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May seems to be a weak month in the East for gaming and we are hearing similar things across the country.  Here are our notes from our 2 day trip.

 

Sands Bethlehem (5-24-2010)

  • Table games should be up and running by mid-July.  The state is looking to open 3 properties at a time over a 3-week period.
  • The hotel is scheduled to open in May 2011 with 300 rooms.  Think that the hotel will help them keep growing their business.
  • Busing program:
    • Focusing on busing Asian customers.  Have 5 runs per day from Chinatown/Flushing and Port Authority NYC.  Most of the busing is from PA and NJ. 
    • On busy days, they bring in 1,500-1,800 people and on slow days, they bring in 500-800 people.
    • Customers pay for their own bus tickets (roughly $15/day from NY for example).  The cost to Sands gives customers $30/day in free play and a $5 coupon for food.
    • When tables go in, they can increase busing programs to Chinatown & Flushing to 15-20 tables per day.
    • Pulling out most of the electronic tables when they go live with tables.  Of the 28 tables they have now, they are only keeping 6 E-tables.
    • Slots mix:  IGT- 45%, BYI - 24%, WMS- 13%, Konami – 4%, ALL- 6.5%, Speilo/ Atronic less than 2%
    • There are no participation games in PA, only leased games.
    • 6% of Sands slots are leased.
    • Have 780 employees at the facility and will add 400 more when tables games are added.  330 of the employee additions will be dealers.
    • 50% of business is local.
    • May could be their best month, primarily due to the ramp in their database.  Tables 16% tax rate decreasing to 12% in 2 years.
  • Sands may have the most incremental growth from the addition of table games in PA.
    • Will be the closest casino with table games to NYC
    • Big Chinese population in NYC
    • Will offer a significant number of Baccarat tables
    • Efficient busing from Chinatown and Flushing - the two Asian centers

PENN MGMT meeting notes: 5/24/2010

  • Not building to get a mid-teen return, but rather to optimize returns as much as they can on each project.
  • Columbus - will be a home run.
    • Downtown vs westside.  Westside supports the construction / downtown doesn't.  Prefers new site - more suburban - can expand if there is capacity.
    • Own Beal racetrack outside of Columbus - if slots at tracks get passed, they will try to move the license.
    • Columbus should be the best ROI on their return.
    • Think that Vegas will have underperformance for another 6-18 months of softness, so they may get another bite at the apple.  They are following City Center very closely.  Like Mirage for their customer base.
    • Aqueduct came out with an RFP - they submitted questions and are waiting for answers.  Bids are due at the end of July and decision will be made in August.

Harrah’s Chester 5-24-2010

  • Struggling in May because of construction disruption to make room for tables and overall demand weakness.  They are moving 2,200 games.
  • How they deal with the AC vs. PA conflict:
    • Don’t see a conflict-- view it as “Earn here, play there” mentality
    • Get a lot of trip frequency in PA but less spend per visitor
    • PA will have credit for the first time with the intro of table games.
    • Think that they will get $75-$78mm of incremental table revenue.  Think that the table margins are going to be a little higher then slots even after taking into account for the lower tax rate.
    • With tables, Chester can get up to 20% margins.
    • Will begin to seed their database with communication about table games in June and use their Philly/AC database to market to them.
    • Will only keep 4 electronic table games or 20 out of 120 seats for now.
    • Don’t need a hotel
    • Racing business makes a couple hundred thousand
    • Only have 100 or so leased games.

Tim Wilmont, CEO of PENN (5/25/2010)

  • Iowa and WV are the only 2 states that have previously allowed tables to be added to slot-only facilities.  On average, slot revenues increased 6-8% when that happened.  Table games generated 10-15% of total revenues in competitive local markets.
  • Cecil County: 1,500 VLTs, 95mm of capex, 1600 parking spots. Hollywood Perryville will be located 30 miles NE of Baltimore. The investment in Cecil is targeting an addressable population of 375k – however, until other facilities open, its addressable population will be more like 1MM - so the initial returns should be very good.
  • Ohio:  Thinks gaming will be a $2bn industry in Ohio; 33% tax rate; $50mm upfront fee per casino; $250mm min spend; 34k new jobs (19k construction 16k permanent jobs).  $1bn of gaming revenues is currently generated by Ohio residents gambling in neighboring states.
  • City of Columbus voted no on issue 3 so they had to move one of their sites. They decided it was easier to go to a new site that was cooperative then a contentious one.  The facility will have 2,000 permanent employees.
  • Toledo - hope to break ground in 3Q 2010.  Area has 71% of the population of their Penn National Race Course (PA) location.
  • Ohio Timeline:
    • June 3: Deadline for enabling passing of gaming legislation
    • Fall 2010: Effective date of legislation
    • 4Q 2010/1Q2011: Appointment of a gaming commission
    • 1Q2011: Licensing investigation