Appropriate Care & Feeding of the Golden Goose
Under the new paradigm of declining economic conditions across a broad spectrum connected with consumer spending, 카지노사이트추천 face a unique challenge in approaching how they both maintain profitability while also remaining reasonably competitive. These factors are further complicated within the commercial video games sector with increasing tax rates, and within the Native american gaming sector by self imposed contributions to tribal general funds, and/or per capita distributions, in addition to a escalating trend in state imposed fees.
Determining how much to be able to “render unto Caesar, ” while reserving the needed funds to maintain market share, grow market penetration and raise profitability, is a daunting task that must be well planned in addition to executed.
It is within this context and the author’s perspective together with time and grade hands-on experience in the development and direction of these types of investments, that this article relates ways in which for you to plan and prioritize a casino reinvestment strategy.
French fry Goose
Although it would seem axiomatic not to cook the goose that lays the golden eggs, it is amazing the way in which 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 help reap the rewards and there is a tendency not to allocate a substantial amount00 the profits towards asset maintenance & enhancement. Thereby pleading the question of just how much of the profits should be invested in reinvestment, and towards what goals.
Inasmuch as each individual project has its own particular set of circumstances, there are no solid rules. For the most part, many of the major commercial casino operators you should not distribute net profits as dividends to their stockholders, but rather reinvest them in improvements to their existing venues whereas also seeking new locations. Some of these programs are also funded through additional debt instruments and/or equity stock solutions. The lowered tax rates on corporate dividends will shift the emphasis of these financing methods, while yet maintaining the core business prudence of on-going reinvestment.
As a group, and prior to the current market conditions, the publicly held companies had a goal profit ratio (earnings before income taxes & depreciation) the fact that averages 25% of income after deduction of the nasty revenue taxes and interest payments. On average, almost two thirds belonging to the remaining profits are utilized for reinvestment and asset replacement unit.
Casino operations in low gross gaming tax fee jurisdictions are more readily able to reinvest in their properties, as a consequence further enhancing revenues that will eventually benefit the tax platform. New Jersey is a good example, as it mandates certain reinvestment aides, as a revenue stimulant. Other states, such as Illinois and Indy with higher effective rates, run the risk of reducing reinvestment that may eventually erode the ability of the casinos to grow markets demand penetrations, especially as neighboring states become more demanding. Moreover, effective management can generate higher available benefit for reinvestment, stemming from both efficient operations plus favorable borrowing & equity offerings.
How a casino venture decides to allocate its casino profits is a very important element in determining its long-term viability, and should be an important aspect of the initial development strategy. While short term loan amortization/debt prepayment programs may at first seem desirable so as to instantly come out from under the obligation, they can also sharply decrease the ability to reinvest/expand on a timely basis. This is also true for any gain distribution, whether to investors or in the case of Indian gambling projects, distributions to a tribe’s general fund for infrastructure/per capita payments.
Moreover, many lenders make the mistake with requiring excessive debt service reserves and place restrictions regarding reinvestment or further leverage which can seriously limit for certain project’s ability to maintain its competitiveness and/or meet available potentials.
Whereas we are not advocating that all profits be plowed-back into the operation, we are encouraging the consideration of an aide program that takes into account the “real” costs of protecting the asset and maximizing its impact.