With new hotel, Indiana riverboat exceeds expectations

Dec 31, 2001 11:26 PM

When Caesars World launched its Indiana riverboat, across the river from Churchill Downs, the track operators were worried about the competition. It took a while for the casino to reach its potential but numbers continue to grow.

Now parented by Park Place Entertainment Corp. (PPE), the Caesars riverboat has benefited greatly from the opening in August of its new hotel, even exceeding analysts’ expectations.

It was expected that the attendance and revenues at Caesars riverboat would increase but the jump appears greater than what was forecast. In November, the boat had revenues of $20.3 million, an increase of 36% over the November, 2000, take of $14.9 million. As for the number of people enjoying the festivities, admissions were up by nearly 40%.

And particularly frightening for Churchill Downs’ Twin Spires racing operation, Caesars November performance was the first time any Ohio River casino other than the Argosy at Lawrenceburg exceeded $20 million in one month’s revenue.

But, the numbers might actually help if they frighten the Kentucky politicians enough to push them toward expansion of their gaming program. The tracks have been hammering for slot machines while others have been suggesting that the state needs its own riverboats.

Legislation is expected to be heard early in the new year.

Recession proof?

Gaming in the Midwest states has been flourishing through the late months of the 2001 calendar year, thus suggesting to some that the activity is recession proof.

Revenues from gaming activities in Illinois, Indiana and Missouri seem to bear out that fact.

Commenting on the record year being experienced by the Empress Casino in Joliet, Ill., Doug Ferrari, general manager, was recently quoted as saying, “Gaming’s been pretty recession-proof...Maybe it’s just the escapist angle. That’s what we hear most.”

That prompted a comment from Frank Fahrenkopf Jr., CEO of the American Gaming Association who said, “An old gambler in Las Vegas told me years ago that during the Depression, no matter who bad things were, people always saved enough to go to the movies. Movies are an escape. He was making the analogy that even in difficult times, people save their money for entertainment.”

Nickel slots

Probably the biggest change in slot play during the past three years has been the growth of action on the nickel slot machines.

In his most recent report on Nevada gaming, Frank Streshley of the Nevada Gaming Control Board noted that the revenue from the five-cent machines jumped 18.4% to $1.7 billion for the period ending Oct. 31.

Because of the popularity of these nickel machines, casinos have been cutting back on higher denomination devices in order to make more room for five-centers. Making it even more desirable has been the hold on nickel machines which has been running at 7.2%, as much as three points higher than $1 slots.

Although called nickel machines, the actual amount played can easily exceed $2.00 since the designers have made multiple plays more attractive.

Patent dispute

Information provided to Casino Data Systems by International Game Technology (IGT) in a patent agreement five years ago has become the subject of a patent lawsuit.

Casino Data Systems has since been acquired by Aristocrat Leisure Ltd., the Australian company that has been enlarging its North American activities, particularly in Nevada.

In its lawsuit, IGT alleged that Casino Data did not have a license for the IGT information and did not have the right to transfer the information to Aristocrat.

Aristocrat responded by saying it felt IGT’s action “is groundless and without merit.” The company added that “Aristocrat always has in the past and will continue in the future, to honor all legitimate patent claims. This action does not fall in that category.”

Bankruptcy filing

In a Friday announcement, Great Bay Casino Corp. said it had filed for bankruptcy and expected to use the proceeds from the sale of its gaming technology business to offset a $63.5 million liability owned to Hollywood Casino Corp. (HWD).

Based in Dallas, Texas, Great Bay said it expected to close the sale of its primary asset, Advanced Casino System Corp. to Alliance Gaming Corp. of Las Vegas (ALLY) for $14.6 million during the first quarter of the new year.

In return for the sale proceeds, Hollywood Casino Corp. has agreed to cancel its debt, the company said. Also, because the money owed to Hollywood “far exceeds the value of its assets,” shareholders’ equity interest in the company will be canceled.

A waste of money?

Attempts to get the electorate to change the California constitution in favor of expanded gaming is “a waste of money,” in the opinion of noted gaming law authority, Nelson Rose.

“There is no way that this is going to get close to enough votes to change the Constitution,” said Rose, a law professor at Whittier College.

He was referring to a political action group called The De Ville Group, which is seeking to solicit enough signatures to put the measure on next November’s ballot. It will require 670,000 signatures to put the Gambling Control Act on the ballot as a constitutional amendment.

The effort is in support of putting slot machines in racetracks and card rooms, as well as permitting such games as craps and roulette to be played in Indian casinos.

Opponents have suggested that such an effort would cost at least $10 million, with one observer suggesting that “If Las Vegas opposes it, I would say $50 million.”

Anchor’s aweigh

Before it merged with International Game Technology (IGT) on Sunday, Anchor Gaming (SLOT) agreed to sell its 68% interest in a management contract for a Southern California casino.

That will leave Jerry Turk, former owner of the Fitzgerald casino in Downtown Las Vegas, in complete charge of the management of the Pala Casino.

Actually, it’s the Tribe of Pala Band of Mission Indians, owner of the casino, that asked Anchor to give up its position for $77 million. The tribal council felt a potential conflict of interest to have IGT as majority owner of the management contract while doing business in selling machines to the property.

Under the agreement, the Indians will pay $14 million cash and sign a $63 million promissory note for the remainder.

The Insider

Officials of the Louisiana Department of Revenue have filed suit against Harrah’s Entertainment Inc. (HET) for taxes and interest owned by Players Lake Charles, Inc., a company that was bought by Harrah’s in 1999. The $4.7 million due was for the period July, 1995 to December, 1996.

GTECH Holdings Inc. (GTK) has received a five-year contract to provide a new central computer system for the Rhode Island Lottery’s video lottery operations.

Acres Gaming Inc (AGAM) says it has sold $5 million in convertible bonds in a private placement.

After increasing its earnings expectations for both 2002 and 2003, Salomon Smith Barney has raised its share price target on IGT to $80 from $70.

Slow growth has been noted in purses paid by racetracks in the U.S. and analyst, Gene Christiansen says that the only reason there has been any real growth in purses paid has been because of slot machines at racetracks in Delaware, West Virginia, Iowa and New Mexico.

Station Casinos Inc. (STN) has sued to have two offshore online gaming companies end the practice of using domain names kenomania.com and sunsetcasino.net, both claimed as company trademarks.

GameTech International Inc. (GMTC) reported flat revenues for the fourth quarter as well as a net loss of $0.37 a share compared to a net loss of $0.13 in the comparable quarter of a year ago.

Moody’s Investors Service has downgraded the debt rating of Hilton Hotels Corporation (HLT) from Baa3 to Ba1 reflecting the significant negative impact on the lodging industry following the events of Sept. 11. A recent study by a research firm indicated that hotel room revenues declined by 16.3% during the month of November. This continued a sharp decline that began following the terrorists attacks.