Appropriate care and feeding the gold goose
Under the new paradigm of lowering economic conditions in a wide range of consumer spending, casinos face a single challenge to address the way they maintain profitability while remaining competitive. These factors are still complicated in the commercial games sector with increasing tax rates and in the Indian Games sector through self-imposed contributions to tribal general funds and / or per capita distributions, in addition to a trend growing costs imposed by the state.
Determining how much to “return to Caesar”, while reserving the funds needed to maintain market share, develop market penetration and improve profitability, is an arduous task that must be well planned and executed.
It is in this context and the prospect of the author who includes practical experience of time and quality in the development and management of these types of investments, that this article tells ways to plan and prioritize a strategy of Casino reinvestment.
Although it seems axiomatic not to cook the goose, which poses the golden eggs, it is incredible how much thought is reflected in its appropriate care and feed. With the advent of a new casino, tribal developers, investors and financially desired financiers to reap the rewards and not to affect a sufficient amount of the benefits to maintenance and improvement of assets. Thus begging the question of how much profits should be allocated to reinvestment and goals.
To the extent that each project has its own set of circumstances, there are no difficult and fast rules. In most cases, many of the major commercial casino operators do not distribute net profits such as dividends to their shareholders, but rather reinvests improvements to their existing places while seeking new locations. Some of these programs are also funded by additional debt instruments and / or share share offers. The reduced tax rates on corporate dividends will probably change the focus on these funding methods, while retaining the cautious of the basic reinvestment activities in progress.
As a group, and before the current economic conditions, public companies have had a net profit ratio (income before income taxes and amortization) which represent an average of 25% of the income after deduction of raw taxes and interest payments. On average, nearly two-thirds of the remaining profits are used for reinvestment and replacement of assets.
Casino operations in low raw rates court jurisdictions are more easily able to reinvest in their properties, further strengthening revenues that will eventually benefit from the tax base. New Jersey is a good example because it requires some reinvestment allowances, as a revenue stimulant. Other states, such as Illinois and Indiana, with more effective effective rates, run the risk of reducing reinvestment that can erode eroding the capacity of casinos to develop penetrations of market demand, especially when Neighboring states become more competitive. In addition, effective management can generate more available benefits for reinvestment, arising from effective operations and borrowing and favorable equity offers.
How a casino company decides to allocate its casino benefits is an essential element of determining its long-term sustainability and should be an integral part of the initial development strategy. Although short-term / debt loan amortization programs may first seem desirable to release quickly from the obligation, they can also significantly reduce the ability to reinvest / extend in a timely manner. This is also true for any benefit distribution, whether for investors or in the case of Indian gaming projects, distributions to the General Fund of the Tribe for Infrastructure Payments / per capita.