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Best of Ken Adams

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Quicktakes - The month's trends in a glance - June 2004

17 August 2004

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.

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.