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Best of Ken Adams

Gaming Guru

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

1 April 2008

The United States will elect a new president in 2008. Presidential elections occur every four years – they center on the issues of that year and pretty much ignore everything else. This year for the first time in my memory gaming is a periphery issue. Gaming certainly isn't a central issue, but because two of the candidates, John McCain and Barack Obama, have both supported anti-gaming legislation and because unions are very important both in elections and increasingly in gaming, the industry is watching and listening to all of the candidates, hoping that none is really anti-gaming. Relax, Frank Fahrenkopf says, no one is; in fact, gaming isn't even on the radar of any of candidates. He is probably correct, but as gaming becomes more and more accepted and more significant to the economy in most states, we should be preparing for the presidential election when it is important. Twenty years ago gaming was not a significant issue in any gubernatorial election, but in 2007 it was central in two states; the time is coming when it will be a national issue.

The leading presidential-nominee candidates pose little threat to Nevada's gaming industry, the president and CEO of the American Gaming Association said Wednesday during a stop in Reno… U.S. Sen. John McCain…led an unsuccessful congressional fight to ban betting on college sports in Nevada in 2002. Since then, McCain has "had a remarkable change," Fahrenkopf said…U.S. Sen. Barack Obama…made troublesome comments about gaming while in the Illinois Senate, Fahrenkopf said…Fahrenkopf said Obama's comments came out of concern for the poor but should not been seen as a threat to Nevada's leading industry…Hillary Clinton and former President Clinton "have a long history in our state" and pose little threat to Nevada gaming, Fahrenkopf said…Huckabee, who won five states Tuesday, would probably not be good for the Nevada gaming industry if elected president, Fahrenkopf said. (Ray Hagar, Reno Gazette-Journal, 2-8-08)

The Dow Jones average is down about 14 percent since its October 9 record and as most Americans have stock, at least in retirement accounts, we all feel the pain a little. This time may not be as bad as the 2000 meltdown of the dot.com stocks, but it is still enough to worry people, and the closer you are to retirement the more it is likely to make you nervous. Still there are some on whom it makes a much bigger impact – Sheldon Adleson, Kirk Kerkorian and Steve Wynn, for example. Adelson lost, on paper, some $12 billion, Kirk got by with just a $4.6 billion loss, and Steve Wynn – a pauper compared to the other two – lost a mere $1.4 billion. It seems like just yesterday that Steve borrowed two or three hundred million to get his start in New Jersey; where has the time gone?

Sheldon Adelson, chairman of Las Vegas Sands, has seen the value of his shares in Las Vegas Sands drop by $10.8 billion, or 40 percent, since October. His holdings in the company were valued at $15.9 billion when the New York Stock Exchange closed Wednesday. That's a bunch even for the third-richest American, who was worth $28 billion in September when Forbes magazine published its list of the 400 richest Americans. Kirk Kerkorian, the Los Angeles-based majority shareholder of MGM Mirage, lost $4.6 billion, or about 30 percent of the value of his stock holdings in the world's second-biggest gaming company. Forbes ranked Kerkorian at No. 7 on the Forbes 400 list with $18 billion in net worth. Steve Wynn, chairman and CEO of Wynn Resorts, has seen the value of his stock holdings in his company decline by one third, or $1.4 billion, since Wynn Resorts hit a high in October. Wynn had a net worth of $3.9 billion and ranked 86th on Forbes' list of the 400 wealthiest Americans. (John G. Edwards, Las Vegas Review-Journal, 2-7-08)

The decline in stock prices may or may not reflect a decline in the economy. Gaming is usually said to be recession proof and not subject to the normal ups and downs of the rest of the economy. But there is a common story every winter in casino land: business slows down – a lot. And when that happens, many, many casinos put employees on short work weeks and lay off others. Most winters that hardy makes the newspapers, unless of course the company doing the layoffs is in the news anyway, as was the case with the Tropicana in Atlantic City and Las Vegas. This winter, however, with the economy in a slowdown and a constant stream of stories about recession, mortgage crisis and gasoline prices, layoffs in gaming are getting more coverage. The story isn't any more of a story than it ever is – gaming slows down radically between Thanksgiving and Presidents' Day. In the spring business picks up and so does hiring at the casinos. But, for whatever reason, layoffs are getting more coverage this year.

Twenty-eight employees were laid off, and others had working hours cut at the Boomtown Casino and Hotel near Verdi, General Manager David Williams said Thursday. A seasonal slowdown and the loss of Boomtown's truck stop, which was razed to make room for the recently opened 150,000-square-foot Cabela's outfitters store, prompted the layoffs, Williams said. (Ray Hagar, Reno Gazette-Journal, 2-15-08)

Harrah's Entertainment has laid off workers and reduced hours at many of its properties around the country, citing the slowing economy, the company confirmed Friday. The current round of layoffs includes nearly 100 workers at its eight local properties, 30 workers in Illinois and smaller numbers at its properties throughout the country. (Arnold M. Knightly, Las Vegas Review-Journal, 2-16-08)

Circus Circus Reno Hotel-Casino has laid off 12 people and cut hours of 34 full-time employees because of the seasonal slowdown of the gaming market, resort officials said Friday. (Ray Hagar, Reno Gazette-Journal, 2-16-08)

There is a trend about these days – slot machine legislation – that appears to be a double-edged sword. California, Florida and Pennsylvania are major jurisdictions that have recently authorized slot machines and more slot machines. Other states are in the throes of slot machine debates; Alabama, Kentucky, Massachusetts, Maryland and Ohio are likely to authorize some form of gambling that will include slot machines. That is one edge of the sword, and the other is enforcing bans on illegal slot machines. As quickly as they authorized slot machines Florida and Pennsylvania, for example, have taken aim at the illegal slot machines operating in those states, sometimes for years. Indiana may take a different tack; instead of stopping the illegal slot machine operators, some in the state legislature at the insistence of bar owners are pushing to legalize all of the remaining forms of gambling in the state.

As Florida continues its drive toward more gambling, adult arcades and other so-called gray market games are coming under increased scrutiny by lawmakers trying to draw a line between illegal gambling and entertainment permitted by law…now Fontaine's four arcade operations and approximately 200 others across Florida are back in the legal cross hairs. A Senate committee set to meet Tuesday in Tallahassee will consider new regulations for the businesses. (Amy Driscoll, Miami Herald. 2-18-08)

Owners of small taverns in Allegheny County, already hit by the new 10 percent drink tax, say they are taking another wallop from a state-funded crackdown on illegal poker machines and other gambling devices…A provision of the law that legalized slot machine casinos in Pennsylvania sets aside a portion of the tax money from slots to fight illegal gambling. (Karamagi Rujumba, Pittsburgh Post-Gazette, 2-18-08)

It used to be easy to gamble at the Marengo Tavern in Crawford County. Customers could play electronic games like Cherry Masters or buy paper pull-tabs at the bar. A few times the place got busted, forcing owner Tony Main to pay fines. But with last year's statewide crackdown on illegal wagering, the Marengo Tavern was forced to stop the games, a move that has made paying the bills a bit of a struggle, Main conceded. Now, the Indiana General Assembly is considering legislation that would allow the Marengo Tavern to bring back at least some of its gambling business -- this time legally. (Lesley Stedman Weidenbener, Louisville Courier-Journal, Indianapolis Star, 2-18-08)

One can see why the casino operators press to have the "grey area" slots eliminated. Casino licenses are expensive, and building and operating a casino is very expensive – and the state always wants its share, which means taxes are usually very high. That is reason enough to demand that all illegal, unlicensed, non-tax paying slot machines should be pulled off the market. The Las Vegas Sands in part of a billion dollar development in Bethlehem, Pennsylvania and Sheldon Adelson doesn't want any freeloaders sifting off his slot play, or so I guess.

Las Vegas Sands building $600 million casino at site of steel plant. The museum and casino are key elements in a $1 billion master plan for the 126-acre site with the dual goals of bringing economic opportunity to the region and preserving its past…Las Vegas Sands Corp. is building a $600 million casino, hotel and conference center on the brownfields site. The gambling complex with its 3,000 slot machines is scheduled to open in spring 2009. Simultaneously, the National Museum of Industrial History, the group that Mr. Donches heads, is raising $26 million for Phase 1 of its cultural project. (Len Barcousky, Pittsburgh Post-Gazette, 2-18-08)

The casino industry may be "recession proof." If it is, then something else is going on, because revenue is declining or flat across the country. There are two factors, other than the economy, that we can identify as having caused declines – competition, the reason why casinos in Atlantic City and many parts of Nevada are seeing declines in revenue; and smoking bans – Colorado, Illinois and Atlantic City are dealing with smoking bans. Colorado and Illinois have just one month's worth of experience and operators are not certain about the long-term effects. And then, the economy has some role, but not one that we have managed to quantify yet. It is very likely that we will be discussing competition, smoking and the economy all year. There are states where revenue will increase. Pennsylvania, Florida and California will experience significant expansion and growth – and that will probably have a negative effect on other states.

Atlantic City's January gaming revenue fell 10% to $355 million. (Gaming Industry Weekly Report, 2-15-08)

Colorado casinos reported about $57 million in revenue, down 3.5 % from $59 million in January 2007. (Denver Post, 2-20-08)

Detroit January gaming revenue rose 3.8% to $113.5 million. (Gaming Industry Weekly Report, 2-15-08)

Connecticut slot revenue fell 3.6% in January, the 5th consecutive monthly decline (Gaming Industry Weekly Report, 2-25-08)

Illinois January gaming revenue fell 17.5% to $131.5 million. (Gaming Industry Weekly Report, 2-10-08)

Indiana January gaming revenue fell 8.2% to $199.5 million. (Gaming Industry Weekly Report, 2-15-08)

Iowa January gaming revenue was up 5.3% to $108.4 million, same store revenue was down 0.8%. (Gaming Industry Weekly Report, 2-15-08)

Louisiana January gaming revenue rose 1.5% to $199.8 million, same store revenue fell 1.7%. (Gaming Industry Weekly Report, 2-25-08)

Macau 2007 casino revenue rose 46% to $10.3 billion. (Gaming Industry Weekly Report, 1-28-08)

Mississippi's casinos took in $225.6 million in January, a decline of 8.5 % from $246.6 million in January 2006. (Biloxi Sun Herald, 2-22-08)

Missouri gaming revenue rose 5.6% in January to $132.6 million, same store revenue was down 3.6%. (Gaming Industry Weekly Report, 2-15-08)

Nevada December gaming revenue rose 3.1% to $1.095 billion. (Gaming Industry Weekly Report, 2-15-08)

One of my favorite devices is the "single day perspective." Every month there is at least one day that tells a very complete story about one issue or one jurisdiction. It is my favorite way to bring an issue up to date. This month, Thursday, February 22nd was that day for Pennsylvania.

From that day we learn that the latest casino to open is raking in money just like the first one. We learn that the loss of the steel industry left a big hole in the economy and some cities are eager to have a casino open to fill that void; others with a license are very worried about the casino closing. One of the first licensees has lost control of the casino – the state has taken control – and while the case plays out, the community worries. We also get some insight into the other side of Pennsylvania, the battles over the licenses and locations – because it would seem that not all cities are like Bethlehem and welcoming the casinos. The state's two largest cities, Pittsburgh and Philadelphia, both have forces that are fighting the local licensee tooth and nail.

The Hollywood Casino in Grantville opened with good numbers last week. Pennsylvania's latest slot-machine parlor is stacking up revenues comparable to the other six casinos in the state. In less than a week, the casino at Penn National Race Course took in $45.4 million and paid out $41.3 million. The state's take was $2.2 million. Snow and ice kept visitors away the first two days, but when the ponies started running, wagers doubled, according to Doug Harbach, spokesman for the Pennsylvania Gaming Control Board. (Jim Hook, Chambersburg Public Opinion, 2-22-08)

Today, for the second time in 10 months, Sands BethWorks held a building ceremony in the harshest of conditions, this time celebrating the arrival of steel to build the $860 million casino, hotel and shopping complex in south Bethlehem. With Las Vegas Sands executive vice president Bradley Stone there to commemorate the day, government and community leaders from across the Lehigh Valley signed one of the first beams to be placed in the redevelopment of 124 acres of Bethlehem Steel plant lands. "Standing here today, we are witnesses to something magical," said Bethlehem Mayor John Callahan, "and that is the rebirth of a legendary site with a legendary history." (Morning Call, 2-22-08)

The stakes for Louis A. DeNaples are high in his battle against four counts of perjury…That's because Mount Airy could conceivably keep its casino license and continue operating under different ownership if DeNaples is convicted and loses his license to participate in the casino industry…But if Mount Airy is convicted and loses its license "the harm visited will be borne, not by the alleged perpetrator," DeNaples' attorneys argue in motions filed Wednesday, "but by wholly innocent parties. "Over 900 employees who rely on Mount Airy for livelihoods will lose their jobs. The local small businesses which are flourishing in an otherwise economically depressed area will lose contracts with Mount Airy, which pays those local businesses more than $700,000 per week. Last, but not least, the shuttering of Mount Airy would cost the taxpayers of this Commonwealth lost revenues of $1.45 million each and every week." (Dave Janoski, Wilkes-Barre Citizens Voice, 2-22-08)

Don Barden has delayed a hearing before the city planning commission on lighting, landscaping and other amenities related to his North Shore casino because of last week's appeal by the Riverlife Task Force over the size of the casino's garage. Ed Fasulo, general manager of the Majestic Star casino, said yesterday it didn't make sense to move forward on Tuesday with a hearing and vote on site amenities with the appeal pending. Riverlife filed an appeal with the state Supreme Court last week challenging last month's planning commission approval of the casino design, which includes a 3,800-space parking garage. (Pittsburgh Post-Gazette, 2-22-08)

We also get a snapshot of the other side of expanding slot machines in Pennsylvania. Just as slot machines have impacted casinos in New Jersey, they have also impacted other forms of gaming in Pennsylvania: the lottery and charitable bingo.

With state lottery sales declining over the last three years and year-end Lottery Fund surpluses dropping, maybe Gus, the second-most-famous groundhog in Pennsylvania, will have to develop a new grin, new instant lottery games or new sales ploys. State Rep. Mario Civera of Delaware County, Republican chairman of the Appropriations Committee, said yesterday he's concerned about the drop in lottery ticket sales and declining surpluses from fiscal year 2005-06 to the end of fiscal year 2007-08, which is June 30. Lottery ticket net collections fell from $1.41 billion in fiscal 2005-06, which ended June 30, 2006, to $1.35 billion in fiscal 2006-07, and are forecast to fall again to just under $1.3 billion this fiscal year. Officials are hoping for a slight increase, to just over $1.3 billion, in fiscal 2008-09. Mr. Civera also was concerned that the Lottery Fund's balance, $476 million in June 2007, is projected to fall to $301 million by June 30 and $35 million by June 30, 2009. (Tom Barnes, Pittsburgh Post-Gazette, 2-22-08)

There are 380 bingo licenses in Allegheny County, mostly held by schools and volunteer fire departments. Those organizations rely on bingo revenue to fund their operations, but as casinos move into the region, bingo revenue is going down, putting fire protection and other services at risk. For eight months, bingo and slots have lived side by side in Washington County. Next year, they will be doing the same in Pittsburgh and Allegheny County. The two forms of gaming, however, are not in a peaceful coexistence… State Rep. Don Walko said he believes he has a solution. Concerned about the impact of the Pittsburgh casino on bingo-funded charities, he has drafted legislation that would increase bingo jackpots from a maximum of $4,000 a day to $10,000 a day. He also wants to increase the number of allowable games per week from two to four and allow electronic bingo devices and progressive jackpots. (The Pittsburgh Channel, 2-22-08)

And finally, we get a chance to see how once something is accepted it can often be seen as a universal solution: the classic opening of Pandora's box. This is the first of what will probably be a series of attempts to use slot machines to fund other things or to supplement other budget needs. This time a member of the legislature would like to put slot machines in bars – the same discussion that is taking place in Indiana, but for different reasons.

No sooner was the ink dry on the 10 percent drink tax than Allegheny County's elected officials began to back away from it. Initially, County Chief Executive Dan Onorato and most of the Democrats on County Council said the alcoholic drink tax was a necessary alternative to raising property taxes. They said the drink tax was an alternative to an underfunded public transit system. Now the tax's creators say they need an alternative to the alternative -- like legalized gambling on video poker in neighborhood bars. It's time to stop and take a deep breath…Legalized gambling on video poker would give tavern owners who have claimed harm from the 10 percent drink tax another source of income. It would give the county another enterprise to tax instead of poured drinks…They've even got two Democrats, Rep. Paul Costa of Wilkins and Sen. Sean Logan of Monroeville, willing to offer a bill for an alternative. (Editorial, Pittsburgh Post-Gazette, 2-22-08)

Whenever I see a day like this I always wish that all of the lawmakers in the country could see it the same way that I do. Gaming is complex and the impact of enabling legislation is always very complex and never as simple and linear as lawmakers, governors and investors imagine. There are always consequences that the lawmakers failed to anticipate. As a supporter of the industry, I am usually on the side of expanded gaming, but there are times when additional expansion will weaken the existing industry; before any state adds or expands gaming those who will make the ultimate choices would be well served to spend more time studying the industry in other states – not the polarized or self-serving studies we so often see, such as the ones touted by the governors in Massachusetts and Kentucky, but studies that explore all of the outcomes, including future expansions. Because regardless of what is said today, conditions change, and once a state starts in gaming it is highly likely it will have to continue to expand to maintain the benefit level.

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.