The war is relegated to page 2, and it's the third or fourth
story on the evening news. The economy is improving, if slowly. The feds have
lowered interest rates to new 45-year lows, and the Dow Jones Industrial Average
is back in the 9,000 range. Things are looking up.
Or are they? The news from the casino industry is mixed. There
are new taxes, most states reported a decline in win from the previous year,
and significant expansion seems dead for the year. Even on an annual basis
the industry growth has slowed down dramatically, except for Indian gaming,
which is driven by expansion in California and is still growing much faster.
Even the industry's 3 percent overall growth doesn't necessarily translate into
increased profits. Besides taxes, the cost of operating and competition is
going up faster than revenue.
Revenue at tribal casinos grew nearly 11 percent last year
to $14.1 billion - more than triple the growth rate of commercial casinos,
according to a study by the Analysis Group Inc. Revenue from commercial casinos
in Nevada; Atlantic City, N.J.; along the Mississippi River and elsewhere
rose 3 percent last year to $26.5 billion, according the American Gaming Association.
Doug Abrahms, Gannett News
Service, Lansing State Journal, 6-14-03
Intense competition, lower gaming volume, higher operating
costs such as taxes and insurance as well as adverse weather contributed to
year-over-year decreases in cash flow for casino operators in the first quarter,
Standard & Poor's said in an industry report card. …Even so, the casino
sector is expected to be a "relatively stable performer, with many markets
experiencing flat to modest revenue growth," analysts said. Liz Benston, Las Vegas Sun, 6-19-03
There are a couple of interesting surveys out this month. The
survey that received the most publicity reports that most Americans approve
of gaming and would like a casino close enough to visit. The other from Michigan
is more revealing; it reports that fewer people actually gambled during the
previous year but spent more. Eight-five percent may approve of gaming, but
not all of those people are making a bet. To be healthy, the industry needs
the opposite, more gamblers spending less but continuing to come back year-after-year.
Eighty-five percent of Americans view casino gambling as an
acceptable form of entertainment, with adults 21 to 39 showing the highest
acceptance…In a statement, Fahrenkopf said the survey findings "quantify our
long-held assumption that the more familiar people are with the casino industry,
the more likely they are to embrace and support it." John Stearns, Arizona Republic, 6-24-03
Due partly to a choppy economy, 53 percent of Michiganians
haven't bet on horses, visited a casino, played bingo, bought a lottery ticket
or engaged in any other sort of gambling within the past year, a new study
shows. That's up from 43 percent last year and is the first time that Michigan's
gambling abstention rate has exceeded 50 percent, the study's authors say.
The previous high mark was 49 percent in 1997, when Marketing Resource Group
began tracking Michigan residents' gambling habits. Becky Yerak, The Detroit News, 6-23-03
Dead and dying, the news on expansion is no expansion, except
in Pennsylvania, where legislation is still creeping along. Most state legislatures
have gone home without passing any new enabling legislation on gaming.
The push to ask voters to approve casino gambling in Nebraska
failed Friday when the Legislature adjourned -- but may be resurrected in
January. Las Vegas Sun, 6-2-03
The 2003 Oklahoma Legislature adjourned Friday as a budget
fight fizzled and time ran out on a bill to expand Indian casino-type gambling
to horse racetracks. Ron Jenkins, Associated Press, Las Vegas Sun, 6-2-03
A last-minute push to put racetrack video slot machines on
the November ballot fell apart in the Ohio Senate on Tuesday. … "We just
couldn't come to terms on how this money would be broken out," said Sen. Kevin
Coughlin, R-Cuyahoga Falls, chairman of the State and Local Government Committee.
"So we're pulling the plug." Spencer Hunt, Cincinnati Enquirer, 6-25-03
One of the marquee bills (gaming) of this (Rhode Island) General
Assembly session -- could be dead for the year, a victim of the legislature's
annual last-minute rush toward adjournment. Senate President William Irons
said Tuesday that it is "very unlikely" that with barely a week left before
lawmakers go home for the year, the Senate could properly consider and pass
a major bill that it hasn't even seen yet. Jim Baron, Providence Journal Register,
6-25-03
Round and round it goes, where it stops no one knows. We know
there are cycles in weather, business cycles, some say karma (what goes around
comes around), but who, 10 or 20 years ago, imagined a cycle of casinos? The
cycle is starting afresh in Guam. The poor island is losing tourists and the
economy is struggling. In a move of undoubted brilliance, they have found consultants
who suggest casinos, well regulated of course, to solve the problem.
Guam may see fewer than a million visitor arrivals by the
end of the year, tourism officials said at the Guam Visitors Bureau membership
meeting yesterday. …Since January, the island has averaged about 74 percent
fewer visitors than it had in the same period during 2002, according to GVB
figures. That would be about $69,872,400 less than what was spent on Guam
by the 445,788 visitors who arrived in 2002. Mark-Alexander Pieper, Pacific Daily News, 6-27-03
Gambling on Guam could be a successful and profitable venture
as long as the proper mechanisms are in place to regulate it, according to
an industry expert. …A casino gaming initiative missed the ballot in the
General Election last November because it missed the 90-day window between
the time an initiative is certified and an election is held, as required by
Guam law. Citizens for Economic Diversity, which backed the initiative, stated
it hopes to have a special election sometime this year. The initiative currently
is scheduled to be on the ballot for the 2004 General Election. Mark-Alexander Pieper, Pacific Daily News, 6-27-03
On the other side of the Pacific Ocean, the international
dateline and the casino cycle is Reno. Seventy years ago Reno embarked on
the great casino adventure. Now that casinos have spread everywhere, including
neighboring California, Reno is going outside for adventure, inviting tourists
to play in the great Nevada outdoors. I wonder if Guam would lend Reno some
sand and ocean in exchange for a couple of no longer viable casinos.
The Reno-Sparks Convention & Visitors Authority has an
ambitious new $3.5 million marketing plan, which includes the leveraging of
millions of dollars in what is effectively free regional advertising from
ESPN as part of the upcoming Great Outdoor Games. "It's starting to work,"
he said about the area's new approach to tourism. "People are finally picking
up on 'America's Adventure Place.' We want to stay the course." Thomas J. Walsh, Reno Gazette-Journal, 6-27-03
And in the cycle of things, let us not forget taxes, as if the
gaming industry could forget them. The cycle is simple; when encouraging new
casinos and investment, legislatures and governors are "friendly" in their attitude
toward casino taxation. But as the industry grows and especially when the state's
need for money increases, the attitude changes. The casino industry becomes
an easy target for increased taxation -- who better to step up to the plate
and pay the bills, than a deep pocketed, cash rich industry?
The industry does not always go quietly into the dark night
of increased taxes; in Illinois, Nevada and New Jersey in particular, there
have been pretty intense wars. The war is at the flash point in both Nevada
and New Jersey. It is over in Illinois, and the disastrous 70 percent rate
passed. The governors in both Nevada and New Jersey are threatening court action
and government shut down. In New Jersey the war has centered on the industry;
both the governor and the industry have taken to the airwaves looking for support
and attacking the opposition. In Nevada, the industry has been less visible
in the debate, although Stations withdrew from the local Chamber of Commerce
over the Chamber's position on increased taxes. The legislatures are meeting
in special session and there will be increased taxes and fees for the industry
in both states. It is not just in the United States that this tax cycle exists.
Club owners in Australia are predicting their own demise because of new and
increased taxes.
Unable to agree on a budget for the fiscal year that begins
Tuesday, state legislative leaders disbanded tonight, with bitter words and
plans to meet on Saturday and Sunday. Gov. James E. McGreevey called a special
session of the Legislature to begin Saturday afternoon, accusing the Republicans
of evading their responsibility to offer an alternative budget. Laura Mansnerus, New York Times, 6-27-03
The defeat of the Democratic proposal means there currently
is no tax proposal pending before either legislative chamber. … Attorney
General Brian Sandoval warned legislators Wednesday that they will be in dereliction
of their constitutional duties if they do not pass a tax plan that provides
enough money to support public schools and balance the state budget by Tuesday.
Sandoval said he is researching what action can be taken against legislators,
but said they would not go to jail. Guinn has threatened to move the impasse
into the state Supreme Court if legislators do not reach agreement by the
end of the current special session. Ed Vogel, Las Vegas Review-Journal, 6-28-03
Several rugby league clubs would not be able to field teams
in the NRL competition if the NSW Government's proposed new gaming tax regime
was introduced, NSW Chief Executive David Costello said today. "I think the
NRL is looking at a competition that may have a significantly reduced number
of teams," Mr. Costello said. … "We're very confident of being able to prove
this industry can't sustain the rate of tax that (Treasurer) Michael Egan
foreshadowed on Tuesday." The new tax scales, to be phased in over seven
years, would eventually result in clubs paying 40 percent tax on gaming profits
once they reach $10 million a year, from 2010. The Australian, 6-27-03
There are a couple of unintended and ironic consequences in
all of this. First, in New Jersey, the law requires casinos to have state regulators
on site at all times. If the legislature does not pass the budget, including
a tax package, the state may be forced to shut down some departments. Emergency
and essential departments would be safe, but casino regulation is not considered
essential. Atlantic City could end up with closed casinos, resulting in less
revenue for casinos, but also less tax revenue for the state. And though not
as dramatic, in Australia the casino clubs sponsor athletic teams; therefore,
closing clubs could reduce the number of teams in the National Rugby League.
Most state government operations would stop if Republicans
and Democrats can't reach agreement on Gov. James E. McGreevey's proposed
$24.1 billion budget by midnight Monday. … While State Police, hospital and
care workers, and prison guards would be required to report to work… many
of the state's 77,000 employees would be told to stay home. That could include
workers for the Casino Control Commission and state Division of Gaming Enforcement.
Thomas Barlas, Press of Atlantic City,
6-27-03
There is some tax news that may be good news for the casino
industry and its investors: federal dividend taxes. The expansion bubble seems
to have burst, at least for this year, so it may be better to distribute some
of the extra cash instead of holding it for expansion, especially with the dividend
tax change.
The centerpiece of President Bush's stimulus package is a
reduction in the taxes investors pay on stock dividends, a measure aimed at
helping make stocks attractive investments again. …Currently, investors who
hold stocks in taxable accounts must pay income tax on dividends at rates
ranging from 10 percent to 38.6 percent. Under the new law, the top rate was
dropped to 15 percent through 2008. Wendy Tanaka, Knight Rider Newspapers, Indianapolis Star, 6-29-03
Casino operators and Wall Street analysts on Thursday predicted
dividend payments likely will be the wave of the future for the gaming industry.
The predictions were spurred by International Game Technology's decision Wednesday
to institute an annual dividend policy of 30 cents per share. "We believe
this may represent the first of a series of similar moves by other well-capitalized
industry players," Deutsche Bank analyst Marc Falcone said. Gaming operators
will be prodded toward dividend payouts by the "virtual expropriation" of
earnings in states such as Illinois and the limited prospects for high return
growth, a key sign of a maturing industry, he said. "We believe this (combination
of factors) may lead casino operators and suppliers to re-evaluate their dividend
policy and distribution of excess free cash flow to shareholders, especially
in light of the recent changes in the federal tax code lowering the tax on
dividends to 15 percent," Falcone said. Rod Smith, Gaming Wire, Las Vegas Review-Journal, 6-6-03
Mandalay Resort Group Thursday initiated a policy of paying
quarterly cash dividends to shareholders, the second major gaming company
to do so following International Game Technology's announcement earlier this
month. "For us, the inauguration of dividends is a response to the historic
tax reform," said Mandalay President Glenn Schaeffer. Las Vegas Review-Journal, 6-13-03
Smoking is not a new issue, but there is more smoke and, therefore,
there must be more fire. Up to this point, there has been little impact on
the casino industry from most non-smoking legislation. There are, of course,
no smoking areas in most casino restaurants and some casinos have non-smoking
areas. But there is a change in the air. In some jurisdictions in Australia,
parts of Canada and at racetracks in Delaware, smoking is already banned. In
July it will take hold in Florida at tracks, but there are other states such
as Maine and New York with pending anti-smoking legislation that have implications
for casinos. In some places, like Halifax, the casinos have given in. In others
such as New York and Maine, special interests, that could include gaming, are
seeking special exceptions. The trend is gaining steam; it is certainly time
to watch your state legislature for non-smoking legislation in your state. The
one real wild card is Indian gaming. Indian casinos will be exempt from state
legislation, unless it precedes compact negotiation and is included in the compact.
The governor approved a law Tuesday that will ban people from
lighting up in bars. (The) new law will move Maine closer to banning smoking
in all indoor public places. Smoking is already prohibited in restaurants
in Maine, and the law makes it illegal to smoke in lounges and taverns,
pool halls and certain off-track betting sites. Associated Press, CNN.com, 6-24-03
The law, which takes effect July 1, bans smoking at all Florida
workplaces except so-called "stand alone" bars that serve "incidental" snacks,
on outdoor patios at restaurants, at membership associations and at designated
smoking areas at airports. Associated Press, Macon Telegraph, 6-23-03
Loto-Québec has announced that, starting in the month of July,
its three casinos will be non-smoking establishments. This new policy will
place the corporation in the avant-garde, as its gaming houses will be among
the very few in North America to offer a totally smoke-free environment. "This
initiative is being implemented in response to requests expressed by a large
portion of our clientele and employees," explained Mr. Claude Poisson, president
of operations for the Société des casinos du Québec and Resto-Casino." CNW
Telbec, 6-26-03
The woman who became the poster child for a smoke-free workplace
in Nova Scotia says she's delighted the province's two casinos will abide
by municipal smoking bans. …Casinos have decided to abide by the public smoking
ban that comes into full effect in Sydney July 7 and a couple of weeks later
in Halifax. Beverly Ware, Halifax Herald, 6-17-03
The fight by bar and restaurant owners against the state law
passed in May that prohibits smoking in virtually all indoor public places
has been well documented. Bowling proprietors, too, will continue to seek
relief from the law that takes effect July 24. While the bar and restaurant
groups generally marshaled their efforts to repeal the law, bowling proprietors
are more inclined to seek amendments to the legislation to permit smoking
in separate ventilated rooms. Norm Warner, Buffalo News, 6-28-03
Non-smoking legislation will certainly change the industry.
At this point the cost of that change is purely speculative. Cost that is not
speculative, however, is the cost of competition. Here is an interesting study
on hotel occupancy; the bottom line of the survey is simple. In a slow economy,
lowering rates lowers income but increases occupancy, a lesson that both Atlantic
City and Reno paid a great deal more than the cost of this survey to learn.
Rather than boosting occupancy during slow periods, discount
rates simply hurt revenue, the study by Cornell University's School of Hotel
Administration said. That is especially true as more consumers use the Internet
to find travel and reservation sites offering the cheapest rooms whenever
they want. Inexpensive rooms do not entice people to travel but only give
cheaper accommodations to those who are on the road anyway, the study showed.
When hotels offered discounts of up to 20 percent, room occupancy increased
only slightly while revenue fell by about the same percentage. "Our data
are clear, the demand boost will not be large, but the loss of revenue will
be painful," Cathy Enz, executive director of Cornell's Center for Hospitality
Research, said in the report. Mark Johnson, Associated Press, Hotel Online, 6-22-03
Attitudes toward drinking and driving, like smoking, reflect
changing social mores. As the attitudes change, the law usually changes. T.
G. I. Friday's paid the new price. In the story quoted below, a patron was
served "too" much. T. G. I. Friday's was not the last business to serve the
patron a drink before he killed someone; they did,
however, have the deepest pockets. This is
another lesson for casinos. The rule of deep pockets: The person with
the most pays the most, and casinos always have the most. And in a twist of
fate that defines my ability to understand, the restaurant had to agree to remove
television coverage of horse races.
The company that owns a T.G..I. Friday's franchise restaurant
has agreed to pay $21 million to settle a lawsuit filed by the parents of
two teenagers killed by a drunken driver. The agreement is one of the
largest reported settlements or damage awards against establishments that
served alcohol to customers who later injured or killed others, according
to Mothers Against Drunk Driving. Associated Press, 06/20/03
(The) company also agreed to remove anyone suspected of illegal
gambling and to unsubscribe to a horse racing television network at the restaurant.
The families had sought those stipulations at all of the 30 T.G.I. Friday's
restaurants owned by Ohio Valley Bistros, but the settlement applies only
to the Louisville-area restaurant. Another Louisville bar-restaurant that
served a beer to Eberenz after he left Friday's restaurant agreed to pay $650,000.
Associated Press, 06/20/03
The world of gaming is becoming increasingly international.
Steve Wynn and Sheldon Adelson made news last year when they won licenses in
Macau. This year the jurisdiction of lust is the UK. Although the rush to
the Channel Isles and the Internet seems to have been a false start, the promise
of new regulation in Britain has the major companies drooling and chasing opportunity.
As with every new jurisdiction in the United States the same names continually
pop up, and just as in the United States, Harrah's seems to be a good bet to
be first in line. Steve Wynn has found a new partner, who, besides putting money
into the newly renamed Wynn Vegas is going to be offering management expertise
and cross marketing. And finally in the International scene, Antigua and Barbuda
are taking on the United State's Internet gaming stance.
U.S. casino operator Harrah's Entertainment Inc. and Gala
Group of Britain are in talks on a joint venture to build several British
casinos in an investment worth several hundred million pounds, a source
familiar with the matter said on Thursday. …The venture would build several
casinos -- more than five and fewer than a dozen -- that would be bigger,
flashier and offer more gambling options than casinos operated by Gala, the
source said. Gala has about 30 casinos in Britain. Reuters, Forbes.com, 6-13-02
Wynn Resorts Ltd. and Societe des Bains de Mer announced on
Thursday a strategic business alliance under which the Monte Carlo casino
owner will pay $45 million, or $15 a share, for 3 million shares of Wynn Resorts…
The strategic alliance includes an exchange of management expertise and the
development of cross-marketing initiatives between Wynn Resorts and SBM.
Reuters, Yahoo Finance, 6-13-03
The tiny Caribbean islands of Antigua and Barbuda took on
the United States at the World Trade Organization (WTO) Tuesday, seeking a
ruling on Washington's ban on cross-border Internet gambling. The twin-island
state, which has developed online gaming services to earn revenue, said that
the U.S. action broke WTO rules on open markets for services. The United
States, where gaming is a multibillion-dollar industry, denies that free-trade
rules apply to gambling and says the cross border ban protects its citizens
from the financial and social risks of betting. Reuters,
CNET.com. 6-25-03
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