The information provided in this article is based on appraiser experiences in Las Vegas, Nevada.  While the appraisal related information provided herein may be applicable to gaming in other areas, the author has made no representations regarding its usefulness or accuracy.  

While the best way to value a “going-concern” property in Las Vegas, including its gaming element, is often based on its historic and anticipated income production, some clients want to know what income they can expect by adding a restricted gaming license that allows 1 to 15 gaming machines.  Taverns, convenience stores, grocery stores and motel / hotel businesses are those who most often apply for restricted gaming licenses. 

It is important to note that forecasting income from one or many sources, especially income derived from gaming machines, is speculative and thus value opinions concluded from forecasts of this type are also speculative.  Appraisers generally warn their readers via listing extraordinary assumptions and hypothetical conditions in their reports that forecasts and projections regarding gaming can vary significantly from actual results. 

Appraisers attempting to project income from gaming machines usually start by reviewing gaming abstracts.  Gaming abstracts are available on the Internet from the UNLV Center for Gaming Research at http://gaming.unlv.edu/abstract/index.html that provides general percentage win information.  The State of Nevada “Gaming Abstracts”   provide annual gaming information and are located on the Internet at http://gaming.nv.gov/abstract_rpts.htm.  The online abstracts provide information relevant to gaming facilities that gross over $ 1,000,000.  Thus, the readily available gaming information is not useful for forecasting the income that would be expected from smaller, restricted gaming establishments.  

Private party information on smaller properties is available for a fee via online sources.  See Casino City's Nevada Gaming Almanac http://www.casinocitypress.com/GamingAlmanac/nevadagamingalmanac/ and other sources for the best data.

A typical assumption made by appraisers with regard to restricted gaming area income is that a competent operator will be in charge of the gaming area and the maintenance of the gaming machines.  Poorly managed machines can fall into disrepair quickly and their ability to generate income can thus be significantly diminished if not well maintained.

The socio-economic makeup of the neighborhood where gaming machines will be placed and the traffic through the area where the gaming machines are placed are important considerations when making gaming forecasts.  If there are other restricted gaming areas located within the neighborhood or gaming areas within similar businesses, it is important to know how what kind of play the machines are receiving.  If you ask the right people the right questions, you may be able to get answers to your restricted gaming forecast questions.   

Having an accurate income figures with regard to the anticipated average win per day per machine is one of the most important pieces of information to know for a potential restricted gaming owner.  In addition to the general win per machine per day statistic provided by the State “gaming Abstract,” gaming machine management companies may disclose additional information on areas where they have their own machines.

Outsourcing gaming machine operations is popular in small establishments.  Business owners don’t have to invest tens to hundreds of thousands of dollars in machines and then keep them operational.  In exchange they give up some of the profits to the machine supplier.  Sources have indicated that 20 percent of the gross net win is a typical return to an owner in a good location.

Also important with regard to the analysis of restricted gaming is the derivation of a capitalization rate specific to each restricted gaming location.  The risks and costs associated with restricted gaming are another area of analysis that must be known by the restricted gaming appraiser.