Tribal casinos feeling pinch

August 19, 2008 at 8:51 am · Filed under Online Gambling

American Indian casinos continued to churn out record gaming revenues in 2007 but not at the same annual growth rate seen over the past two decades.

According to Casino City's Indian Gaming Industry Report, American Indian casinos generated $26.5 billion in gaming revenue last year, a 4.9 percent increase compared with $25.3 billion generated during 2006. The study, which is being released today, was authored by economist Alan Meister of Los Angeles-based Analysis Group.

The increase was the smallest year-over-year figure experienced by the American Indian casino industry in almost 20 years. Indian gaming revenues grew 10.2 percent in 2006, 14.6 percent in 2005, 15.3 percent in 2004 and 14.3 percent in 2003.

The sagging U.S. economy, which has been cited as the primary reason for an unprecedented decline in revenues generated by the American commercial casino market, may be affecting Indian casinos. In some states, public policies that restrict gaming expansion also factored into the growth slowdown.

Still, Meister said the figure was an increase.

"Indian gaming tends to be less impacted by the general economy," Meister said. "Indian gaming tends to be more regionalized and localized."

The industry is still seeing increases in other areas. Nongaming revenues generated by the casinos in 2007 rose 9 percent to $3.1 billion from $2.9 billion. Also, the tribal casinos employed approximately 346,000 workers in 2007, compared with approximately 343,000 workers in 2006. Salaries totaled roughly $12 billion in 2007, compared with $11.2 billion in 2006.

"It's still a healthy industry," Meister said.

American Indian tribes operated 425 gaming facilities in 28 states during 2007, according to the report.

California continued to be the nation's center for Indian gaming. The state's 60 Indian casinos accounted for more than $7.8 billion in gaming revenue during 2007, 29.4 percent of all Indian gaming revenues.

However, California's revenue growth rate was just 1.6 percent over 2006, which Meister said was attributable to both a weak economy and restrictions which slowed expansion. In February, voters allowed several tribes to increase the number of slot machines they can offer above the 1999 compact limits of 2,000 machines. In exchange, the casinos will pay increased fees to the state. However, the expansions won't have an impact until later this year and into 2009.

Meister said California's sluggish economy may be playing a role in the slowing growth rate because the state's Indian casinos primarily draw upon customers from within the state.

"Expansion has been needed but it has been delayed," Meister said.

Indian casinos in Oklahoma, by comparison, saw gaming revenues grow more than 22 percent in 2007 to almost $2.5 billion. Tribes in the state added five new casinos in 2007, mainly because of a change in state law that allowed casinos to offer Las Vegas-style slot machines.

"Oklahoma draws customers from states like Texas and Arkansas, which don't have a lot of gaming opportunities," Meister said. "That's why you see their figures climb."

Connecticut, which only has two casinos, Foxwoods and the Mohegan Sun, continued to be the nation's No. 2 Indian gaming market with more than $2.5 billion in gaming revenues. Combined, Foxwoods and Mohegan Sun have 13,469 slot machines and 691 tables games. Both casinos have plans for expansion in 2008.

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Quarterly loss widens for Herbst Gaming

August 19, 2008 at 8:48 am · Filed under Online Gambling

Financially strapped Herbst Gaming had another challenging quarter, losing $62.3 million while suffering revenue declines in both its slot machine route operations and casinos.

The Las Vegas-based company, which said in March it might be forced to file for bankruptcy, said the loss covered the quarter that ended June 30. In the same quarter a year ago, Herbst Gaming lost almost $1.4 million.

The company recently filed its quarterly earnings report with the Securities and Exchange Commission. The company did not issue a statement nor hold a conference call on the results.

Herbst Gaming's overall revenues fell 4.5 percent to $204.5 million, compared with $214.2 million in the second quarter of 2007.

Revenues from the company's 7,200-machine Nevada slot machine route operations, which have declined significantly since a voter-approved statewide smoking ban in restaurants and taverns took effect in January 2007, fell 11 percent in the quarter to $63.9 million. Casino revenues fell 8.4 percent for $120.2 million.

Herbst operates 15 casinos in Southern and Northern Nevada.

Most of the casino losses were at the company's three Primm resorts, which have seen visitation from Southern California curtailed by high gasoline prices. Herbst paid $394 million to acquire the Primm casinos from MGM Mirage in April 2007.

Herbst Gaming is privately held by brothers Ed, Tim and Troy Herbst but has publicly held debt of more than $1.146 billion.

At the end of March, Herbst Gaming told investors the company might have to seek bankruptcy protection unless it can reorganize a payment structure for its debt. Auditors said the company's troubles meeting its bond payments triggered a potential default under its credit agreement.

"We continue our evaluation of financial and strategic alternatives, which may include a recapitalization, refinancing, restructuring or reorganization of our obligations or a sale of some or all of our businesses," Herbst Gaming said in its filing with the SEC.

"We and our advisers are actively working toward such a transaction that would address the decline in our operating results and our capital structure, including our outstanding indebtedness. We cannot assure you that we will be successful in undertaking any such alternative in the near term."

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FBI on Vegas mob museum bandwagon

August 19, 2008 at 8:45 am · Filed under Online Gambling

Las Vegas -- The FBI says it has joined the backers of a new museum in Las Vegas that will be devoted to the shenanigans of organized crime in the gambling mecca's history.
A spokesman for the bureau's Vegas field office told the Las Vegas Sun Monday that the FBI will provide input to make certain the planned Las Vegas Museum of Organized Crime and Law Enforcement accurately portrays its role in fighting the mob.

FBI headquarters in Washington is pitching in by going through its archives and warehouses in search of interesting artifacts that could be added to the collection.

The project was spearheaded by Mayor Oscar Goodman, a lawyer who had his share of Mafioso clients over the years, and will likely unveil its logo and marketing plan as early as next month.

The Sun said fundraising was going along well with the help of former FBI Agent Ellen Knowlton at the helm of a non-profit group working with the city.

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Gamblers want to sue Loto-Québec over VLTs

August 19, 2008 at 8:38 am · Filed under Online Gambling

A group of gamblers has launched a lawsuit against Loto-Québec, accusing the lottery corporation of downplaying the dangers of video lottery terminals (VLTs).

The gamblers have filed for permission to launch a class-action lawsuit against the provincial corporation, seeking more than $500 million in damages to cover treatment costs for people addicted to VLTs.

Documents filed in Quebec Superior Court this week allege that Loto-Québec has not fulfilled its obligation to warn users of the risk of addiction when using VLTs. The case refers to government studies that link VLTs to pathological gambling.

The class-action lawsuit is being launched by Jean Brochu, a Quebec lawyer and recovering compulsive gambler.

Loto-Québec has stated in the past that it believes compulsive gambling is a personal health program rather than a legal issue with clearly defined liability.

Quebec started regulating VLTs in 1993. Prior to regulation, there were between 25,000 and 50,000 terminals across the province. There are now about 12,000 installed in casinos, bars and restaurants.

The application will be heard in Quebec Superior Court in September.

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