Ameristar Casinos (NASDAQ: ASCA) operates eight casino resorts in the Midwestern U.S. Unlike other casino operators such as Wynn Resorts (WYNN) or Las Vegas Sands (LVS) which attract higher-end tourists, Ameristar's main customers are local residents and regional, in-state tourists. Customers come to Ameristar's casinos to play Vegas-style, low limit slots and a range of table games, including blackjack, craps, roulette and poker. The vast majority of Ameristar's revenues come from slots.
Ameristar's growth strategy has been driven by acquisitions. In September 2007, for example, Ameristar acquired Resorts East Chicago, which is located in northwest Indiana and serves the Chicago area, the third largest commercial gaming market in the U.S.
Ameristar Casinos owns and operates eight casino resorts in the Midwest region of the U.S. These resorts are located in St. Charles (Missouri), Kansas City (Kansas), Council Bluffs (Iowa), East Chicago (Indiana), Vicksburg (Mississippi), Black Hawk (Colorado) and Jackpot (Nevada). 
First Quarter 2010 Results
Ameristar reported first quarter revenue decreased 4.2% to $302.6 million. Revenue declines at five of Ameristar's properties were partially mitigated by a $16.6 million increase in net revenues at Ameristar Black Hawk. For the first quarter of 2010, the company generated operating income of $52.8 million, compared to $69.3 million in the same period in 2009. Consolidated adjusted EBITDA decreased 13.0%, from $97.9 million in the initial quarter of 2009 to $85.2 million in 2010.
Ameristar Casino Resort Spa St. Charles serves the greater St. Louis metropolitan market with a casino and a range of amenities, including its luxury hotel and spa. The hotel also features a 7,000-square-foot, full-service spa and indoor/outdoor pool. The property has seven dining venues, a conference center, a nightclub and a number of bars offering local, regional and national entertainment.
Ameristar Casino Hotel Kansas City is a 184-room hotel, which offers a mix of suites and standard rooms. Guests can select from nine restaurants and seven bars/lounges. The property also features an entertainment options that include headline entertainers as well as local and regional bands. It is located seven miles from downtown Kansas City, Missouri.
Ameristar Casino Hotel Council Bluffs serves the Omaha and southwestern Iowa markets. The property’s hotel and Main Street Pavilion comprise its landside facilities. Ameristar Casino Hotel Council Bluffs 160 rooms include luxury suites and king whirlpool rooms. The property also offers dining, live entertainment and meeting space.
Ameristar Casino Hotel East Chicago serves metropolitan Chicago. East Chicago’s dining choices include five restaurants and two bars. The property also features a 290-room hotel, banquet space and a 182-seat VIP player’s club lounge. It draws approximately 70% of its guest base from Illinois, with the remaining 30% coming from Northwest Indiana and surrounding areas.
Ameristar Casino Hotel Vicksburg has a live poker room, two restaurants, a lounge and a 1,000-space parking garage with direct access to the casino. The property has a 149-room hotel. It also has a three-level dockside casino. The property also offers guests dining and live entertainment. Ameristar Casino Hotel Vicksburg is located one-quarter mile north of Interstate 20 in Vicksburg, Mississippi. Ameristar Casino Hotel Vicksburg caters primarily to guests from the Vicksburg and Jackson, Mississippi and Monroe, Louisiana areas, along with tourists visiting the area.
Ameristar Casino Resort Spa Black Hawk is a casino in Colorado and is a gaming and resort destination with a luxury hotel. The construction of a luxury hotel at Ameristar Casino Resort Spa Black Hawk was completed in September 2009. The 33-story hotel tower includes 536 suites and a meeting and event center. It has Black Hawk’s only full-service spa, an enclosed rooftop swimming pool and indoor/outdoor whirlpool spas. The property also has four dining venues and a number of bars offering local and regional live entertainment. Ameristar Casino Resort Spa Black Hawk is located in the center of the Black Hawk gaming district, approximately 40 miles west of Denver, and caters primarily to guests from the Denver metropolitan area and surrounding states.
Cactus Petes Resort Casino and The Horseshu Hotel and Casino are located in Jackpot, Nevada, south of the Idaho border. The properties resort amenities include 416 hotel rooms, an Olympic-sized pool and heated spa, a styling salon, lighted tennis courts, a recreational vehicle park and access to 18-hole golf course. In addition, a general store and service station serve guests and regional travelers. The properties also offer several dining selections and a showroom. The properties are located on either side of Nevada State Highway 93, a regional north-south route, and serve guests primarily from Idaho, and secondarily from Oregon, Washington, Montana, northern California and the southwestern Canadian provinces.
The gaming industry as a whole is highly regulated and subject to state and local legislation, and is especially vulnerable to changes in gaming taxes and fees. State and local governments may attempt to reduce budget deficits through increases in gaming taxes, especially during economic downturns, and Ameristar operates casinos in eight different U.S. states. For example, Nevada (home to Ameristar's Jackpot casino) is considering increasing its gaming taxes by 3% to raise money for public school spending.
Recent smoking bans across states have also affected casino revenues. Gross revenues in Illinois casinos decreased 14% in 2008 after smoking ban legislation was passed, and attendance has decreased by almost 6%. In January 2008, Colorado (home to Ameristar's Black Hawk casino, which generated 26% of the company's 2007 revenue) imposed a statewide smoking ban that includes casino floors.
The gaming industry as a whole is vulnerable to economic conditions, as it decreases consumers' disposable income, leading to both fewer visitors and less spending per visitor. Indeed, the current US economic slow down, caused by the 2007 subprime mortgage crisis has already begun to affect the comapny. The Vicksburg and Council Bluffs markets have taken 4.3% and 1.5% hits to total revenue, respectively, when compared to 2006, and the St. Louis, Kansas City and Chicagoland markets saw slow revenue growth. Ameristar's resorts cater to local, middle income customers whose discretionary incomes are sensitive, and adverse economic conditions take a toll on their entertainment budgets. For example, the increase in gasoline prices could negatively effect the company as most of Ameristar's customers drive to their casinos. The general strategy for casinos in such economic slowdowns is to offer discounts and packages to attract more customers, which does drive revenues but has an adverse effect on the company's operating margin.
Although current Interest Rates are low, the Federal Reserve is expected to increase rates soon to counter-act the weak US dollar. As of 2007, Ameristar has about $1.6 billion in outstanding debt and its properties are highly leveraged. This large debt is mainly due to additional borrowings to fund the acquisition of Resorts East Chicago in 2007. With the planned expansion projects, total debt will further increase, and may exceed the maximum permitted senior leverage ratio in 2008.. In 2007, the company paid $77.6 million in interest costs , almost 44% of operating income. An increase of one percentage point in the average interest rate applicable would increase the company's annual interest cost by around $16.4 million. Thus, a rise in interest rates would significantly impact Ameristar's net income and available cash. This would also limit the company's ability to finance its plan of expanding its current properties.
As all of Ameristar's properties are located in the Midwest, they are vulnerable to adverse weather conditions such as flooding, heavy snowfall and other natural disasters. These extreme weather conditions damage casino properties, deter customers from traveling and makes it difficult for them to visit the casinos. For example, the Vicksburg property in Mississippi suffered damage and was closed for months in 2005 as a result of Hurricane Katrina. The Midwest floodings in 2008 has already affected attendance at casinos in St. Louis, Illinois and Iowa, and will also affect the attendance and revenue of Ameristar's casinos.
The gaming industry is highly competitive and Ameristar faces competition from both regional casinos and national chains. Ameristar, however, is able to distinguish itself by providing Vegas-style resort casinos in smaller, Midwestern markets, where many larger competitors such as Wynn Resorts do not have properties. It attracts customers by providing low-limit slots (such as penny and nickel slots, which are popular among gamers), a variety of table games, good gaming facilities, multiple dining options and well known entertainers in its resorts.
Ameristar's main national competitors include:
Harrah's Entertainment is the world's largest gaming company and operates 50 properties globally, including in the Midwestern markets, such as Iowa and Indiana. The majority of its revenue (55%) however, comes from its properties in Las Vegas and Atlantic City where Ameristar does not compete.
Boyd owns and operates 16 casinos in Nevada, Mississippi, Illinois, Louisiana, Indiana and Florida. Unlike MGM Mirage or Wynn Resorts, the company typically caters to the middle-income customer. However, like MGM Mirage and Harrah's, Boyd also mainly focuses on its Las Vegas properties, as only 44% of its revenue is derived from operartions in the Midwestern region.
Penn National Gaming owns 12 casinos, 7 racetracks, and off-track betting facilities in 14 states and in Ontario, Canada. Its casinos and racetracks generate revenues primarily through house winnings in table games, slot machines, and wagers on races.
MGM Mirage runs 23 hotels and casinos globally, most notably in Las Vegas and Macau, but also in the Midwest.The company generates slightly less than half of its income from casino activities while lodging, dining, entertainment and retail services comrpise most of the rest. MGM also hosts major conventions and operates gambling facilities for third parties.
|'||Ameristar Casinos||Boyd Gaming||MGM Mirage||PENN|
|Net Income ($M)||63.43||303.04||1584.42||160.05|
|Market Cap ($M)||774.68||990.18||8720||2490|
|Number of properties||8||16||23||12|