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Quick-takes: The month's trends at a glance - November 2004

12 April 2005

The election of 2004 is over and we have a president, the stock market is up, crude oil and gas prices are down and consumers seem ready and able to spend for the holidays. In general, things look pretty good for the last month of 2004. Of course there are some clouds: there is still much uncertainty in the Middle East that could threaten world peace and the American economy; Iraq, Israel, Palestine and Ukraine are facing difficult elections. However, for the moment the outlook is not bad.

Stocks surged Wednesday, with the Dow Jones industrials posting triple-digit gains as investors expressed relief following Senator John Kerry's concession to President Bush. Sam Stovall, chief investment strategist at Standard & Poor's, characterized the advance as "a Republican-inspired relief rally" for the stock market. …Anxiety about the outcome of the election hobbled the market for weeks, keeping stocks in a tight trading range…the market rallied in anticipation of a Bush victory even as votes were still being counted in three states. Meg Richards, Associated Press, Yahoo! Business, 11-3-04

Consumer spending and confidence, gas prices, the promise of slots in Oklahoma, Florida, Pennsylvania, California and possibly a couple of other states, mergers and the rumors of more to come and good earnings reports kept gaming stocks outperforming the broader market. The pundits often say that slot companies are the best bets, but in 2004 more than one operator is outperforming the manufacturers.

Gaming stocks continued to surge throughout November as investors responded to positive third-quarter earnings announcements and the news of potential new casino development along the Strip, giving shares of several companies double-digit increases in their average daily prices. Analysts said the trend could continue this month as long as economic indicators remain strong. …"The bulk of the manufacturers performed relatively well this month," Gordon said. "Elections early in the month proved that gaming expansions are going to take a more conservative path as states try to identify alternative revenue generators." Howard Stutz, Gaming Wire, Las Vegas Review-Journal, 12-1-04

News of a merger between two second-tier gambling companies sent their shares - and those of the remaining sector small-fry - sharply higher Thursday as investors looked to get in early on the next buyout. …Bill Schmitt, an analyst with CIBC World Markets, expects further consolidation among smaller outfits, most likely involving Pinnacle, Ameristar, Isle of Capri and Aztar. "The larger ones have some digestion issues to go through and I think they are out of the game for the time being," he said. "Some combination [among those] four would make the most sense in the near-term." However, with the high proportion of insider control at Ameristar and Isle making them unlikely sellers, Schmitt said, "Pinnacle and Aztar are the likely candidates" for acquisition. …In a note to investors Thursday, Banc of America Securities' J. Cogan wrote, "The drumbeat of consolidation continues to outweigh routine noise in the sector in the near term, as a result of six large deals and numerous small ones/one-offs." … Among the possible losers from further consolidation, he noted, were gambling-equipment makers. "On the margin, mergers are not positive for gaming suppliers," Cogan said, including International Game Technology, Alliance and WMS. Those outfits, he said, "could lose some pricing power, although we believe gaming technology products and services offer a compelling value proposition to casino operators." William Spain, CBS Market Watch, 11-4-04

Shares of Reno-based Monarch Casino & Resort, the owner of the Atlantis Casino Resort & Spa, stood at $37.03 a share Tuesday at the close of trading, up by almost 400 percent from a year ago. Thomas J. Walsh, Reno Gazette-Journal, 11-16-04

Across the country jurisdictions report the same positive growth trends as the individual companies. The only exception was Mississippi, still suffering from the impact of Hurricane Ivan. Even in good times not every operator does well. Five of the twelve casinos in Atlantic City had declining revenues and Trump filled chapter 11 bankruptcy. Somewhere under the numbers there is often another story: increased competition inside and outside of each market is reducing profit margins. So, while the overall results are very good, there are other stories like Trump's that will surface in 2005. Like any mature industry, it will take more than open doors to succeed in gaming. Unless a casino has a monopoly, and there are no casinos in neighboring states, the forces of competition will shape the patterns of success.

Nevada casinos won $924.8 million from gamblers in September, a 10 percent gain from the same month a year earlier…slot machines and table games were up -- 10.3 percent for the games and 9.4 percent for slots; and every major casino market had a positive month. Brendan Riley, Associated Press, Las Vegas Review-Journal, 11-11-04

Connecticut's two American Indian-run casinos took in more than $140 million from slot machines in October and gave $35 million to the state…Mohegan Sun's slots…win of $71.6 million…Foxwoods Resort Casino…$68.4 million. …In October of 2003, the two casinos took in about $135 million and contributed $33.6 million to the state. Associated Press, 11-16-04

Louisiana's state-licensed casinos won $178.9 million from gamblers in October, up from $163.4 million in October 2003, state police said. The 14 riverboat casinos won $126.7 million, up from $124.1 million in October 2003. Harrah's land-based casino in downtown New Orleans won $28.6 million, up from $24.3 million a year ago. Slot-machine casinos at race tracks took in $23.6 million from gamblers in October, up from $14.9 million in October 2003. Shreveport Times, 11-17-04

Colorado casinos saw overall revenues rise in October, when results were boosted by five full weekends in the month, state gaming officials said Wednesday. Establishments statewide reported $62.9 million in adjusted gross proceeds in October, up 10.7 percent from $56.8 million in October 2003, the Colorado Division of Gaming said. Denver Post, 11-18-04

Overall, gross operating profits for the Atlantic City's 12 casinos rose 9.2 percent in the quarter to $396.2 million,…Net revenues climbed 4.4 percent in the quarter to $1.3 billion. Donald Wittkowski, Press of Atlantic City, 11-19-04

Detroit casinos took in $95.9 million in October, up 1.5%. MBG's MotorCity was up 8%, MGM was down 2.5% and Greektown was down 1.5%. Gaming Industry Weekly Report, 11-19-04

Mississippi October revenues, which were just under $93.5 million, dropped 4.4 percent from the same period a year ago. Biloxi Sun Herald, 11-23-04

Northwest Indiana's casinos together made $102 million last month, up 5 percent from a year ago when they brought in $97 million. Lisa Shidler, Merrillville Post-Tribune 11-23-04

Southeast Indiana's riverboat casinos last month posted a collective 6.5 percent gain …Argosy Casino & Hotel, Belterra Casino Resort and Grand Victoria Casino & Resort combined collected $62.3 million in win from gamblers. Ken Alltucker, Cincinnati Enquirer, 11-23-04

Poker isn't a new story, but it certainly is a trend, and every month there are a few stories that demonstrate the significance of the trend. In November, USA Today and dozens of other newspapers carried a story about high school students playing poker. Several major Las Vegas casinos have announced the return of poker to their property, and poker on television just keeps on rolling, like this story about a "gambling channel." I don't know about you, but I picture it becoming like a combination of the National Geographic and the Shopping channel.

Anyone who has watched any television over the past year has likely stumbled upon a program or series related to casino gambling. The Travel Channel's "World Poker Tour," ESPN's "World Series of Poker," NBC's "Las Vegas" and the Discovery Channel's "American Casino" are among a few of the programs that transport viewers to a Las Vegas that is part fantasy, part reality. For people who can't get enough, several groups of investors are vying to be the first to market with an all-gambling television network. Several factors -- the most important of which is the booming popularity of poker on television -- has brought the gambling channel concept closer than ever to reality, experts say. Some say up to eight groups of investors are hunting for partners and distributors. Most of them are startup enterprises with contacts that gear toward the cable industry rather than companies affiliated with casinos or gaming companies. …While laying money on casino games from home is technically illegal, there are loopholes in federal and state laws that allow subscribers to bet on horse races via phone or Internet. HorseRacing TV and TVG Network already are exploiting that opportunity nationwide and are working on interactive television features. Liz Benston, Las Vegas Sun, 11-18-04

Smoking and gambling seem to have a natural affinity, at least that was the common wisdom for the last seventy years or so. Of course, for most of that time smoking was not thought to be an issue and was separate from other marketing or operational issues. The Surgeon General's first warning did little to change where and when people smoked. However, with the class action suits against tobacco companies and the increased awareness of the potential dangers of second hand smoke, "where" has become a very big issue. One at a time individual states have enacted legislation to restrict smoking to certain areas; and as that trend has increased, the number of acceptable smoking areas has decreased substantially. The original smoke free target was the workplace; that easily led to a crossover into bars and restaurant. They are, after all, someone's workplace.

In more than 1,000 cities from Boston to Beverly Hills, smokers are compelled to snuff out their cigarettes in workplaces, bowling alleys, shopping malls, restaurants and bars. Associated Press, 11-24-04

Starting Thursday, smoking will not be permitted in most Raleigh County restaurants, bowling alleys, sports arenas, convention halls, retail stores, auction houses, taxis and buses. In addition, all workplaces must be smoke-free and smokers must smoke at a reasonable distance of 10 feet from their buildings' entrances and exits. Most of West Virginia's 55 counties have some type of clean indoor air regulation. Those that do not at this time include Logan, Mercer, Mingo and Ohio counties. The Wheeling-Ohio County Health Department is considering a proposal to ban smoking in most enclosed public places within the county. Associated Press, 11-24-04

In today's language, all enclosed public spaces are the subject of non-smoking legislation. The underlying concept is to protect the innocent from second-hand smoke.

The Kansas City Council is considering a smoke-free law, with a vote expected Nov. 23. But advocates are trying to do something that experts say has never been accomplished elsewhere in the country — persuade elected leaders in an entire metropolitan area, straddling two states, to adopt such a ban. Lynn Horsley, Kansas City Star, 11-14-04

Health Secretary John Reid announced that smoking would be banned in the majority of enclosed public places in England within four years, but stopped short of a blanket ban like that seen in Ireland. The long-awaited Public Health White Paper revealed that cigarettes would be outlawed in all workplaces, restaurants and the 90% of pubs which prepare and serve food by the end of 2008. Lyndsay Moss/ John-Paul Ford Rojas, PA, The Scotsman, 11-16-04

Every new law seems to bring with it a new set of constituents complaining of the law's impact on their business. The businesses seeking exemption from the restrictions are commonly restaurants, bars and other places of entertainment.

A lawyer for the Tacoma-Pierce County [Washington] Board of Health urged the state Supreme Court yesterday to uphold the county's indoor smoking ban, while an entertainment industry lawyer urged the justices to strike it down as a violation of the state Clean Indoor Air Act. …The ban was the most sweeping in the state, applying to bars, restaurants, bowling alleys, mini-casinos, hotels, private clubs and most other non-tribal businesses. … There was no immediate indication when the court might rule. Associated Press, Seattle Post-Intelligencer, 11-17-04

In a victory for health advocates, a Superior Court judge in Hartford has thrown out a lawsuit that sought to overturn the state's new smoking ban in bars and restaurants. After the ban took effect in bars in April, four bar owners in southeastern Connecticut filed the suit because they said they were losing massive amounts of business to the Indian-run casinos and private clubs, which allow smoking. The owners said the state's new law was unconstitutional because it exempts private clubs and the casinos - putting the bar owners at a competitive disadvantage. Christopher Keating, Hartford Courant, 11-9-04

For the most part, casinos have been successful in remaining outside the smoking restrictions. Possibly because casino taxes are too important to local governments or from some primitive sense of sin: gambling, smoking and drinking are tangled together in a confused thinking which puts all three together in an inseparable manner. There have been two mutual funds based on those sins, Sin Shares and the Vice Fund. Sin Shares folded in 2003, but Vice Fund lives on. And there are even anti-sin funds, not limited to gambling, smoking and drinking, but you get the idea; it is a real concept in the world.

This week, the Ohio County Commission [West Virginia] voted unanimously to pass a resolution opposing the smoking ban proposal. Commissioner David J. Sims said economic concerns for local businesses, including restaurants and Wheeling Island Racetrack & Gaming Center, led him to introduce the resolution. He said he would like to see a ban that avoided such consequences. Associated press, 11-24-04

Burton D. Morgan, who in 1979 put together a private partnership to invest in a profitable and provocative theme: sin. He called the venture "Sin Shares… he took it public as a closed-end fund with a more upbeat name: Morgan Funshares…fund was dissolved at the end of 2003. Sin-based investing, however, survives in the Vice Fund (VICEX), launched in August 2002…In 2003, its first full year, the fund returned 34 percent. James Glassman, National Review, 4-1-04

The Ave Maria fund caters to Catholics who want to put their money where their faith is. It shuns the usual 'sin' stocks plus some you might not expect, including companies like Microsoft and Intel that offer same-sex benefits. John Middleton, MSN, 5-15-01

Regardless of the compatible sins concept, casinos are coming under more and more pressure from anti-smoking legislation. The one winner, if there is such a thing in this issue, might be Indian casinos, which will be not be affected by state legislation.

An initial review shows a plan by casinos, taverns and convenience stores to impose more limits on smoking in public places, but not as many as health groups want, appears to have enough signatures to advance to the 2005 Nevada Legislature. …The plan would bar smoking in dining areas within restaurants, on school property, in hospitals, movie theaters, concert halls, government buildings, grocery stores and drug and convenience stores…would permit smoking in casinos, bars, strip clubs, brothels, private residences, hotel and motel rooms and grocery or drug stores that have slot machine arcades. KNRV 4, 11-17-04

Gamblers who smoke will likely have to butt out when they visit Ontario casinos once the province passes its proposed anti-smoking legislation, Health Minister George Smitherman suggested Tuesday. Smitherman promised to introduce legislation before the holiday break that would impose a total ban on smoking in all public buildings and places of employment across the province. "It will stand as a bill that fulfills the commitments that we've made to Ontarians to have a 100 per cent ban on smoking in public and work places," he said. Keith Leslie, Canadian Press, Canadian National Post, 11-17-04

Bingo nationwide is big business, bringing in millions of dollars a year. Places like the Eastwood American Legion Post 1276, have brought bingo to its players every Friday night since 1964. …At one time, the legion brought in nearly 300 players or more. Now it only sees about 125 people on Fridays. The legion is just one of several bingo hosts in the Central New York area reporting a dramatic loss in business. …"The Indian reservation out in Oneida where the casino is, they can go out there and they can play Bingo, and they're not subject to the New York health department rules out there. So they can smoke or do whatever they want, while they're playing bingo," Ted Holtz said. News 10 Now, 11-17-04

This is not exclusively an American or Canadian trend, it is an international trend particularity, though not exclusively, in the English speaking world. Australia, New Zealand, Canada, Scotland, Ireland and England all have some kind of legislation in place or are debating the issue. To illustrate the point, 131 nations have signed a smoking treaty and 40, not including the United States, have ratified it.

Russia's upper house of parliament approved a bill on Wednesday to restrict smoking in public places in one of the world's heaviest smoking nations. The bill bans lighting up on public transport and at the workplace, and also the sale of tobacco in health, sports and cultural centres or near schools. AOL, 11-24-04

Health Minister [Australia] Lea Stevens announced the date yesterday afternoon, after controversial anti-smoking laws passed through the Legislative Council on Thursday night. The legislation will totally ban smoking in clubs, pubs, gaming rooms and the casino by October 31, 2007. Rebecca Jenkins, The Australian, 10-30-04

NOW THAT 40 nations have ratified a wide-ranging treaty designed to limit the health effects of smoking around the world, the next move is up to the United States. …The treaty required ratification by 40 nations to take effect. After Peru ratified it Tuesday, it can now be implemented by the nations who have ratified it thus far. The United States is not one of them. San Francisco Chronicle, 12-1-04

It may not happen this year or next, but non-smoking casinos are on the way. If you haven't thought about it, it may be time to begin planning for a casino industry that does not include smoking. Except possibly Indian casinos, and that would be a very significant competitive advantage, wouldn't it?

The Harrah's-Caesars merger is creating some interesting dynamics. Regulators are concerned about market concentration, which will lead to the sale of a few of either Harrah's or Caesars' properties. Harrah's is using the opportunity to gain a better position in some markets by selling the weaker performers, and there are other companies trying to take advantage of the merger to enter new markets. One company in particular, Columbia Sussex, appears to be writing a national expansion plan based on the merger. The sudden appearance on the national stage by Columbia Sussex has caused more than one observer to ask, "who is that?" It would seem we will all know more about the company before the end of 2005.

The troubled Bally's Casino New Orleans will be sold to an affiliate of Columbia Sussex Corp., a private hotel and casino operator in Kentucky, as part of the sell-off of properties in preparation for the merger of Harrah's Entertainment Inc. and Bally's owner Caesars Entertainment Inc. Columbia Sussex agreed to purchase the eastern New Orleans riverboat casino for about $24 million -- a little more than the casino paid about 1 ½ years ago to buy out its local partner. Rebecca Mowbray, New Orleans Times-Picayune, 10-23-04

Caesars today announced that it has entered into a definitive agreement to sell its Caesars Tahoe casino resort to an affiliate of Columbia Sussex Corporation, a hotel, resort and casino operator based in Fort Mitchell, Kentucky, for approximately $45 million. Business Wire, Yahoo! Business, 11-19-04

Columbia Sussex, among the largest operators of Marriott hotels nationwide, has steadily increased its casino business in recent years. The Fort Mitchell, Ky.-based company bought and redeveloped the old Maxim hotel and casino near the Las Vegas Strip, which reopened in 2003 as a Westin hotel with a small casino. Columbia Sussex later purchased the River Palms casino in Laughlin and most recently agreed to buy a Vicksburg, Miss., casino from Harrah's. Columbia Sussex plans to rename the Mississippi property the Horizon Casino, the same name as a casino it operates in South Lake Tahoe. Liz Benston, Las Vegas Sun, 10-25-04

Yung said gambling has been an important addition over the past couple of years to the family-owned business, which ranked third on the 2004 Greater Cincinnati/Northern Kentucky 100 list of privately owned companies. Columbia Sussex reported $594 million in revenue last year, a 7.9 percent jump from a year ago. The rapidly-expanding hotel and casino company added nearly 1,700 workers this year. The firm now employs 10,000. Ken Altucker, Cincinnati Enquirer, 11-16-04

The bankruptcy of Trump has caused some speculation, not as much as the Harrah's-Caesars merger, but the Donald does cause tongues to wag. Donald keeps his job, but loses control of the company, hardly important to the media darling. When the company announced the bankruptcy, Orange County, Indiana and the State Gaming Commission still expressed confidence; the Twenty-Nine Palms Band of Mission Indians decided to think about him; and Gary, Indiana saw no cause for concern. Some of Trump's bondholders just might not agree, but what do they know? He did find a bank willing to lend him $100 million dollars, so I guess everything will be okay.

Half-empty or half-full is a matter of perspective; and it helps when the goblet in question is grasped by Donald Trump. The billionaire's eponymous firm, Trump Hotels & Casino Resorts filed for Chapter 11 bankruptcy protection on Sunday, after months of wrangling with bondholders. …Trump said he will remain chairman and chief executive of the leisure firm, but his holdings will be reduced to 27% from 47% under the restructuring plan agreed to last month. Greg Levine, Forbes, 11-22-04

Orange County is keeping its hopes for a casino-led economic revival hitched to Donald Trump, even though his casino company has filed for bankruptcy protection…Historic Hotel Preservation Commission in Orange County, said yesterday that the bankruptcy filing was expected and will not stall plans for the new casino complex to be built in French Lick…Indiana Gaming Commission also said they expect the project to move forward as planned. Kimberly Hefling, Associated Press, 11-23-04

Gary Kovall, a lawyer for Twenty-Nine Palms Band of Mission Indians, confirmed Tuesday that Donald Trump's gaming license for Trump 29 Casino is being examined. Evidentiary hearings on the two-year license began last week and are still in process, Kovall said. "It's routine -- nothing out of the ordinary,' he said, acknowledging that the fiscal health of Trump's empire, given Sunday's Chapter 11 bankruptcy petition filing by Trump Hotels & Casino Resorts, Inc., is playing a role in the reevaluation. Financial stability is part of the licensing criteria, Kovall said. Debra Gruszecki, Palm Springs Desert Sun, 11-23-04

Donald Trump's casino empire filed for Chapter 11 bankruptcy on Sunday, a move not likely to make any immediate waves for Trump's Gary riverboat casino. Susan Erler, Northwest Indiana Times, 11-23-04

Beal Bank announced today that it has provided $100 million in interim financing to Trump Hotels & Casino Resorts, Inc. as part of that company's recapitalization plan. In announcing the transaction, Beal Bank's Chairman and Chief Executive Officer, Andy Beal, said, "Trump Hotels & Casino Resorts, Inc. is run by one of America's leading entrepreneurs, Donald J. Trump. We appreciate the opportunity to work with a businessman of his stature on this transaction, and we look forward to future transactions." PRNewswire, Yahoo! Business, 11-30-04

The economy is looking good, and most gaming companies are looking better. The industry is having a good fall, and while the election didn't bring everything an industry insider might have wanted, it did bring some good news for slot companies. Major mergers are driving some major changes in the industry and building some new major players, such as Penn National and Columbia Sussex. Anti-smoking legislation is moving closer to the industry and television is going deeper into the industry. The Donald might not have enough money to pay his bills, but he still finds people who want to lend him money. And we are just one month from the end of 2004. 2005 should provide some significant expansion in the states of California, Florida, Oklahoma, Pennsylvania and maybe a couple of others; internationally England, Singapore, Macau, and other Asian countries are heating up for expansion. The 2004 mega-mergers are certain not to be the last, and the big question for 2005 is who will eat whom?

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.