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Casino Reinvestment and Expansion

The proper Care & Feeding of the Golden Goose

Under the new paradigm of weak economic conditions across a diverse spectrum of consumer spending, casinos ยูฟ่าเบทบนมือถือ face a unique challenge in addressing how they both maintain earning while also remaining competitive. These factors are further complicated within the commercial gaming sector with increasing tax rates, and within the Indian gaming sector by self required contributions to tribal general funds, and/or per capita distributions, in addition to a growing trend in state required fees.

Determining how much to “render on to Caesar, inch while saving the necessary funds to maintain market share, grow market penetration and improve earning, is a daunting task that must be well planned and executed.

It is in such a context and the author’s perspective that includes time and grade hands-on experience in the development and management of these types of investments, that this article relates ways in which to plan and prioritize a casino reinvestment strategy.

Baked Goose

Although it appears to be axiomatic not to cook the goose that lays the golden eggs, it is amazing how little thought is oft times given to its on-going proper care and feeding. With the advent of a new casino, developers/tribal councils, investors & financiers are rightfully anxious to reap the rewards and there is a tendency not to allot a sufficient amount of the profits towards asset maintenance & enhancement. Thereby begging the question of just how much of the profits should be allocated to reinvestment, and towards what goals.

Inasmuch as each project has its very own particular set of circumstances, there are no hard and fast rules. For the most part, many of the major commercial casino operators do not distribute net profits as dividends to their stockholders, but instead reinvest them in improvements to their existing venues while also seeking new locations. Some of these programs are also funded through additional debt instruments and/or equity stock offerings. The lowered tax rates on corporate dividends will likely shift the emphasis of these financing methods, while still maintaining the core business discretion of on-going reinvestment.
Profit Allowance

As a group, and prior to the current economic conditions, the publicly held companies had a net profit relation (earnings before income taxes & depreciation) that averages 25% of income after deduction of the gross revenue taxes and interest payments. May, almost two thirds of the remaining profits are utilized for reinvestment and asset replacement.

Casino operations in low gross gaming tax rate jurisdictions are more readily able to reinvest in their properties, thereby further enhancing revenues that will eventually benefit the tax base. Nj is a good example, as it mandates certain reinvestment allocations, as a revenue stimulant. Other states, such as The state of illinois and Indiana with higher effective rates, run the risk of reducing reinvestment that may eventually erode the ability of the casinos to grow market demand penetrations, especially as nearby states become more competitive. Moreover, effective management can generate higher available profit for reinvestment, arising from both efficient operations and favorable borrowing & equity offerings.

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