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Best of Ken Adams

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

1 September 2008

Finding signs of the economic downturn is not difficult; in fact, avoiding them is the challenge. By now, in the 7th month of 2008, it is clear that gaming is very much a part of the economic downturn. You read everywhere about signs of the downturn in gaming. Almost universally, jurisdictions and individual companies are reporting less revenue. There have been many layoffs across the country – in the summer as compared to the expected layoffs experienced in the winter months. Add to this a whole series of delays in construction, financing and expansions.

Even where gaming is expanding, it is not necessarily expanding in the way we are accustomed to seeing. For example, Kansas is initiating gaming, and though the timing may not be the best, the candidates have lined up for a chance to operate a casino in Kansas: sort of. There are nearly as many opting out of the process and leaving Kansas as those remaining in the queue. Two race tracks have closed; MGM, Las Vegas Sands, Foxwoods and Ruffin have pulled out of the running; and Penn National, while still in the running, says that if they don't get both of the licenses they're seeking, they will withdraw – and even then they will be spending less than originally promised.

The Woodlands horse and dog track, the state's last surviving pari-mutuel racetrack, is closing Aug. 24…The release said Kansas Racing was closing the Woodlands, though the company hoped "it will re-open with new gaming revenue at some point in the future." The track had been negotiating a contract with the Kansas Lottery for 800 slot machines, but no agreement was reached. Slots had long been viewed as a possible savior for the track, so Kansas's recent law allowing them along with state-owned casinos was cause for celebration. But the law gave 40 percent of revenues from slots to the state; 25 percent to the track; and 20 percent to local governments and various funds to help horses, dogs, smaller tracks and problem gamblers. The other 15 percent was negotiable. (Kansas City Star, 7-22-08)

The Las Vegas Sands Corp. has folded in the competition to develop and operate Wyandotte County's state-owned casino. A statement from the company said higher borrowing costs and the prospect of Missouri's lifting its loss limits at its already established casino made opportunities elsewhere around the world more attractive...The proposal was one of five for the county the Kansas Lottery Commission approved in May for further consideration. The Sands' proposal was for a site in Edwardsville, leaving a proposal from another Las Vegas company, Golden Gaming, as the lone Edwardsville plan. The three others are around the Legends and Kansas Speedway area. They are from a Kansas Speedway-Cordish Co. partnership, a group including Pinnacle Entertainment, and a group including Red Development, which operates the Legends. (Kansas City Star, 7-23-08)

A couple of years ago when Kansas lawmakers approved legislation that would permit four casinos licenses, as well as slot machines at racetracks, gaming companies rushed to get in on the act…It looked like a win/win for both the state and the lucky license holders. But in rapid fashion, times have changed. A slumping national economy and potential competition from other states has altered the gambling landscape in Kansas. First, casino owner Phil Ruffin, who sold his New Frontier Hotel/Casino on the Las Vegas Strip to the Elad Group for the highest price paid per acre for any gaming parcel, failed to negotiate a beneficial slots contract for his Camptown Greyhound Park in Frontenac, and walked away …About the same time, Las Vegas Sands Corp. said it was withdrawing its application for a casino license in Wyandotte County. In May, MGM MIRAGE Inc. and its partner Foxwoods Development Co. also pulled out of the running…Penn National Gaming Inc., the only applicant for in Cherokee County, has indicated that if it is not successful in its bid for a second license in Sumner County, it may scrap plans for Cherokee County. (Ray Poirier, Gaming Today, 7-30-08)

Harrah's remains in the running and is being touted by some consultants hired by the State of Kansas as the best of the bunch. But Harrah's has its own share of problems. Harrah's has postponed or canceled projects around the country; it has had at least one major national layoff and is still smarting from very difficult financing of the private equity buyout.

Harrah's proposal for a casino in Sumner County would generate more revenue than two other plans from companies vying to run a state-owned facility there, according to consultants for Kansas' casino review board. Potential revenues a casino would generate for the state will be a factor as the Lottery Gaming Facility Review Board decides which companies will receive management contracts for four state-owned casinos. But the board also will consider which plans would best attract tourism and what's in the state's best interest, a broad category allowing the agency to consider just about whatever it wants, said Matt All, chairman of the seven-member board… On Aug. 21-22, the board will decide who gets the management contracts in Sumner and Cherokee counties, and on Sept. 18-19, it will make the same decisions for Wyandotte and Ford counties. A law enacted last year allows the casinos. (Carl Manning, Associated Press, 7-23-08)

Harrah's Entertainment says it's not stopping work on the Margaritaville Casino project, just slowing it down. Rumors swirling around Biloxi had placed a cloud over the massive construction work adjacent to the Grand Casino Biloxi. "Over the next few weeks, residents of Biloxi will notice less activity and fewer workers at the Margaritaville work site," said Marybel Batjer, vice president of communications, in an e-mailed statement. "Rest assured that Harrah's is NOT canceling the project. We still believe in the Margaritaville concept, and we remain committed to our vision for the property. This is a project that we studied extensively, and we believe that it still has a great potential to benefit the Biloxi market and our company." …The project was announced in May 2007, with completion targeted in 2010. Harrah's said the first phase would cost $700 million, with two additional phases that could push the price tag over $1 billion. (Mary Perez, Biloxi Sun Herald, 7-23-08)

Kansas and Harrah's are not the only ones finding that the current financial market is putting the breaks on gaming and just about everything else. Don Barden won the bid for the casino license in Pittsburgh, Pennsylvania. The city was tough, grinding him for as many concessions as it could, making the deal more risky and potentially less profitable. Early in the process, Barden made reference to his willingness to sell his Las Vegas Fitzgerald's Casino – the sale would give him more cash and allow the company to focus on the Pittsburgh development. The city and the economy have made the licenses less and less viable. Barden has declared he cannot meet his current obligations nor find funding for the complete project. A savior may be waiting in the wings that would allow Barden to keep a position in the property. However, the state regulatory agency has yet to even schedule meetings on the subject and the savior is weary of waiting. To make matters worse, some state senators are calling for a rebidding of the license – oh, yeah, try and fund that one!

International lender Credit Suisse has notified North Shore casino developer Don Barden he is in default of a $200 million bridge loan for the project according to a petition filed with the state Gaming Control Board…Walton Street Capital Fund 6, which is investing $120 million to complete financing for the project, will be the majority owner. Chicago billionaire Neil Bluhm said he is one of five founders of Walton. (Mark Belko, Pittsburgh Post-Gazette, 7-10-08)

Whatever happens to the troubled Pittsburgh casino project, the facility should remain on its under-construction North Shore site and all promises to the city, Penguins and neighborhood groups must be kept, Mayor Luke Ravenstahl said…he wants a series of meetings involving himself, Allegheny County Executive Dan Onorato, the state Gaming Control Board, and the prospective new majority owners of the Majestic Star Casino…He stopped short of endorsing a proposal backed by state senators to rebid the casino license. (Rich Lord, Pittsburgh Post-Gazette, 7-15-08)

The latest deal to save a casino in Pittsburgh faces major uncertainty by as early as July 30 if it is not approved by then by the state Gaming Control Board. That's what Chicago billionaire Neil Bluhm today told a state Senate committee that is looking into the deal where Mr. Bluhm and other investors would take over for Don Barden, who now holds the slots license for the partially built North Side casino. "We have a situation where the project could be in default by July 30. The bridge lenders have sent a notice of default and foreclosure. They have threatened to sell the property in foreclosure. This project could go into bankruptcy. That would mean a long delay," Mr. Bluhm said. He added bankruptcy proceedings could drag on for months and construction costs would almost certainly rise. He didn't say exactly whether his offer of $170 million to take over the project would be withdrawn. (Tom Barnes, Pittsburgh Post-Gazette 7-24-08)

By now everyone has heard that finding a buyer for the Tropicana in Atlantic City is more difficult than the regulators imagined, and much of the reason is financing. It would not be any easier to find financing for an Atlantic City casino in the midst of a credit squeeze and an economic downturn than it is for a casino in Biloxi or Pittsburgh. In fact, even in Las Vegas it is not easy or may be even impossible, at least in July of 2008. This year we have heard that the Cosmopolitan can't get its financing, and James Packer decided not to build anything new on the Strip. But the real shockers were Boyd and MGM-Mirage. Boyd is postponing its nearly $5 billion project because it can't get full funding, and MGM-Mirage has not yet secured its final financing, even with Dubai World on board.

A couple of weeks ago, major bond rating agencies downgraded credit issued by the major gaming companies, warning that the gambling business in Las Vegas is in trouble. Though it made for dramatic headlines, experts say the actual effect of the ratings downgrades — which were based on old information rather than new developments — will likely be muted. Gaming stocks and bonds had been badly pummeled by early evidence of the tourism slowdown and decisions by airlines to cut back on flights to Las Vegas. When tourism was booming, casino companies were flying high on Wall Street. The bad news had a whipsaw effect and the stocks had further to fall than those of companies in less volatile industries…Lower bond ratings make it more expensive for companies to borrow money — a big deal for companies seeking to refinance or raise money for new projects…The takeover of Harrah's Entertainment Inc. by private equity firms in late January was the last of the major leveraged buyouts to close on Wall Street after lending dried up. Though Harrah's had locked in interest rates for its bonds, the banks that owned them had trouble finding buyers and sold the bonds at a discount to get them off their books. The fire sale cost the banks hundreds of millions of dollars and Harrah's bonds are now trading at 75 cents to 85 cents on the dollar. (Liz Benston, Las Vegas Sun, 7-28-08)

The Cosmopolitan, which sits half-built in the middle of the Strip, has been held up as a symbol of Las Vegas' doubtful future…The usual hurdles have grown higher amid the economic downturn. Prospective buyers need to come up with several billion dollars during a credit crunch that has made capital cost-prohibitive. Owner Deutsche Bank, unwilling to see the costly and complex project that it bankrolled fall into the wrong hands, will be choosier than the typical seller. The difficulty in getting financing, the tourism slowdown and the challenge of reconfiguring an under-construction property to meet a new owner's needs will likely add up to a loss on the sale for Deutsche Bank, which is owed more than $900 million on the property. (Liz Benston, 7-17-08)

Australian newspapers said earlier in the day that Crown, controlled by billionaire James Packer, could switch its sights to Ameristar after it pulled out of a $5 billion casino project in Las Vegas last month. (Reuters, 7-10-08)

Boyd Gaming announced this morning it would delay its $4.8 billion Echelon resort on the Strip until the capital markets and the broader economy improves. The announcement triggered a 20 percent increase in the company's shares. Boyd's stock has been clobbered by investors who, beyond their concern over the general economy, didn't believe Boyd could pull off the resort, which would be the largest and most luxurious in Boyd's portfolio. (Liz Benston, Las Vegas Sun, 7-1-08)

MGM Mirage still seeking financing for $9.2 billion CityCenter project on Las Vegas Strip MGM Mirage Inc. and partner Dubai World have run into delays in securing more than $3 billion in financing for a $9.2 billion Las Vegas Strip casino project, but expect a deal to be done in the coming weeks, an MGM Mirage executive said Tuesday. (Associated Press, 7-29-08)

MGM Mirage Inc. has ended a partnership with a realty development company on a housing and casino project about 13 miles from the California-Nevada border. The Las Vegas-based casino company cited "current market conditions" in a Monday filing with the Securities and Exchange Commission, and a company spokesman said it wasn't the right time for the Jean project with the current state of the U.S. economy. (Associated Press, 8-4-08)

And just to show it is not just in the United States, Packer also opted out of the Philippines for the same reason – too difficult to borrow money.

Casino operator Crown Ltd has abandoned plans to invest in a casino project in the Philippines due to rising borrowing costs. Crown chief executive Rowen Craigie said on Wednesday that global credit crunch made it harder to develop projects needing significant capital…"After further review, Crown has determined not to participate in Bloombury's proposal or any other proposal to develop an integrated casino-entertainment complex in Manila Bay," Mr. Craigie said. The Philippines project is worth about $US1.5 billion ($A1.55 billion) and Bloombury is on of four firms seeking new casino licenses in the country. (Sydney AAP, 7-08)

But there are those that already have the financing and are getting ready to open. Stations Casinos and Steve Wynn are both ramping up their hiring. They need thousands of employees, and with other properties laying off employees, it is likely they will get more applicants than they have job openings, thousands and thousands more.

You don't need to tell Robert Gibson how tough it is to find steady work in the current job market. Gibson searched for two months before landing a job as a cook at the Eastside Cannery, which is scheduled to open Aug. 28. Recently he drove 25 miles from his residence in the Green Valley section of Henderson hoping to ride his wave of good fortune by landing a second job with a similar position at Aliante Station in North Las Vegas. "I am surprised by how tough (the job market) is," he said while waiting for an interview at the hotel-casino's employment center near Aliante Parkway and the Las Vegas Beltway…In addition to Aliante Station and Eastside Cannery, Encore, a Wynn Resorts Ltd., property will open in December. Data show people are hungry for jobs. When Station Casinos began accepting applications in November 2005 for Red Rock Resort, Clark County unemployment was 3.7 percent with a labor pool of 875,000. By contrast, according to the latest numbers released by the state Department of Employment, Training and Rehabilitation, the county's unemployment rate in June was 6.5 percent with 64,600 workers unemployed and a labor pool of 996,000 workers…Wynn Resorts Ltd. received 20,000 applications for its $2.2 billion Encore in the first three days its employment center was open, said Stephanie Rosol, the company's vice president of human resources…Cannery Casino Resorts said the company received approximately 20,000 applications for 1,200 jobs for its new $250 million Eastside Cannery. (Arnold M. Knightly, Las Vegas Review-Journal, 7-28-08)

Steve Wynn, just as he always does, thinks he understands Las Vegas, gambling, and entertainment better than his competitors. In an interview with the New York Times, Wynn talks about his casinos compared to the others and he sees no comparison. He also wishes times were better, but he says over the long run, he will do just fine, thank you. The nay-sayers have always said every new Wynn property was too expensive and would not survive – up to this point Steve Wynn has always been right and the nay-sayers have all been wrong.

The Chips Are Down in Vegas, but Steve Wynn Is Betting Big "Sure, I wish it was a boom time. You like to open up when everybody is ripping and roaring," says Mr. Wynn, speaking of the Encore's Las Vegas opening later this year. But, he adds, his properties are meant to last for decades. "Who cares if the opening is slow?" Steve Wynn casually plops a 231-carat, plum-size, pear-shaped diamond into my greedy little paw. Seated in his office in the Wynn casino resort here, and flanked by two German shepherds, he won't tell me how much he paid for his rock. But he quickly points out that it's better than a 218-carat diamond that the godfather of Chinese gambling, Stanley Ho, displays in one of his casinos in Macao…Later this year, Mr. Wynn, 66, will open his latest project: the $2.3 billion Encore casino resort, a fantasy land featuring 2,034 luxury suites, a glass-encased casino overlooking several pools, and penthouse baccarat tables for high rollers…Although the stock of Mr. Wynn's company, Wynn Resorts, has fallen 45 percent, it is faring much better than those of his rivals. And despite the bleak times facing Las Vegas, Mr. Wynn has a rather devil-may-care demeanor when asked about the economy…Asked whether Las Vegas, in its pell-mell rush to court the more recession-resistant luxury market, could be building too many luxury properties like CityCenter, Mr. Wynn stops the conversation cold. "Whoa, whoa, whoa, whoa, whoa. Who said that is the luxury market?" he asks, his voice rising. "The luxury market in Las Vegas is Bellagio and Wynn. Period. You can look at the average room rate. We're in one category, and they're a notch down."… For his part, Mr. Wynn may be sanguine about the challenges facing Las Vegas and the economic downturn looming over the town because he has faced down naysayers and financial challenges before…Taking some not-so-subtle jabs at his competitors, he defends his current projects as being well within his comfort zone. "We didn't overreach. We're not building 12 hotels at once," he states, his voice again rising. "I think we've bitten off something we can chew. How it shakes out, only time will tell." (Julie Creswell, New York Times, 8-3-08)

There were no big surprises in gaming results in June – at this point in time no one is expecting growth – except, of course, the state governors and legislators who build budgets on the never ending growth of casino tax revenue.

Atlantic City June gaming revenue fell 11% to $373.6 million. (Gaming Industry Weekly Report, 7-21-08)

Colorado June gaming win fell 12.1% to $60.6 million. (Gaming Industry Weekly Report, 7-28-08)

Connecticut June slot revenue was down 8.9%. Foxwoods was down 8.8% to $90.9 million while Mohegan Sun was down 9% to $96.9 million. (Gaming Industry Weekly Report, 7-21-08)

Delaware June gaming revenue fell 4% with Harrington Raceway the only one to show an increase, up 0.4%. Dover Downs' revenue declined 3.8% while Delaware Park was down 6.4%. (Gaming Industry Weekly Report, 7-14-08)

Detroit's three casinos were down 0.6% on the 26.2% increase at MGM Grand to $48.7 million. That offset declines of 18.5% at Greektown and 10% at MotorCity. (Gaming Industry Weekly Report, 7-21-08)

Florida racinos generated a 4.4% increase in June slot revenues to $17.2 million. Win per slot per day was $147. (Gaming Industry Weekly Report, 7-21-08)

Illinois June gaming revenue plunged 20.7% to $130.8 million. (Gaming Industry Weekly Report, 7-14-08)

Indiana June gaming revenue fell 0.5% to $220.7 million with same store revenue down 12.2%. (Gaming Industry Weekly Report, 7-14-08)

Iowa June gaming revenue was up 0.5% to $113.8 million but down 4.8% on a same store basis. (Gaming Industry Weekly Report, 7-21-08)

Louisiana June gaming revenue was down 2.5% to $214.2 million while on a same store basis, revenue was down 3.4%. (Gaming Industry Weekly Report, 7-21-08)

Mississippi June gaming revenue rose 0.8% to $237.8 million. (Gaming Industry Weekly Report, 7-14-08)

Missouri gaming revenue rose 2% in June to $136.7 million but on a same store basis was down 8.4%. (Gaming Industry Weekly Report, 7-21-08)

Nevada's May gaming revenue plunged 15.2% to $970 million. (Gaming Industry Weekly Report, 7-14-08)

New York racinos generated $74.3 million of VLT revenue in June, up 13.9%. Gaming Industry Weekly Report, 7-14-08

Pennsylvania Casinos had a sequential decline in revenue in June at $133.3 million, versus $146.7 million in May. (Gaming Industry Weekly Report, 7-21-08)

West Virginia slot revenue for June was down 6.8% but overall revenue rose 1.3% including table games. (Gaming Industry Weekly Report, 7-14-08)

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.