Under the new paradigm of widespread consumer spending deteriorating economic conditions, casinos face the unique challenge of working on ways to stay profitable as competition continues. These factors are exacerbated within the commercial gambling sector due to rising tax rates and within the Indian gambling sector due to voluntary contributions to tribal public funding and / or personal distribution, in addition to rising rates. I am. Imposed by the state.
Determining the amount to "give to Caesar" while retaining the funds needed to maintain market share, increase market penetration and increase profitability is a difficult task that needs to be well planned and implemented. It's work.
In this context, from the author's perspective, including the time and college experience in developing and managing these types of investments, this article lists how to plan and prioritize casino reinvestment strategies.
Cooked goose
Not cooking golden spawning geese may seem counter-intuitive, but it is surprising that little attention is paid to proper care and nutrition. With the advent of new topsvariety casinos, developers / tribal councils, investors and financiers are eager for bonuses and tend not to allocate enough prizes to maintain and improve their assets. Therefore, the question arises as to how much profit should be allocated for reinvestment and what goals should be aimed at.
Each project has its own set of conditions, so there are no strict rules. In most cases, many commercial casino operators do not distribute their net income as dividends to shareholders, but instead reinvest in improving existing placements, looking for new locations at the same time. Some of these programs are also funded through additional debt deeds and / or stock offerings. Reducing tax rates on corporate profits could shift the focus to these financing methods while maintaining the core business wisdom of ongoing reinvestment.
Profit sharing
As a group and prior to the current economic situation, listed companies had an average net profit margin of 25% of their income after deducting income tax (income tax and sales tax pre-income). Payment of total income and interest. On average, almost two-thirds of the remaining profits are used to reinvest and exchange assets.
Operating a casino in a jurisdiction with a low overall tax rate on gambling makes it easy to reinvest in assets and ultimately boosts profits on a taxable basis. New Jersey is a good example and requires some reinvestment allowances to increase your income. In other highly effective states, such as Illinois and Indiana, there is a risk of reduced reinvestment, which could ultimately undermine the ability of casinos to further penetrate market demand, especially as neighboring countries become more competitive. there is. .. In addition, effective management can generate higher returns available for reinvestment from efficient management, lucrative loans, and capitalization.
The way casino companies decide to allocate casino prizes is an important factor in determining their long-term viability, and it must be an integral part of their early development strategy. A short-term debt prepayment / loan repayment program may seem desirable at first to get out of debt quickly, but it can significantly reduce your ability to reinvest / expand in a timely manner. This applies to any profit sharing, whether it be an investor or an Indian gambling venture, such as the distribution to the tribal endowment for infrastructure / personal payments.
In addition, many lenders have the ability to claim excessive debt repayment reserves, make the mistake of imposing reinvestment limits or additional leverage, and remain competitive or take advantage of certain projects. It can be seriously restricted.
We do not recommend reinvesting all profits in the process, but consider a privatization program that takes into account "real" costs to protect assets and maximize their impact. It is recommended.