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Quicktakes - The month's trends in a glance - June 2004
17 August 2004
By Ken Adams
Iraqis are governing Iraq; Iraqis are going to try Sadam. The war in Iraq may
not be over, but war pressures on the economy appear to be decreasing. Even before
the changes in Iraq, the economic news in June was generally very positive; although
the stock market at times seems to be stuck in place; averages go up and down,
but most of the year have been pretty much at the same level: 10,400 for the Dow,
NASDAQ at 2000 and S & P at 1,100. Gas prices are down, consumer spending
and confidence is up, and credit card delinquency is down. All the good news spells
inflation to the feds, who are expected to raise interest rates soon.
Gasoline prices have dropped back under $2 a gallon…weighted
national average price for all three grades of gasoline fell to $1.97 a
gallon Friday, 6.6 cents lower than two weeks earlier, after rising more
than 59 cents between mid-December and June, Lundberg says…was partly
due to moderating oil prices and the completion of U.S. refinery maintenance
projects. Falling crude oil prices were also a factor. USA Today, 6-28-04
Consumer confidence jumped to a two-year high in June,
buoyed by an improved job market and softening gasoline prices, the New
York-based Conference Board reported Tuesday. …The Consumer Confidence
Index…increased nearly 9 points to 101.9, up from a revised reading of
93.1 in May. The latest reading was much better than the figure of 95 that
analysts had expected. Anne D'Innocenzio, Associated Press, 6-29-04
Personal spending was up 1.0 percent in May, the Commerce
Department said, beating Wall Street forecasts for a 0.8 percent gain and
posting the biggest advance since October 2001's 2.4 percent rise. …the
overall picture was of consumers making another solid contribution to U.S.
growth. "The numbers show the economy is doing very well and inflationary
pressures are slowly building," said Peter Frank, senior foreign
exchange strategist at ABN Amro. Alister Bull, Reuters, USA Today, 6-28-04
The percentage of credit card payments that were past due
fell sharply in the first quarter this year…The seasonally adjusted
percentage of credit card accounts that were 30 or more days past due dropped
to 4.21% in the January-to-March quarter, the American Bankers Association
said in a quarterly survey released Tuesday. "This may be the break in
the clouds we've been looking for," said James Chessen, the association's
chief economist. Jeannine Aversa, Associated Press, USA Today, 6-29-04
A good economy is good for gaming, good enough that the big stories from gaming
are not about recovering from 9-11-01, or other difficult economic times, but
rather of dreams of growth and glory. The biggest gaming story of the month,
if not the year, is the MGM Mirage offer to buy Mandalay Resorts, thereby creating
the world's largest gaming company with annual revenues of $7 billion, a pretty
penny to set before a Kirk. Kirk Kerkorian may just be following in the footsteps
of Howard Hughes. He may be a step or two (actually several decades) behind
Howard Hughes in the movie, airline and casino industry, but when he does a
thing he does it well, much better than Howard, it would seem. Mr. Kerkorian's
casino empire, after the completion of this latest deal, will be the largest
ever. Just imagine that when Howard was getting a good start on becoming a billionaire,
Kirk was working as a laborer for the WPA. The MGM Mirage purchase of Mandalay
Resort is a big deal, but Kerkorian also owns 74 percent of another MGM (you
know the move company), which may soon be purchased by Sony or Time Warner for
$5 billion. Seems like Kirk must just think in billions of dollars, doesn't
it?
MGM MIRAGE today announced that following discussions throughout
the weekend, its management and the management of Mandalay Resort Group have
agreed on all material terms of an offer whereby MGM MIRAGE would acquire
Mandalay in an all-cash transaction. MGM MIRAGE management intends to recommend
approval of the transaction to its Board of Directors, which is expected to
meet tomorrow to consider the transaction. Under the proposed terms, MGM MIRAGE
would pay $71.00 per share in cash… The total value of the transaction
would be approximately $7.9 billion. PRNewswire-FirstCall, Yahoo Finance!,
6-14-04
MGM MIRAGE announced today that it has entered into a joint
venture agreement with Pansy Ho Chiu-king to develop, build and operate a
major hotel-casino resort in Macau S.A.R. The facility, which will use the
"MGM Grand" name, will be 50/50 owned and jointly operated by the
two partners. The resort will be located….next to the planned Wynn Resorts
facility…an area destined to become the casino "Strip" of Macau.
…could open by late 2006. PRNewswire-FirstCall, 6-21-04
Some might ask why a company would want to own so many casinos in the same
place, or a "bunch" of casinos anywhere. There are probably lots of
answers--some that are more related to ego than economy, but there are enough
economic answers to satisfy most business people. Take for example the case
of Harrah's, which has just digested its own billion dollar acquisition. Harrah's
just announced a new line of credit for $2.5 billion at an interest rate that
is less than you would pay for a house or car loan. As an illustration, compare
the interest rate on Nevada Gold & Casinos line of credit and imagine Nevada
Gold trying to compete against Harrah's. The Donald, with interest rates like
Harrah's, would see all of his problems in Atlantic City disappear and he could
improve his properties to keep up with Harrah's and MGM, which owns half of
the Borgata. Harrah's size and power also translates into opportunities all
over the Untied States and the world. Harrah's appears to have purchased a racetrack
in Pennsylvania, betting that slots would be approved; and slots do seem destined
to be approved within a month.
Bank of America Corp. and Wells Fargo & Co. are arranging
a $2.5 billion revolving credit for Harrah's Entertainment Inc., the
Las Vegas-based casino owner said in a statement. Harrah's said the banks
converted a $1.1 billion revolving credit and a $900 million loan into the
new financing. The loan can be increased to $3 billion if both sides
agree. Harrah's will pay a lower interest rate on the new loan than it did
on the credits being replaced, based on the company's debt ratings and ratio
of debt to equity. Harrah's will pay interest at 1.1 percentage points
more than the London interbank offered rate, down from 1.3 percentage
points. Bloomberg News, Las Vegas Sun, 6-25-04
Nevada Gold & Casinos announced today a new $40 million
revolving credit facility. The new revolving credit facility expands the Company's
borrowing capacity from $13 million to an aggregate of $40 million. The interest
rate on the $13 million credit facility was 11%. The interest rate on the
new revolving credit facility will be 8.5%. The credit facility expires
in June 2008. Business Wire, Yahoo! Finance, 6-30-04
Harrah's Entertainment Inc, the No. 2 US casino company, will
hold talks with Singapore officials today to discuss setting up a casino in
the city, senior vice-president Jan Jones said. …Mr. McFadden and
Ms. Jones were speaking on the sidelines of a gaming conference in Singapore.
Singapore has said it may include a casino in a resort and residential development
being planned for one of its offshore islands, to lure more tourists and business
travellers. Asian Business Times, 6-25-04
Harrah's Entertainment, Inc. said it has received approval
from the Pennsylvania State Harness Racing Commission to acquire a 50 percent
interest in Chester Downs & Marina, L.L.C., an entity licensed to develop
a harness-racing facility in southeastern Pennsylvania. PRNewswire-FirstCall,
Yahoo Business!, 6-24-04
If the MGM story is the biggest domestic gaming story, then the tighter-than-expected
British controls is the biggest international story. Over the last year or so,
most of the major gaming companies have gone to Britain to explore the "opportunity"
of the pending regulations that would, by all accounts, loosen British gaming
regulations and create an industry much like a typical American jurisdiction.
Harrah's bought into a bingo chain, several companies bought into football franchises,
and Sheldon Adelson offered to build a casino near the stadium of any team that
would agree. Even little companies, like one from Colorado, saw an opportunity
to operate small, American-like casinos. But the English have managed to confound
the lot. The new regulations will not allow unlimited slots, casinos in every
town or much of anything except casinos with limited slots located in non-urban
tourist resorts. Steve Wynn was about the only major player that could not see
the UK as the promised land; he opted not to waste his time on the British Isles
and to confine his efforts to Macau. Oh well, it sounded good for a while and
the trip to England was fun, didn't you think so, Sheldon?
Shares in gaming groups took a tumble in the UK today after
the British government announced tougher controls on gambling. Details
of a shake-up in gambling laws surprised investors, leading stocks such as
Stanley Leisure and Rank to lose around 5% of their market value. Under
the plans announced today, Las Vegas-style slot machines offering unlimited
prize money will now only be allowed in the biggest casinos, with numbers
limited to 1,250 in each casino. Small casinos will not be allowed to run
bingo games, and all casinos will have to have "chill-out" non-gambling
rooms. The announcement shocked investors, who had not expected the proposals
to be so tough Irish Examiner, 6-14-04
One of the world's largest casino operators has warned
that billions of pounds of investment and the chance to regenerate swathes
of Britain are at risk if proposed reforms to gambling laws are scaled back.
The warning from Las Vegas Sands, owner of the Venetian in Las Vegas, follows
a report from a cross-party committee of MPs and peers that called for the
number of slot machines in each casino to be capped. The Department for Culture,
Media and Sport is today expected to respond to the report and give an update
on the progress of the draft gambling bill, which it hopes will become law
at the end of next year… "It would certainly jeopardize our investment,"
said Bill Weidner, president of Las Vegas Sands. "[A slot limit] would
affect our investment and would hinder regeneration efforts." Matthew
Garrahan, London Financial Times, 6-14-04
On the other side of the planet, Mr. Adelson did open a casino and promises
much more. The Sands in Macau opened to capacity crowds, Steve Wynn broke ground,
and MGM Mirage announced a deal with the godfather of Asian gaming, Stanley
Ho's daughter. The loosening of Ho's control over gaming in Macau and the entry
of American companies has sparked interest in many other Asian countries; the
countries just begging for new laws and casino revenues seem almost unlimited.
And for those looking for something closer to home, Mexico is preparing to debate
gaming again; each year gaming is thought to be a certain thing, and this year
is no exception.
Suddenly, it seems, everyone in Asia is placing bets on
gambling. While Singapore debates the merits of having a casino on its soil,
others such as Thailand, Japan, Taiwan and Indonesia are getting into the
act by relaxing, or taking another look at their anti-gambling laws to allow
casinos. Those which already have them, such as Macau and the Philippines,
are trying to stay ahead of the game by sprucing up what they have to offer
to high rollers from around the region. The buzz was clear at a casino
conference held in Singapore last week. The record number of more than 1,000
participants, from gaming company bigwigs to officials, made the event the
biggest in nine years. Quite obviously, what lies behind the surge of interest
is the high payoff on offer. Asians spend about $14 billion a year on gambling,
including illegal betting offered by underground operators hiding from tough
laws. By 2010, they are expected to spend $23 billion, in the region and beyond,
on anything from blackjack, jackpot and roulette to lotteries like 4-D, industry
experts at the conference predicted. "Asians love to gamble,"
Ambrose So, director of the Sociedade de Jogos de Macau, which until last
month had a monopoly on Macau's casinos, told The Straits Times. Add to
that East Asia's booming economies, most notably China's, and the expected
explosion in tourism that will result, it is no wonder that governments are
placing their chips on the industry. It's also no wonder that So's company,
and the likes of U.S. gaming giants MGM-Mirage and Caesars Entertainment,
all here last week, are looking for elbow room at the table. Governments
are not just salivating at the taxes that betting will bring in - one estimate
is that here, they could account for as much as a fifth of the government's
revenue - they know that gamblers from overseas also splurge on hotels,
food and entertainment like other tourists. Korean Herald, 6-29-04
"Buenas" and "Ya gané" may be common
winning phrases in Mexico, but there is one that is never heard. "Jackpot."
Since 1947, the Mexican government has prohibited casinos and gambling. However,
with a recent push from several Congress members and representatives from
the Reynosa Chamber of Commerce, that might soon change. There is an initiative
now under review in the Mexican Congress that would revise La Ley Federal
de Juegos y Sorteos, the anti-gambling law. Congress will vote in September.
"Right now for the first time we have that initiative," said Patricio
Mora, a member of CANACO, the Reynosa chamber of commerce. …He said legalizing
gambling and casino investment would give Mexico a new competitive edge. …The
study indicates that the private sector would at least develop 10 mega-casinos,
comparable to those in Las Vegas, and initially invest more than $2 billion
for the project. Those mega complexes would have hotel capacity for 125,000
guests in addition to the casino - similar to the population of some small
Mexican cities. Victoria Hirschberg, Valley Star Monitor, 6-28-04
From Asia and the column labeled, "News of the Absurd", are two other
stories. In Cambodia a casino is being built where the Khmer Rouge leader died;
and monks in Thailand have become so obsessed with football that they will do
anything--risking defrocking by sneaking out at night to watch football, betting
and even fist fighting when they lose. Maybe casinos in Cambodia could make
book on the outcome of the fist fights of the monks in Thailand; actually you
could probably find the wager on the Internet if you tried.
Construction has begun on a casino and five-star hotel to
lure tourists to the mountain where the Khmer Rouge leader Pol Pot spent his
final days in northwestern Cambodia, a provincial official has said. The
buildings are located near the spot where Pol Pot's body was unceremoniously
cremated in 1998, months after he was purged. AFP, International Herald
Tribune, 6-25-04
To keep monks from wagering on football, senior monks will
propose the Sangha Supreme Council enforce monastic regulations against gambling
when the Euro 2004 tournament kicks off June 12. Phra Dhamamoli, an abbot
of Wat Pichayatikaram and First Region chief monk who oversees men of the
cloth in Bangkok and nearby suburbs, admitted monks in almost every temple
bet on football matches both among themselves and on soccer betting lines.
"Some monks hooked on football betting stole a temple abbot's bank account
number and forged his signature to steal money for betting,'' the monk said.
"Several monks were defrocked after they were caught betting. They have
destroyed the integrity of the monastic institution." Monks are barred
by monastic regulations from watching football. Gambling is punishable by
defrocking. He expressed concern the trend of football wagering among monks
would cause Buddhists to lose faith in their monks." The football
matches will be televised at night and monks can sneak out and watch TV at
night. Their cheering could disturb people living around monasteries,'' he
said. Phra Thepmethi, caretaker abbot of Wat Maha That in Bangkok, agreed
with Dhammamoli, saying many monks were deep in debt from football betting
and some even got into fist fights after losing money. Thailand Nation,
6-3-04
And if the two biggest non-Indian stories are the MGM-Mandalay deal and the
new British regulations, then the biggest Indian gaming story is the signing
of new compacts in California. The compacts haven't been confirmed by the state
legislature yet, only five tribes have signed, and at least one tribe is suing
to stop the process, but the compacts have still rocked the Indian gaming world.
Next to Mohegan Sun and Foxwoods, the new mega casinos in California could be
the largest in the world, serving Los Angeles, Sacramento, San Diego and San
Francisco. Not every tribe has a major urban population base, but for the winners
which would, of course, include IGT, the prize is huge.
Gov. Arnold Schwarzenegger signed new deals with five California
Indian tribes…gives them the right to operate a limitless number of slot
machines - and gives the state considerably less in revenues than the governor
promised in his campaign last year. …The five tribes are the Rumsey Band
of Wintun Indians in Yolo County, the United Auburn Indian Community in Placer
County and three San Diego County tribes. …must be approved by the Legislature
and the federal Department of the Interior… Steve Wiegand, Sacramento
Bee, 6-22-04
There are plenty of Americans willing to play at the existing casinos and more
available as casinos move closer to population centers. Pennsylvania appears
to be the next major jurisdiction to open up, and if it does, Maryland may follow,
which may inspire other states to expand gaming. The merry-go-round is moving
very fast with lots of brass rings up for grabs, especially for the major gaming
and slot companies. The pace of the last couple of years has been dizzying,
and we haven't run out of "underdeveloped" jurisdictions yet. Do you
have a ticket for the ride? More and more Americans are buying gaming stocks,
hoping to be part of the golden-ring-ride.
About 53.4 million American adults visited a casino in
2003, nearly 2 million more than in 2002, a survey found. Those who went
to casinos made a total of 310 million trips, according to the 2004 State
of the States: The AGA Survey of Casino Entertainment, sponsored by the American
Gaming Association. That equates to about 5.8 trips per person. The study
includes 2003 economic data for the commercial casino industry, as well as
the results of 2004 public opinion polling. Polling conducted for the AGA
by Peter D. Hart Research Associates Inc. and The Luntz Research Companies
found that more than 80 percent of those surveyed believe casino gaming
is acceptable for themselves or others - a figure that has remained consistent
the past five years. William H. Sokolic, Courier-Post Staff, 6-7-04
Indications that Pennsylvania's politicians may have put together
a deal to bring more gambling to the Keystone State pushed shares of slot-machine
makers higher Thursday. According to press reports, lawmakers have reached
a tentative agreement that could result in the installation of over 37,000
slot machines in the state, a potential bonanza for the gambling equipment
business. Shares of category leader International Game Technology were
up almost 6 percent to $37.24 while WMS gained 8.8 percent to $29.01 and Alliance
soared almost 10 percent to $17.40. "We view this as an enormous positive
development for IGT, wrote Joe Greff, an analyst with Fulcrum Global Partners
as he reiterated a "buy" rating on the stock. Not only would the
company be able to sell a lot of one-armed bandits into Pennsylvania, but
Greff speculated that "this may put the onus back on neighboring Maryland
lawmakers to revisit slots at racetracks, creating another market of 10,000
to 20,000 -- another positive for IGT." Deutsche Bank's Marc Falcone
wrote that "this is obviously good news for slot suppliers," and
also a plus for Penn National, which has two racetracks in the state. William
Spain, CBS.MarketWatch.com, 6-24-04
Harrah's and CD&M have agreed to develop Chester Downs,
a 5/8-mile harness racetrack facility approximately six miles south of Philadelphia
International Airport. …Upon closing of the transaction, Harrah's
will acquire a 50 percent interest in CD&M. Harrah's and CD&M expect
to finalize the transaction during the third quarter. Harrah's currently has
ownership stakes in five racetracks located in Louisiana, Iowa and Kentucky.
PRNewswire-FirstCall, Yahoo! Business, 6-24-04
Nevada regulators made a couple of interesting rulings this month. Dennis McAndrew,
once know as Dennis Nikrasch, was permanently banned from Nevada casinos. Dennis
was as smart and sophisticated a slot cheat as the industry has ever seen. If
he was a game developer, inventor or even operator, his obituary would express
sadness at the loss to the industry he served. Instead operators heaved a collective
sigh of relief. He was smarter than all of us and operating without him, and
hopefully others of his kind, is now much easier. The other ruling was the approval
of Garfield as a slot theme. By the time Nevada approved the game, New Jersey,
Michigan and most GLI jurisdictions had approved the theme. It would seem both
the industry and the regulators have found the boundaries of games that are
based on themes that might appeal to children.
The state Gaming Control Board nominated computer expert Dennis
McAndrew, who changed his last name from Nikrasch; and Eugene Bulgarino, a
member of a ring headed by McAndrew who has been imprisoned twice for schemes
that netted about $16 million from slot machines. McAndrew used a concealed,
hand-held computer to program slots so they'd pay off big jackpots. Expected
to be released from prison this summer, he's been labeled "the mastermind
of the biggest slot-cheating schemes in Nevada history," Deputy Attorney
General Darlene Caruso told the Control Board. "The evidence in this
case overwhelmingly supports the nomination," Control Board Chairman
Dennis Neilander said. "Clearly he's very bright," said board member
Scott Scherer. "Unfortunately, this is the way he's chosen to ply his
talents." Brendan Riley, Associated Press, Reno Gazette-Journal, 6-4-04
The Garfield cartoon character was recommended Thursday as
a theme for a new slot machine by casino regulators after a lawyer for the
slot manufacturer insisted the new device would appeal to adults and not children.
…The board had a staff recommendation against use of the Garfield theme,
but Mikohn attorney Jeff Silver said anyone who reads Garfield "will
clearly see this comic strip is not geared for children." Brendan Riley,
Associated Press, Reno Gazette-Journal, 6-4-04
The stories of the month are definitely growth, expansion and new opportunity.
The UK may have closed the door on a major expansion and the opportunity of
American gaming companies, but in Asia, Pennsylvania and California the door
has opened even wider. The economy is doing well, which means people have more
money to spend, and that always bodes well for the casino industry. All-in-all,
for the midway point of view, 2004 looks like a good year for the gaming industry
on The Street, in the street, and in the state house.
Recent Articles
Best of 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.
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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.
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