gatehouse News Service, 12-8-07)

The casino town of Central City is playing fast and loose with the statewide smoking ban definition on what constitutes an outdoor patio. That charge comes from anti- smoking groups a week after Central City passed an ordinance redefining "outdoor area." The city's new rule says that a structure that is at least 40 percent open to the outdoors is considered an outdoor area. (April M. Washington, Rocky Mountain News, 11-30-07)

Harrah's Entertainment, the world's largest gaming company, owns Bally's, Caesars, Harrah's and Showboat Casino Hotel in Atlantic City. In reporting its third-quarter earnings Wednesday, the company said "effective marketing" helped to counter extra competition from slot parlors in neighboring states and the impacts of Atlantic City's casino smoking restrictions. (Press of Atlantic City, 11-8-07)

Among the midcaps, Rank continued its downward path, falling another 5p, or 4.8%, to 98.5p. The group behind Mecca bingo halls said this month that it had been hit harder than expected by the smoking ban and new gaming regulations. (Guardian, 10-23-07)

Depending on whom you're talking to, the Nevada Clean Indoor Air Act, which bans smoking in almost all public places except casino gaming floors, has been an unmitigated disaster or an unparalleled success. Today marks the first anniversary of the law that went into effect after voters approved the ballot initiative in the 2006 general election… Herbst Gaming…saw profits fall almost 20 percent in the first nine months of 2007…Taverns and bars are suffering just as much as the convenience stores…revenues are down anywhere from 20 to 40%. (Ray Hagar, Reno Gazette-Journal, 12-8-07)

2008 will also be a year of increased competition and may be a year when the media, politicians and analysts understand competition as a very significant force in gaming. Too many fail to recognize the changes brought by the growing competition; except for the Las Vegas Strip, every gaming jurisdiction is experiencing the pressures of competition, and not necessarily in-market competition. The most serious competition often comes from across the state borders, as Atlantic City is beginning to experience as slot machines are added in Pennsylvania.

Nearly every month a reporter from the Reno Gazette-Journal calls looking for a quote – some context for the latest gaming revenue numbers released by the State of Nevada. It is always a challenge, mostly because the context the paper wants is in the immediate time period covered by the report: "What happened during that month to make the numbers for our area……….?" In northern Nevada the trend has been down and it has been down for several years. The cause of the trend is not the weather, the number of weekends in the month, or the presence or absence of a particular convention or any other immediate cause. The reason is much longer term: gaming is now legal and thriving in all of Reno's feeder markets, but repeating the same reason every month isn't news.

Casinos in California, Oregon, and Washington are the answer – whether it's this month, next month or next year – to the less than stellar performance of Reno casinos (and downtown Las Vegas). The Strip is different for many reasons – it is different because in one month baccarat revenues can exceed all of the gaming revenue in northern Nevada. The Strip is different because of David Beckham, Shaquille O'Neal and all the other sports stars who like to hang out in Vegas, and when a major prize fight is in town, the A-list comes to party. It is different because of Elvis Presley, Liberace, Celine Dion and all the other big names that love to play Las Vegas. Ms. Dion illustrates Las Vegas entertainment as well as any performer could; Celine just finished her first four-plus-year run at Caesars. Caesars spent $95 million to build a theater to her specifications, and she reciprocated by bringing 4,000 people a day to Caesars. The Strip is lined with shows and entertainers that draw thousands of people a day, and is filled with first-class restaurants, hotel rooms and retail.

The state took in $108 million in baccarat; Reno casinos took in almost $62 million, a drop of 8.6 percent. The Las Vegas Strip, the engine of Nevada's gaming machine, took in $640 million in October, a jump of almost 20 percent. Washoe County casinos took in $85 million in October, a drop of 8 percent when compared to the same month last year. (Ray Hagar, Reno Gazette-Journal, 12-12-07)

Gambling win downtown was up slightly in October…no small feat for a market that has been stagnant or in decline for more than a decade. (Benjamin Spillman, Las Vegas Review-Journal, 12-12-07)

David and Victoria Beckham spent time at Spearmint Rhino, spies say. British soccer star David Beckham and his wife, Victoria, spiced things up Monday by sampling Sin City's bawdy side. Spies say they spent three hours in a private room at Spearmint Rhino, an adult entertainment club often favored by celebrities…Beckham and his wife were in town for a long weekend that included the Floyd Mayweather Jr.-Ricky Hatton title fight and three concerts by the reunited Spice Girls, who played their final show here on Tuesday. Beckham's wife is "Posh Spice." (Norm Clarke, Las Vegas Review-Journal, 12-12-07)

Celine Dion's final night in Vegas…was as over the top of any of her high notes, with its 45-minutes-late start (unheard of in Vegas), a maudlin and self-congratulatory introductory video, 11 standing ovations, 10 minutes of Dion's rambling to the audience about the various shades of meaning the night held for her…and those 100,000 rose petals falling on the stage. Dion's show grossed over $400 million in a run that stretched for nearly five years, and it was a regular sellout…Caesars Palace agreed to build a $95-million, 4,000-seat venue for Dion's massive show, which would include a band, sets and more than 50 dancers…Never had so much been spent to lure an artist to Vegas…It's an understatement to say that things worked out between Caesars and Dion, and there is no better proof in a bandwagon town than to see who jumped on and what shows followed hers to Vegas. Elton John's "Red Piano" joined her at Caesars, and then Barry Manilow took up residence at the Las Vegas Hilton. (Richard Abowitz, Los Angeles Times, 12-20-07)

Every jurisdiction and most of the individual properties facing competition are responding, each in its own way and in ways that reflect in-market thinking. Among the states feeling the pinch of Pennsylvania slot machines is West Virginia; the industry pushed and finally won the right to add table games to their all-slot casinos, hoping that with games they would have an advantage over Pennsylvania operations that by law can only have slot machines.

After years of battling the odds, representatives of the two gaming resorts in West Virginia's Northern Panhandle hope to see their big payoff today with the introduction of table games such as blackjack, craps and roulette. The West Virginia Lottery Commission yesterday approved Mountaineer Casino, Racetrack & Resort and Wheeling Island Hotel-Casino-Racetrack…Mountaineer will operate up to 50 tables, and Wheeling Island Hotel-Casino-Racetrack will have as many as 43 tables in use at any time, 24 hours a day…For years, West Virginia resorts offered horse racing, off-track betting on dog races and slot machines. (Dan Majors, Pittsburgh Post-Gazette, 12-20-07)

Pinnacle opened a new casino in St. Louis, spending half a billion dollars, more than nearly any development in the city. However, Missouri still has loss limits that have limited expansion and presented even more challenges as other jurisdictions expand.

In Reno, the Peppermill opened the latest of its nine expansions; this one cost $400 million, nearly twice what was spent on the last "new" casino, the Silver Legacy in the 1990s. Silver Legacy got 1,725 rooms for that price and a chance to dominate the Reno market; the Peppermill bought a quarter as many rooms (after this expansion, the Peppermill still has fewer rooms than the Legacy) and a chance to take one step ahead of its major competitor, the Atlantis, which is also in the midst of a major expansion. There was a time when expansion of that size would have been startling and market changing; now it is a necessity to stay in the game and not suffer the declines the rest of market is experiencing.

Pinnacle Entertainment opened the doors to its $507 million Lumière Place casino complex Wednesday night with a black-tie gala and a fireworks show that lit up the night sky over downtown…Lumière Place joins the region's five other casinos…that generated nearly $1 billion in revenue last year…Throughout the night, one of the casino's biggest tasks was processing the sheer number of people who needed to get the required players card that allows them to enter the gambling floor. The cards are required by the state, which uses them to make sure gamblers are complying with the state's $500 loss limit law. (Tim Barker, St. Louis Post-Dispatch, 12-20-07)

The newest addition to the Truckee Meadows skyline opens today with the Peppermill hotel-casino's $400 million expansion topped by the 19-story Tuscany Tower. Observers believe the addition, including the 62,000-square-foot Tuscany Ballroom, the largest free-span convention center in Northern Nevada, can help reinvigorate the region's slumping gaming business…Peppermill officials said the Tuscany Ballroom will boost its convention business… Tourism officials hailed the expansion in the south Reno gaming corridor as reflecting the region's transformation. (Bill O'Driscoll, Reno Gazette-Journal, 12-20-07)

That is the way gaming across the country is responding to increased competition: increased spending on improving facilities and on marketing and promotion. But in Las Vegas, new games and expansions of $400 or $500 million hardly make the newspaper. And this is the real reason that Las Vegas marches to a different drummer and is not subject to the same trends as Northern Nevada, Atlantic City, Missouri, Illinois or any other jurisdiction – the cost of one project in Las Vegas is more than all of the capital invested in business structures in Reno and most other cities. Including the latest one, the $5 billion Plaza, working its way through the process, there are three properties (four if Harrah's moves forward with the property it has assembled now that the buyout approval process is complete) underway that will cost in the neighborhood of $5 billion, not including the latest expansions of the Venetian and Wynn, two others with a total cost of over $4 billion. Las Vegas attracts more than just tourists and gamblers from around the world; it attracts the richest and most successful investors who want to be a part of the phenomenon that is Vegas.

The latest multibillion-dollar project planned for the Strip has received its first round of approval from county officials… The Clark County Planning Commission late Tuesday unanimously approved the $5 billion Plaza project's development plans, which would include the largest casino on the Strip, for the New Frontier's 34.5-acre site…the project that is being developed by Elad IDB Las Vegas, a joint venture between New York-based Elad Group and Property & Building Corp., a subsidiary of IDB Holdings Corp. The mixed-use project will have a French Renaissance architectural style and will be modeled after New York City's Plaza Hotel. The plan calls for 4,100 hotel rooms and 2,600 condominiums spread through six towers 671 feet high and a seventh tower reaching 577 feet. (Arnold M. Knightly, Las Vegas Review-Journal, 12-20-07)

Add it up and you have some $30 billion – now that is critical mass and that is only counting the six properties mentioned and not the others on the Strip. A critical mass of that magnitude defines its own market. All markets are subject to the ups and downs of the economy, the price of gasoline, a housing slump or surge, a new competitor and a hundred other things. Reno's economy is continually diversifying and relies much less on gaming than it did just ten years ago, and that is good news for Reno. So my answer to the local reporter is always the same: too much competition in the feeder markets and too many reasons why people are traveling and spending less. But that would also be my answer for the next few years for Atlantic City, unless, of course, Atlantic City finds a way to replicate the Las Vegas Strip.

The owner of the Tropicana in Las Vegas and in Atlantic City, William J. Yung III, was one of those aggressive investors who sought a way to stake a claim on the Strip. In what was probably the most difficult year of his life, Yung went from being a newly licensed operator in Nevada and New Jersey to losing his license in New Jersey. Yung thought he had a grasp on the golden ring when he won a billion-dollar bidding war for Aztar – the parent company of the iconic Tropicana. Gaming licenses are said to be a privilege, not a right; clearly it is not always a privilege to have a gaming license. Yung and his company, Columbia Sussex, may or may not lose the other licenses, but will most likely be forced into selling all the other casinos, which totaled 14 when the New Jersey hammer fell.

Columbia Sussex paid a premium for Aztar and began immediately to try reducing expenses in an effort to make the marginal properties profitable. Aztar was never known for its operating skill, and much of the price paid for Aztar was based on the land values on the Las Vegas Strip; the Vegas Tropicana had been scheduled for eventual implosion and a mega-billion-dollar replacement for years. Aztar never seemed to feel the time was right, waiting instead for the likes of Yung to take the risk.

The company's efforts to reduce expenses made enemies everywhere it operated casinos. Unions, politicians and regulators lined up to criticize the company's decision to lay off employees, as many as 15 percent in some casinos, although it was far from unprecedented. Showboat and others had done the same thing in the past. In fact, many times casinos were praised for making the hard decisions and bringing the casino expenses back in line with revenues – but no critic saw Columbia Sussex's moves in that light. The company was even accused of endangering employees and customers because the casinos were said to be understaffed, unclean and unsafe.

In a stunning development, the New Jersey Casino Control Commission refused today to renew the license of the troubled Tropicana Casino and Resort, and said a trustee would operate the Boardwalk facility until a buyer was found. It was only the second time that a license renewal has been denied in the 29-year history of legalized gambling in Atlantic City. The Tropicana's attorney, Paul O'Gara, said the casino owner, Columbia Sussex Corp., would appeal the decision, as soon as tonight in state court. By a 4-1 vote, the commission said Columbia Sussex and its chief executive, William J. Yung III, had failed to meet the state's strict operating standards for financial responsibility, character and integrity. (Suzette Parmley, Philadelphia Inquirer, 12-12-07)

With the Tropicana Casino and Resort in need of a new owner, state casino regulators said Friday they are devising a process for interested buyers who want to make a formal pitch. No names of potential buyers were mentioned by Linda Kassekert, chairwoman of the state Casino Control Commission…Gaming analysts have estimated the Tropicana's sale price could be about $1 billion. (Erik Ortiz, Press of Atlantic City, 12-15-07)

It is not the only time a license has been denied, and it wasn't the highest profile denial. That honor could go to Hugh Hefner, of Playboy fame, Barron Hilton or Clifford Perlman, but this was easily the most dramatic and one that promises to have the largest impact on the industry as it plays itself out across the country.

Past denials: 1979 - The Casino Control Commission orders the chairman and vice chairman of the Caesars World board, Clifford and Stuart Perlman, to sever their relationship with the company because of their business dealings with alleged organized-crime associates. The commission denies a license to Bally Manufacturing Corp. board Chairman William T. O'Donnell because of his business dealings with an alleged organized-crime figure. 1982 - The commission denies a permanent license to Hugh Hefner and his Playboy Enterprises Inc., which had opened the Playboy Casino & Hotel the year before, because it felt Hefner had lied on the witness stand. Two months later, the casino hotel becomes Elsinore's Atlantis. 1985 - The commission denies a casino license to Barron Hilton and his Hilton Hotels Corp. due to questions about some of its executives and ties to a Chicago attorney whose activities suggested a possible link to organized crime. The company sells its marina casino to Donald Trump for $320 million. 1989 - The Atlantis closes after the Casino Control Commission rules that it is no longer financially stable. Donald Trump buys the property for $63 million and operates it as the Trump Regency, a noncasino hotel. (Press of Atlantic City, 12-12-07)

Some think the Atlantic City casino alone will draw a billion dollars; regulators will not allow Columbia Sussex to profit from the sale and any excess will go to the state. But with a year of declining revenues in Atlantic City, it is hard to think an old and underperforming property will bring that kind of a premium. But who knows, there may be another Columbia Sussex in the wings, just waiting for a chance at the easy money in gaming.

Atlantic City July gaming revenues fell 7.7 % to $374.7 million. (Reuters, 12-11-07)

Colorado casino revenue increase increased 5.6% to $66.7 million, up from $63.1 million for November 2006. (Denver Post, 12-20-07)

Delaware November gaming revenue fell 6.7%. (Gaming Industry Weekly Report, 12-17-07)

Detroit November gaming revenue rose 4.5% to $113.2 million. (Gaming Industry Weekly Report, 12-17-07)

In Connecticut, Mohegan Sun slot revenue fell more than 3% in November to $70.5 million. Foxwoods slot revenue fell more than 4% to $58.9 million. (Gaming Industry Weekly Report, 12-24-07)

Florida slot revenues rose 9% to $16.2 million month to date through November 26th. Win per day rose to $190, up 22.8%. (Gaming Industry Weekly Report, 12-10-07)

Illinois November gaming revenues rose 4.2%. (Kansas City Star, 12-14-07)

Indiana November gaming revenue fell 3.8% in November to $204.4 million. (Gaming Industry Weekly Report, 12-17-07)

Iowa November gaming revenue rose 5.8% to $111.7 million but on a same store basis, revenue was down 0.1%. (Gaming Industry Weekly Report, 12-17-07)

Louisiana November gaming revenue rose 1.6% but on a same store basis was down 1.3%. (Gaming Industry Weekly Report, 12-17-07)

Mississippi November gaming revenues increased to $104.1 compared to $95.5 million in 2006. (Biloxi Sun Herald, 12-18-07)

Missouri November gaming revenue rose 1.1% to $125.9 million. (Gaming Industry Weekly Report, 12-17-07)

Nevada casinos won $1.16 billion from gamblers in October, a 9.6 percent increase. (Reuters, 12-11-07)

October Macau gaming revenue rose 56%. (Gaming Industry Weekly Report, 12-10-07)

Ken Adams

Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.
Ken Adams
Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.